US DOE raises the spectre of severe power outages

“Things take longer to happen than you think they will, and then they happen faster than you thought they could.” Known as Dornbusch’s law, this quote highlights how policymakers tend to underestimate long-term risks facing economies. Markets can be stable, simmering along and then suddenly boil over with unexpected shocks.  

A new report by the US Department of Energy (DOE), released 7 July, suggests that the US grid is precisely at this tipping point. The report warns that a combination of rising loads, thermal retirements and outdated reliability tests leave the US increasingly vulnerable to blackouts within the next five years.

Our analysis shows that the DOE raises valid concerns. Under President Donald Trump’s latest energy and trade policies, investment in power supply has not kept pace with power demand from AI. Without urgent remedies, risks of power supply outages and higher power prices increase, with the country losing momentum in the global AI race. Dornbusch’s law may prove prescient: the lights are on, then abruptly out.   

In this edition of the Energy Pulse, we also include a preview of our latest Horizons report, why the Pennsylvania Energy and Innovation Summit will not move the needle on AI and how the Permian and Haynesville are critical to meeting US natural gas demand.

A 100-fold increase in power outages by 2030

The DOE’s Resource Adequacy Report finds the state of affairs in the US power market to be unsustainable. With current energy policies, the DOE concludes the US faces a 100-fold increase in longer, more severe power outages by 2030. To meet load growth and ensure a reliable power system, the report suggests more robust resource adequacy tests and raises the possibility of tightening regulation across the power sector.

Wood Mackenzie view

When it comes to power demand, the US has too much of a good thing. Power demand in the country is rising rapidly, reflecting leadership in AI, advanced manufacturing and a buoyant economy. Wood Mackenzie’s Grid Edge analysis notes that utilities have committed to meeting around 64 GW of large loads, equivalent to a 12% rise in US power demand. However, uncommitted load growth is even higher at around 132 GW, meaning power demand could accelerate further. These load numbers are compiled via our bottom up, large load tracking by our Grid Edge team.

Transport electrification is a structural trend, despite the One Big Beautiful Bill Act (OBBBA) axing incentives for battery electric vehicles (BEVs). Even under a revised post-OBBBA outlook, BEVs will reach around an 18% share of total US passenger car sales by 2030, according to Andrew Brown, Wood Mackenzie’s Director for Transport Modelling. Electrolytic hydrogen and residential and industrial sector electrification remain long-term tailwinds for load growth.

Historically, renewable power has been the fastest way to meet load. From 2019 to 2024, the US added over 160 GW of wind, solar and energy storage combined, nearly five times higher than natural gas-fired power installations. Regional grid operators like ERCOT, PJM and MISO have been hot spots for renewable power growth nationally. But with the stroke of a pen on 4 July, the Trump administration ushered in sweeping changes that will hamstring the renewable sector.

Under the OBBBA, developers have a shorter time window to claim 45Y and 48E tax credits due to new project completion timelines. Costs for new capacity will be higher as developers will need to diversify out of China’s supply chain, owing to potentially strict treasury guidance on foreign entity of concern rules. With these constraints, we think it is possible that renewable power installations could be reduced by around 100 GW by 2030 compared to our base case expectations.

Another new headache for renewable power developers is the copper tariffs announced on 8 July. Copper makes up around 11% of costs for wind, solar and energy storage, according to Wood Mackenzie’s Supply Chain and Cost Hub. Long lead times for new US copper capacity will delay any domestic supply response and lead to higher copper prices, according to Research Director Charles Cooper. When combined with tariffs announced earlier this year, the latest tariffs further erode the economic competitiveness of wind and solar.

New natural gas capacity is expanding, but it will take time to have an impact. Gas turbine manufacturing capacity is maxed out globally. Gas turbine costs are well above power market prices and capacity markets in some cases – a challenge to the investment thesis for new natural gas-fired power. In a sign of how long adding new gas capacity will take, PJM’s Reliability Resource Initiative expects new natural gas-fired power to come online only by 2030.

The US could fall back on its ageing coal fleet. President Trump’s executive orders from 8 April included a two-year exemption to the Mercury and Air Toxic Standards (MATS) from the Environmental Protection Agency. Power plants not running MATS-compliant emissions standards could face lower operating costs, supporting power plant economics.

According to the US Energy Information Administration, 58% of all US coal retirements are expected to be in the Midwest and Mid-Atlantic regions. Talen Energy, Georgia Power, PacificCorp, the Tennessee Valley Authority (TVA) and Alliant Energy have all recently announced coal-fired power retirement delays.

Wood Mackenzie’s base case outlook is that the country has limits on how long it can prolong coal. The average age of the US coal fleet is 47 years, meaning most of the fleet is at the end of its economic life. By comparison, Asia’s coal fleet is around 15 years old and still has room to run. According to Ryan Sweezey, Head of Long-Term Power Modelling for North America, our base case outlook expects around 120 GW of thermal coal retirements between 2025 and 2035. It is unlikely that utilities will invest in major capital projects to prolong coal-fired power, Sweezey stated.

