The U.S. electric power sector is experiencing a surge in renewable energy deployment, yet the grid faces mounting pressure from skyrocketing demand and shifting federal policies. As data centers and electrification drive consumption to new highs, aging infrastructure and regulatory uncertainty threaten to push the system toward a reliability crisis.

The U.S. electric power industry finds itself at a critical inflection point in 2025, grappling with a perfect storm of surging demand, policy upheaval, and infrastructure constraints that threaten to reshape the sector’s trajectory for years to come. After decades of relatively stable electricity consumption, the grid now faces an unprecedented surge in demand driven by the explosive growth of data centers, artificial intelligence (AI) applications, industrial reshoring, and accelerating electrification across transportation and buildings. The North American Electric Reliability Corporation (NERC) projects demand increases of 15% for summer peak and 18% for winter peak over the next decade—figures substantially higher than previous assessments and driven largely by the voracious energy appetite of the digital economy. Many of these same issues are weighing heavily on power industry participants in other parts of the world.

In the U.S., the demand explosion is colliding with a grid already strained by aging infrastructure, workforce shortages, and the complex challenge of integrating variable renewable energy sources while maintaining reliability. NERC’s latest assessments paint a sobering picture of capacity challenges across multiple regions, with grid operators warning that insufficient power capacity and transmission bottlenecks could lead to supply shortages during peak periods. These reliability concerns have taken on new urgency as extreme weather events continue to test system resilience, while the retirement of traditional baseload generation accelerates faster than replacement capacity can come online. Recently, emergency orders were issued by the U.S. Department of Energy to keep fossil generators online beyond previously scheduled retirement dates in an effort to prevent power shortfalls.

Compounding these operational challenges is the dramatic policy shift under the Trump administration, which has introduced significant uncertainty into long-term planning assumptions that utilities and investors have relied upon for years. The administration’s emphasis on fossil fuel development, proposed cuts to renewable energy programs, and withdrawal from offshore wind leasing areas has created a complex regulatory environment where federal priorities appear increasingly at odds with state-level clean energy mandates and corporate sustainability commitments. This policy divergence has left industry stakeholders navigating conflicting signals about the future direction of energy policy, investment incentives, and environmental regulations.

Clean Energy Technologies Dominate Grid Additions

The renewable energy sector, despite facing headwinds from federal policy changes, continues its remarkable growth trajectory, with solar and battery installations (Figure 1) expected to account for 81% of new power generation additions in 2025, according to U.S. Energy Information Administration (EIA) projections. However, this expansion faces mounting integration challenges as grid operators struggle to balance intermittent renewable sources with reliability requirements, while supply chain disruptions, permitting delays, and escalating development costs threaten to slow deployment timelines. The industry must simultaneously manage this energy transition while addressing geopolitical risks that have exposed vulnerabilities in critical supply chains for everything from solar panels to grid equipment.

1. rPlus Energies is developing the Green River Energy Center (GREC), a solar-plus-storage project in Emery County, Utah. The project includes 400 MWAC of solar PV and 400 MWAC/1,600 MWh of battery storage. GREC is among the largest solar-plus-storage projects currently under construction in the U.S. Courtesy: rPlus Energies

Beyond NERC and EIA estimates, a variety of other organizations produce projections that imagine a wide range of futures based on divergent visions about policies, technologies, prices, and geopolitics. Resources for the Future (RFF), an independent, nonprofit research institution based in Washington, D.C., released a report in April titled “Global Energy Outlook 2025: Headwinds and Tailwinds in the Energy Transition.” In it, RFF researchers applied a detailed “harmonization process” to compare 13 scenarios across two historical data sources and seven energy outlooks published last year. Taken together, these scenarios offer a broad scope of potential changes to the energy system as envisioned by some of its most knowledgeable organizations, including the International Energy Agency (IEA); BloombergNEF (BNEF); bp; ExxonMobil; the Institute of Energy Economics, Japan (IEEJ); and OPEC.

The report notes that low-emissions technologies have benefited from substantial tailwinds, with a record $2 trillion investment in clean energy technologies and infrastructure in 2024. However, it says significant headwinds to the energy transition remain as global CO₂ emissions reach record highs, and the benefits of energy investments are distributed unevenly. Growing challenges also come from the prioritization of energy security, a new direction in energy and climate policy from the U.S., and surging electricity demand from emerging technologies, such as AI.

The record investment in clean energy deployment has been largely driven by accelerated electrification and global electricity demand, which is projected to grow substantially across scenarios. Under all scenarios, renewable energy sources, led by wind and solar, account for more than 50% of electricity generated in 2050. Fossil fuel generation remains roughly flat or declines across scenarios, but the degree of decline and share of generation in 2050 depends largely on the scale of climate ambition.

