Much of the United States electricity grid is outdated and ill-prepared for the influx of renewable energy projects waiting to be connected. There are various reasons for the poor state of the country’s transmission infrastructure, including fragmented ownership and management across states and regions.
Meanwhile, the rapid rollout of data centers is driving up the country’s power demand, while renewable energy capacity grows in non-conventional regions, underscoring the need for investment in U.S. grid modernization.
An Aging Grid System
Most of the United States electricity grid was developed in the 1960s and 1970s, and by 2023, over 70% of the grid was more than a quarter of a century old. Between the late 1970s and the early 2000s, the U.S. transmission grid expanded at around 2% per year.
An estimated 31% of U.S. transmission and 46% of distribution infrastructure are already near or past their intended lifespans, according to analysis from the Bank of America Institute.
A 2021 presentation from the advisory firm the Brattle Group stated that transmission infrastructure typically lasts between 50 and 80 years. It also said that replacing infrastructure that’s nearing the end of its lifespan could cost an estimated $10 billion a year.
In 2023, American Electric Power, which owns 40,000 miles of transmission infrastructure, said that 30% of its power lines would need to be replaced over the next decade.
One of the main issues utilities are facing is the shift in energy sources. While fossil fuels, such as oil, coal and natural gas, are generally transported by rail or pipeline to be burned in power plants near cities, many new renewable energy projects are in rural regions of the country.
To connect wind and solar projects, utilities must build many more miles of power lines to areas far beyond the urban hubs where most of this infrastructure is currently located.
As other countries invest heavily in their transmission infrastructure to meet rising power demand and adapt to a greener energy mix, the United States must overhaul its grid to keep up. For example, China has an extensive, modern grid, which supports large-scale AI deployment. To keep pace with China’s growth, the U.S. must also invest heavily in grid modernization.
Policy, Progress and Challenges
The Bipartisan Infrastructure Law, introduced in 2022 under the Biden administration, included $30 billion to improve and modernize the grid, with $2.3 billion available to states to strengthen grid resiliency.
The Biden administration also launched the Building a Better Grid Initiative, aimed at accelerating the development of new and upgraded transmission through new programs funded by BIL and existing programs.
In 2024, the Department of Energy published its 10th Liftoff report, which outlined a pathway to scale up grid solutions, including advanced transmission and grid-enhancing technologies such as advanced conductors, dynamic line rating, advanced power flow control, and topology optimization. Deploying innovative grid technologies was expected to increase transmission and distribution capacity in the United States significantly.
While this funding and policy push helped to spur action on the long road to grid modernization, several hurdles remain. The fragmented U.S. grid is owned and managed by hundreds of different companies across different states and regions, making a federal overhaul of the network nearly impossible.
In addition, modernizing the grid will require importing various components, such as high-voltage transformers from South Korea, China, and Germany; steel from Mexico, Canada, Asia, and Europe; and substation equipment from various countries. The need to import so many components results in long delays in replacing and upgrading parts.
Where it’s Heading
Investments in grid modernization are projected to rise by 23% between 2025 and 2030, following a 27% increase between 2020 and 2025, according to a Wood Mackenzie analysis. Meanwhile, a growing range of companies, including private equity firms, are investing in transmission infrastructure.
With power demand set to rise significantly in the coming years, accelerating investment in the grid will help meet this demand. By 2030, data centers are expected to use between 325 TWh and 580 TWh of electricity per year, equivalent to 6.7% to 12% of all U.S. consumption, according to a 2025 Lawrence Berkeley National Laboratory report.
“That kind of load growth is prompting regional planning authorities to accelerate transmission development,” Florencia Feleder, a spokesperson for the energy firm Avangrid, told Reuters. Sustained load growth is requiring more “long-term infrastructure planning” and “creating long-term visibility for component suppliers and reinforcing the need for increased production capacity across the supply chain,” she added.
Utility companies are also feeling pressure to enhance their transmission infrastructure to better withstand extreme weather events, following the severe floods, wildfires, and hurricanes of recent years.
While utilities have taken significant efforts to enhance transmission infrastructure across the United States over the past decade, major bottlenecks persist. This could be addressed through stronger federal regulation and greater openness to investment from a broader range of sources to accelerate grid modernization.
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