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US Power Grid Faces Transmission Bottleneck as Electricity Demand Surges, Wood Mackenzie Says

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The US faces a growing transmission bottleneck as electricity demand surges after years of stagnant growth, while construction of high-voltage power lines remains well below the levels needed to support the expansion, Wood Mackenzie strategists said in a note on Monday.

Wood Mackenzie analysts said that electricity consumption is poised for its strongest structural expansion in decades, driven by data centers, electric vehicles, industrial activity and broader electrification.

However, the transmission network required to deliver that power has been underbuilt for more than a decade.

Wood Mackenzie said that the mismatch is becoming increasingly stark. The average length of high-voltage transmission lines, those operating at 230 kilovolts or more, completed per year in the 2020s is less than half the average built each year during the previous decade.

Data centers are projected to account for about 20% of total US electricity demand by the end of the 2030s, putting additional pressure on a grid already struggling with limited capacity.

The consultancy said that the transmission shortfall is largely a regulatory and planning problem rather than a technological one.

Disagreements over who should pay for new infrastructure, fragmented permitting processes, reactive grid planning and weak coordination between regions have slowed projects and increased costs.

The consequences are spreading across the power market. Projects are taking an average of about three years to secure interconnection agreements, while renewable-energy curtailment is increasing as developers encounter grid constraints. Wood Mackenzie said annual congestion costs have climbed above $10 billion.

Federal policy is beginning to provide some momentum. The Federal Energy Regulatory Commission's Orders 1920 and 2023 represent significant efforts to overhaul transmission planning and interconnection rules.

Wood Mackenzie said that independent system operators and regional transmission organizations have also unveiled over $100 billion of transmission projects in their development pipelines.

However, the scale of those plans does not eliminate the risks involved in getting projects built.

Execution risk remains high, the consultancy said, pointing to unresolved questions around cost allocation, permitting, planning and regional coordination.

Wood Mackenzie analysts said grid-enhancing technologies should be viewed as a bridge rather than a substitute for new high-voltage infrastructure. The analysts said the US will ultimately need to accelerate transmission construction if it is to accommodate the next wave of electricity demand.

The consultancy said that without faster permitting, clearer cost allocation, more coordinated planning and stronger interregional investment, the transmission gap risks becoming a constraint on the US's energy market.

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