The annual Black & Veatch report, based on insights from 500 US energy stakeholders, unveils an industry at a turning point. The demand for electricity is surging at an unprecedented pace, with the challenge of powering data centers surpassing emissions reduction as the top priority for utilities.
AI-driven data centers, capable of becoming operational within 18 months, are straining an energy ecosystem where building supporting grid infrastructure typically takes six years.
Jenn Cahill, associate vice president and campus infrastructure integration lead at Black & Veatch, notes that the rise of AI and hyperscale data centers is fundamentally changing how utilities approach grid planning.
“Electricity demand from digital infrastructure has overtaken emissions reduction as the top priority for US utilities,” she states.
Limited power availability is the leading obstacle to getting new data centers online, followed by transmission constraints. Image: Alamy
According to Cahill, flexible interconnection models, improved forecasting tools, and coordinated investment across stakeholders are essential to avoid compromising grid reliability.
Nearly half of respondents stated that their current tools are not keeping pace with the rapid growth in electric load, especially in regions experiencing a surge in hyperscale data center construction.
Utilities cite limited available power (53%) as the leading obstacle to getting new data centers online, followed closely by transmission (47%) and substation (46%) capacity constraints. These bottlenecks are slowing connections and forcing utilities to re-evaluate grid modernization priorities.
“Accelerating power delivery for large-scale digital infrastructure hinges on advanced grid technologies and strong partnerships,” Cahill says.
Flexible interconnection models, dynamic load forecasting, and grid-enhancing technologies such as high-capacity transmission and storage are critical.
She adds that equally important are coordinated efforts between utilities, data center operators, and regulators to streamline approvals and align investment strategies.
“These collaborations ensure reliability while meeting the rapid timelines demanded by hyperscale development,” Cahill says.
Cybersecurity Rises as a Critical Weak Point
As utilities embrace digitalization and smart infrastructure, cybersecurity risks are multiplying. The number of expanding device networks are ballooning, creating more entry points for attacks.
The report found that 40% of respondents now prioritize cybersecurity training over purchasing new security tools – recognizing that human error, not technology, often poses the greatest vulnerability.
Despite a 50% rise in substation attacks, only 22% of utilities use unified teams to manage both physical and cyber threats. The majority still operate in silos, even as ransomware and malware increasingly target operational systems.
Cahill says as grid digitalization accelerates, managing cybersecurity and operational risks requires a layered approach.
“Utilities must integrate advanced monitoring and threat detection into grid control systems while enforcing strict access protocols and encryption standards,” she explains.
Partnerships with cybersecurity specialists and industry consortia are crucial for sharing intelligence and developing resilient frameworks. At the same time, robust contingency planning and real-time situational awareness ensure that digital innovation does not compromise reliability or safety.
“Digital grids demand layered security and real-time vigilance to turn innovation into strength – not vulnerability,” Cahill says.
Energy Mix, Policy Uncertainty
While the data center boom dominates planning conversations, the report also reveals a renewed interest in nuclear power, particularly in small modular reactors (SMRs). Nearly 47% of respondents said they see SMRs as a potential investment, reflecting a broader search for stable, zero-carbon baseload generation amid volatile demand.
Federal climate policy also appears to be having a limited influence on near-term utility strategies. More than a third of respondents expect no impact from shifting regulations, and nearly half (47%) say they will maintain their current course even if federal rules loosen.
According to Cahill, SMRs and other emerging generation sources could play a pivotal role in stabilizing future load demand driven by AI and data centers.
“Their modular design enables faster deployment and siting near high-demand clusters, reducing transmission strain,” she says.
In addition, SMRs offer carbon-free capacity that complements intermittent renewables, while advanced technologies, such as long-duration storage and hybrid generation models, enhance grid flexibility. Together, these solutions provide a resilient backbone for meeting rapid growth without compromising decarbonization goals.
“For a grid under pressure, SMRs deliver firm, carbon-free capacity that keeps reliability front and center,” Cahill says.
Climate Resilience Still on the Agenda
Despite the pivot toward capacity expansion, utilities continue to invest in climate resilience. Respondents cited backup systems (40%), vegetation management (30%), and freeze protection (27%) as the top tactics for mitigating climate-related disruptions.
Cahill says effective collaboration between regulators, utilities, and tech companies starts with synchronized planning and transparent data sharing.
“Streamlined permitting processes, joint forecasting models, and standardized interconnection frameworks can align infrastructure timelines with energy availability,” she says.
Public-private partnerships that prioritize grid flexibility and accelerate transmission investment are crucial for meeting rapid deployment schedules without compromising reliability or sustainability.
“True alignment comes from trust – utilities, tech, and regulators moving in lockstep to deliver reliable, sustainable power,” Cahill says.
