By Mark Jaffe, EUCI energy writer
U.S. utility sector investment in electric, gas, and water projects are projected to rise to more than $780 billion between 2025 and 2028, according to a research report by consultant and market analyst S&P Global.
Total U.S utility energy investments are projected to set a record at $202 billion in 2025, $206 billion in 2026, and $211 billion in 2027. Aggregate water project investment is forecast to total $172 billion by 2028.
Money is being spent on modernizing the electric grid, building transmission lines, and water and gas distribution systems, adding wind, solar, and natural gas generation, as well as integrating new technologies such as smart meters and batteries.
“These increases are largely driven by federal legislation passed in 2021 and 2022 that supports infrastructure investment, state-level energy transition plans and incentives, and a strong surge in demand from datacenters amid the continuing expansion of AI and cloud computing technologies,” S&P Global said.
Even outside the U.S., there is a major growth and shift in investment to clean technologies, according to the International Energy Agency (IEA). For the sixth straight year, global investments in clean energy and energy efficiency rose in 2024 reaching $2 trillion, a 6% increase over 2023.
That was almost double the $1.1 trillion spent on fossil fuel projects, the agency said.
“Clean energy investment is setting new records even in challenging economic conditions, highlighting the momentum behind the new global energy economy,” Fatih Birol, the IEA’s executive director, said in a statement.
In the U.S., a representative sample of 45 publicly traded energy utilities capital found expenditures for 2024 were estimated at $187 billion, a 12% increase over 2023 and a 30% rise compared to the $144 billion in 2022.
“This significant capital outlay is poised to underpin robust profit growth within the utility sector for the foreseeable future,” S&P Global said.
Among the factors expected to drive future utility capital investment are the need to replace aging infrastructure, an increase in state-mandated renewable energy portfolios and federal infrastructure initiatives, such as the Inflation Reduction Act (IRA).
The IRA was one of the signature legislative accomplishments of the Biden administration, and Trump administration representatives have voiced the intention of rolling back some of those Biden initiatives.
“Despite potential uncertainties stemming from a new U.S. administration regarding investments supported by the IRA, the financial frameworks underpinning these initiatives are generally expected to withstand administrative changes,” S&P Global said.
“Many of the subsidies are structured as tax credits, effectively functioning as tax reductions, thereby providing significant insulation from shifts in congressional or executive control,” the consulting and market analysis firm said.
Renewable energy investment is projected to continue to grow with investments surpassing $30 billion in 2025 and 2026 and reaching more than $33 billion in 2027.
Among the other factors driving utility renewable energy projects are declining technology costs, consumer and corporate demand, and environmental, social and governance considerations.
Many of these projects – such as large-scale wind and solar farms – will be located far from demand centers and will need new transmission line projects.
Natural gas generation is also expected to remain a key source of power especially to bridge capacity gaps created by rising data-center demand that cannot presently be entirely met by renewables.
S&P Global projects $58 billion in natural gas pipeline, storage distribution, and other projects between 2024 and 2027.
While global spending on clean energy is rising, there is an imbalance on where it is being spent, the IEA said.
“China is set to account for the largest share of clean energy investment in 2024, reaching an estimated $675 billion,” the agency said. “This results from strong domestic demand across three industries in particular – solar, lithium batteries, and electric vehicles.”
Europe and the United States follow, with clean energy investment of $370 billion and $315 billion respectively. “The three major economies alone make up more than two-thirds of global clean energy investment, underlining the disparities in international capital flows into energy,” the IEA said.
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