Notably, while the RFF report says wind and solar are now the cheapest sources of electricity in many markets, Ryan Luther, director of Energy Transition Research with Enverus, told POWER that the majority of solar capacity in U.S. interconnection queues is still dependent upon tax credits. “Basically, we’ve modeled out the economics for every single project that’s in the interconnection queue,” he explained. “We looked at how much capacity is in the queue that could sign a PPA [power purchase agreement] below the merchant price plus the REC [renewable energy certificate].” In the end, Luther presented a graphic showing the Electric Reliability Council of Texas (ERCOT), Midcontinent Independent System Operator (MISO), and Southwest Power Pool (SPP) markets to be almost entirely dependent on federal tax credits (>90% in all three markets), while capacity in the California Independent System Operator (CAISO) queue was found to be almost entirely non-dependent on federal tax credits. Other major U.S. markets were in the roughly 40% to 70% dependent range. “However, there’s a lot of capacity in the queues and if you add up all the capacity that doesn’t depend on federal tax credits it amounts to over 284 GW, or more than six years of development activity at last years pace,” he said.

U.S. Energy Policy Swings Toward Fossil Fuels and Nuclear

The Trump administration’s sweeping energy policy overhaul represents one of the most dramatic reversals in modern American energy history, fundamentally reshaping how the nation generates and distributes electricity. Since taking office, President Trump has declared a “national energy emergency” and unleashed a cascade of executive orders designed to restore what he calls “American energy dominance.” At the heart of this transformation lies a stark pivot away from renewable energy toward fossil fuels and nuclear power, with the administration lifting restrictions on coal plants, halting offshore wind development, and fast-tracking permits for oil and gas infrastructure. The policy blitz includes granting about a third of U.S. coal plants a two-year reprieve from mercury emission standards and reversing Michigan’s planned retirement of an aging coal facility—moves that signal a clear departure from the previous administration’s climate-focused approach.

The financial implications of these changes are already rippling through the energy sector, creating a complex web of winners and losers. Trump’s aggressive tariff strategy—imposing 25% duties on steel and aluminum, and up to 100% on Chinese-made components like lithium-ion batteries—is driving up costs for critical grid infrastructure and renewable energy projects. Meanwhile, the administration’s decision to lift restrictions on liquefied natural gas (LNG) exports could paradoxically increase domestic electricity prices as more American gas flows overseas, potentially undermining Trump’s campaign promise to slash energy costs. The proposed cuts to renewable energy funding, including $15 billion from the Bipartisan Infrastructure Law and potential rollbacks of the Inflation Reduction Act’s tax credits, threaten to slow the deployment of solar and wind projects just as they’re becoming the cheapest sources of new electricity generation.

Perhaps most significantly, these policy shifts are occurring against the backdrop of surging electricity demand driven by AI data centers and industrial growth. The administration’s emphasis on reliable baseload power favors dispatchable sources like coal, gas, and nuclear over intermittent renewables, with nuclear power receiving increased support (Figure 2). However, the same tariffs designed to protect American industry are creating supply chain disruptions that could delay the very grid modernization projects needed to support AI infrastructure, highlighting the internal tensions within the administration’s energy strategy.

2. President Trump signed executive orders regarding nuclear energy on May 23, 2025. Source: The White House

The ultimate success of Trump’s energy revolution will depend largely on factors beyond presidential control—congressional approval for budget cuts, legal challenges to environmental rollbacks, and the stubborn economics of an energy market where solar and wind continue to undercut fossil fuels on price. While the administration can accelerate fossil fuel development and slow renewable growth through regulatory changes, the fundamental market dynamics favoring clean energy remain intact. The result is likely to be a more complex energy landscape where policy headwinds meet economic tailwinds, potentially leaving consumers facing higher electricity costs while the clean energy transition continues at a more modest pace than previously projected.

Concerning the effects these actions have had on the power industry, Luther suggested changes within the U.S. Environmental Protection Agency (EPA) have had the greatest impact. “What that means for existing coal and gas assets is rather than them retiring, they’re staying on longer,” he explained. “It’s not creating as much opportunity for new renewable generation and storage, which is really what is needed to backfill those.”

While wind power has been a significant target for cuts by the administration, Luther said the wind industry was under pressure well before Trump took office. “Really, the economics of wind—both onshore and offshore—has deteriorated due to inflation the last several years and the supply chain issues they’ve had, so investment there was already pulling back on its own,” he said.

—Aaron Larson is POWER’s executive editor.