By Mark Jaffe, EUCI energy writer
Facing electricity demand hitting all-time highs, the U.S. utility industry is giving a boost to natural gas-fired generation and a reprieve for coal-fired power plants, according to an analysis by the federal Energy Information Administration (EIA).
After a long period of slow growth – with an average annual increase of 0.1% between 2005 and 2019 – annual increases in demand since 2020 have averaged a 1.7% a year, reaching an all-time high in 2026 and 2027 – more than 400 billion kilowatt-hours.
“Much of the recent and forecasted growth in electricity consumption is coming from the commercial sector, which includes data centers, and the industrial sector, which includes manufacturing establishments,” the EIA said.
Under the pressure of the rising demand, the EIA projects an increase in fossil fuel generation, primarily from natural gas, but also from coal.
The agency is forecasting U.S. natural gas generation will increase by 1.7% between 2025 and 2027, but under a higher electricity demand scenario, that rate would jump to 7.3%, equal to 105 billion kilowatt-hours.
Natural gas provides the largest share of U.S. electricity generation, about 40% of the total in 2025.
While not increasing the absolute share of coal-fired generation, a high-demand scenario would slow down coal plant retirements. In 2025, coal provided 17% of all electricity generation.
The agency had projected that during the next two years, 9.3% of coal capacity (equal to 68 billion kilowatt-hours) will be taken offline, but under the high-demand scenario, the retirement rate would drop to 5% of the fleet.
The EIA said that most regions can accommodate higher-than-expected electricity demand growth. One element helping to ease the surge is low demand, below the U.S. average, from households.
The agency also expects an increase in data center power demand in Nevada and Arizona, but load growth in the Southwest remains low for now since most of the data center development will come after 2027.
The two grids most under pressure from growing demand are the Electric Reliability Council of Texas (ERCOT), which manages a grid covering most of Texas and the PJM Interconnection, serving all or parts of 13 Midwestern and mid-Atlantic states and the District of Columbia.
The EIA projects annual load growth to average 10% annually in ERCOT and 3% in the PJM, which covers all of part of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia.
In the PJM, Midwest and Southeast regions, coal accounts for more than half the additional increase in electricity generation in the high-demand growth scenario because coal-fired plants have existing spare capacity.
“If demand were to grow faster than supply, the stresses on the grid would be evident in spikes in wholesale power prices or even periods of rolling blackouts,” the agency said.
The demand will have the sharpest impact on rates in ERCOT where the 2027 wholesale sale price is now projected to rise 78% or by $37 a megawatt-hour over EIA’s February forecast of $47.39.
“ERCOT’s grid is isolated and has limited connections to the main Eastern and Western grids. This inability to draw from electricity supply in neighboring regions makes the price response to higher demand more acute,” the agency said.
Outside ERCOT, the average 2027 wholesale price across the other major regions would increase $2.10 a megawatt-hour in the high-demand growth scenario compared with the February forecast average of $48 a megawatt-hour.
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