Power Force: How Surging Demand and Policy Shifts Are Reshaping the Energy Industry in 2026
A Year of Reckoning for the Power Sector
2026 will be a year of reckoning for the electric power industry. The sector faces unprecedented challenges as electricity demand is surging—driven by data centres, manufacturing reshoring, and transportation electrification—even as the industry navigates an unprecedented transformation in how power is generated, transmitted, and consumed.
The convergence of technological advancement, policy changes, and market forces is creating a perfect storm that will fundamentally reshape how electricity is produced and distributed across the globe. Industry leaders must navigate this complex landscape whilst ensuring grid reliability and managing costs for consumers.
Record-Breaking Power Consumption
U.S. power consumption, which hit its second straight record high in 2025, will rise further in 2026 and 2027, the Energy Information Administration said, projecting power demand will rise from a record 4,198 billion kWh in 2025 to 4,256 billion kilowatt-hours (kWh) in 2026 and 4,364 billion kWh in 2027.
Demand is surging in part due to data centres dedicated to artificial intelligence and cryptocurrency, and as homes and businesses use more electricity and less fossil fuel for heat and transportation. However, industry analysts are closely monitoring whether these projections will materialise as expected.
The AI Uncertainty and Market Recalibration
Whilst artificial intelligence has been touted as a major driver of power demand growth, recent developments suggest a more nuanced reality. In 2026, power sector participants will be closely watching exactly how much data centre load comes online and whether current forecasts are accurate. There are already signs that data centre demand will grow more slowly than expected.
DeepSeek R1’s efficiency breakthrough showed that algorithmic innovation could drastically reduce the energy footprint per AI task, casting doubt on the exponential power-growth curves currently driving data centre planning. This technological advancement highlights the risks of overbuilding infrastructure based on potentially inflated demand forecasts.
Policy Shifts and Industry Response
Major policy changes in the One Big Beautiful Bill Act, which axed most subsidies for clean energy and electric vehicles, are forcing utilities, manufacturers, developers and others to pivot fast. Despite these headwinds, renewable energy continues to show remarkable resilience and growth.
Global capacity of solar and wind is expected to reach 4,000 GW in 2026, overtaking operating capacity of coal and gas-fired power capacity for the first time, albeit with output commensurate with lower capacity factors. This milestone represents a historic shift in the global energy landscape.
Gas-Fired Generation Expansion
Natural gas generation is experiencing a significant resurgence. Five-year plans rose about 65% from last year’s assessment, to about 107 GW for the 2026-2030 period from approximately 65 GW for the 2025-2029 period. This dramatic increase reflects the industry’s need for dispatchable power sources that can reliably meet baseload demand whilst renewable capacity continues expanding.
Financial Pressures and Infrastructure Challenges
S&P Global said public power and cooperative utilities face a negative outlook in 2026, reflecting converging, substantial, and costly infrastructure financing needs and diminished consumer rate affordability. These financial pressures are compounded by the enormous capital requirements for grid modernisation and new generation capacity.
Looking Ahead: Opportunities and Obstacles
The power industry stands at a critical juncture. The power industry is extraordinarily dynamic right now, and more big changes are expected to come in the next few years, particularly as legal challenges to policy initiatives play out.
For consumers, businesses, and investors alike, 2026 represents a pivotal year that will determine the trajectory of the energy sector for decades to come. The ability of industry stakeholders to balance reliability, affordability, and sustainability will define success in this transformative period.