Facing multiple constraints, US power policy must evolve

New large load tariffs, policy support for domestic manufacturing and greater regulated power rate structures are all options major power markets should consider, according to Ben Hertz-Shargel, Wood Mackenzie’s Global Head of Grid Edge. Additionally, system operators, utilities and regulators need to accelerate the interconnection process. That it takes between 5 and 10 years to finalise interconnection agreements is a major delay to zero-carbon power growth. Energy sector permitting, while not addressed in the OBBBA, also remains a critical, untapped reform that would expedite project delivery for the US power sector.

Wood Mackenzie Horizons 

Staying power: how new energy realities risk extending coal's sunset is the latest in Wood Mackenzie’s Horizons series. Leveraging a new high coal demand case, the report explores the potential for a delay in peak coal demand by around 10 years. While there have been numerous predictions for peak coal, nobody has called it right – coal is now the single largest source of electricity generation in the world.

New realities facing global energy markets over the last 12 months sparked Tony Knutson, Global Head of Thermal Coal, to develop a new high case for coal demand. These include:  

• Renewed energy security goals, especially in Asia: across the region, coal is a strategic domestic resource that supports energy security, affordability and employment.
• Accelerating load growth across the world: in an era of rapid power demand growth driven by data centres, artificial intelligence (AI) and wider electrification, power markets may need to lean on coal like never before. This could slow down investment in lower-carbon alternatives.
• Emerging technology investment could shift to coal: advances in technologies such as carbon capture, use and storage (CCUS) and hydrogen co-firing could improve the emissions profile of coal plants, extending their operational life.

According to Knutson, the goal of the analysis is to spark debate about the future of power markets in the coming decades. The report includes four implications across coal supply, natural gas, renewable power and climate policy.

In brief

At the Pennsylvania Energy and Innovation Summit on 15 July, leading energy and technology announced US$90 billion in investments to position Pennsylvania as a leading hub in both energy and technology. The summit included investments in new natural gas-fired plants and upgrades to existing facilities like the Limerick nuclear power plant. Senator David McCormick, a Republican from Pennsylvania, concluded that the investments in the state show President Trump is serving the people of “Pittsburgh, not Paris”. However, most of the projects announced at the summit were already under development, planned, or will face construction challenges. Accordingly, the summit is unlikely to accelerate the administration’s AI ambitions.

The US Nuclear Regulatory Commission (NRC) announced it is reviewing the first utility-led construction permit for a small modular reactor (SMR). The Tennessee Valley Authority (TVA) plans to build a 300-MW GE-Hitachi reactor at the Clinch River facility. Reflecting renewed high ambitions for new nuclear in the Trump administration, the NRC is targeting a 17-month regulatory review process to put the TVA on a pathway for construction beginning in 2028 and first power by the early 2030s. This timeline depends on new reactor costs, government funding and continued US load growth.

Wood Mackenzie's 2025 New Technologies Outlook is a comprehensive assessment of 260 emerging technologies across 14 distinct groupings, introducing regional scoring for the US, China and Europe. The report evaluates innovations spanning electrification, materials, transport, nuclear, geothermal, carbon capture, hydrogen, energy storage and bioenergy. The report concludes that cumulative global investment requirements for new technologies range from US$72 trillion in a delayed transition scenario to US$117 trillion under a net zero pathway.

Sign up for the Inside Track newsletter via the form on this page for more on the 2025 New Technologies Outlook, coming soon. 

Other views

Beauty or a Beast? Everything the 2025 US Tax Bill Means for Energy – Noble Pendergrass

50% tariffs on copper? Assessing the potential impacts – Charles Cooper

BP corporate report: make-or-break for BP as leadership looks to rebuild investor confidence – Luke Parker

Carbon offset methodologies: an overview of the evolution of carbon offset methodologies and the role they play in the carbon offset market – Fernanda Abarzua Torres

Pentagon and Apple's US$900 million bet: how close is the US to an independent rare earth supply chain? – Suzanne Shaw

IMO 2050 Outlook for global marine fuels, July 2025 – Iain Mowatt

Quote of the week

“What we are surrounded by here is big, beautiful clean coal. This is the largest source of global electricity and has been for over a century… let’s celebrate American hydrocarbon production and the renaissance we’re entering.”

Our quote of the week comes from US Secretary of the DOE, Chris Wright. Embracing President Trump’s energy dominance agenda, Secretary Wright highlights the role that domestic thermal coal will have under the Trump administration.

Chart of the week

Wood Mackenzie expects natural gas demand to expand nationwide in our latest base case. One of the regions with the fastest-growing demand will be the US Gulf Coast. We expect this region to grow by 28 bcfd by 2050 – supported not only by exports, but by power, industrial and blue hydrogen sectors.

In response to rising demand growth, our latest report assesses how US Gulf Coast natural gas supply will evolve. The Permian and Haynesville each play a critical role in supporting most of the region’s expansion. Each region provides about 10 bcfd of growth to Gulf Coast demand centres at long-term peaks. Permian-associated gas production provides essential supply flexibility through enhanced pipeline connectivity across the region. Meanwhile, Haynesville non-associated production experiences accelerated growth into the mid-2030s, supporting West Louisiana's export ambitions.

Get The Inside Track 

Ed Crooks’ Energy Pulse is featured in our weekly newsletter, alongside more news and views from our global energy and natural resources experts. Sign up today via the form at the top of the page to ensure you don’t miss a thing.