The US AI brings "power acceleration," and energy storage may be the overlooked solution

AI data centers are driving a surge in electricity demand in the United States, with energy storage potentially becoming a key solution.

According to the latest research from Huatai Securities, artificial intelligence data centers (AIDC) are significantly increasing electricity demand in the U.S., with an expected power gap of 18-27GW by the end of 2026. In the context of a long construction cycle for traditional power sources, electrochemical energy storage is expected to become an important means to alleviate power shortages.

Based on the September update from the U.S. Energy Information Administration (EIA), the forecast for electricity growth in the U.S. for 2025/26 is 2.3%/3.0%, respectively. Huatai Securities estimates that based on the latest capital expenditure assumptions for data centers, the U.S. is expected to see an additional 6-13GW of AIDC electricity demand annually from 2025 to 2026, far exceeding historical growth rates. By the end of 2026, the cumulative power gap in the U.S. electricity system could reach 18-27GW.

The long construction cycle of traditional power sources makes it difficult to respond quickly, while energy storage, with its rapid deployment advantage of 1-1.5 years, is expected to become a crucial solution that the market has overlooked. For investors, this trend will drive U.S. electrochemical energy storage demand to maintain a growth rate of over 50%, while benefiting battery manufacturers, energy storage integrators, backup power equipment, and fuel cell-related companies.

Data centers drive a sharp rise in U.S. electricity demand, power shortages push up market electricity prices

According to the latest EIA data, U.S. electricity growth reached 3.1% in 2024, with forecasts for 2025/26 indicating growth rates of 2.3%/3.0%, respectively. Based on updated capital expenditure assumptions for data centers, it is expected that the U.S. will see an additional 6-13GW of AIDC electricity demand annually from 2025 to 2026.

Huatai Securities states that the incremental load forecast for six key regions (which account for 55% of the highest load in the U.S. and cover major data center states) is expected to average over 15GW annually, meaning that non-data center areas will also see an incremental load of over 2GW annually. Overall, the highest load in the U.S. is expected to maintain a growth rate of over 2%, which is four times the 0.5% compound growth rate from 2016 to 2024.

Due to the scarcity of grid connections and power supply, data centers are locking in supply at levels far above market electricity prices. Large tech companies and nuclear power companies have signed direct connection agreements at $100/MWh, which, considering a $20 transmission fee, totals $120, nearly double the average wholesale electricity price of $41 in PJM for 2024.

The rising capacity electricity prices quantify the expectation of power shortages. The capacity price in the PJM electricity market for the 2026/27 cycle reached $329.17/MW-day, which is 22% higher than the capacity price for the 2025/26 cycle from last year's bidding. This increase is equivalent to residential and commercial electricity prices rising by 47% and 59%, respectively.

Energy storage becomes a key choice for recent alleviation solutions

The slowdown in coal power retirements can partially alleviate pressure. According to the latest EIA statistics, the U.S. will retire 6.2GW and 3.4GW of coal power in 2025 and 2026, respectively, resulting in a cumulative replacement demand of 9.6GWHuatai Securities estimates that under the scenario where half of the coal-fired power plants are delayed in retirement, there will still be a shortfall of 11-20GW in short-term load.

However, the long construction cycle for new gas and nuclear power plants poses a major challenge. In 2024, new orders for gas turbines in the United States will reach 11.4GW, but considering the lead time of three years, they will not be operational until the end of 2027 at the earliest. In terms of nuclear power, although the Trump administration signed an executive order in May this year to accelerate the expansion of nuclear energy in the U.S., aiming for 400GW of operational nuclear power by 2050, the visibility for new nuclear units before 2030 is low due to the 4-6 year approval process and 6-8 year construction cycle required for U.S. nuclear projects.

Huatai Securities stated that unlike the capacity bottlenecks and lengthy installation and commissioning processes of gas turbines, the supply chain for solar and storage is relatively loose, with a fast deployment pace, typically expected to be operational within 1-1.5 years.

Referring to PJM's assessment of independent storage providing a 40% derating factor in the grid, the corresponding storage installation demand is 28-51GW, which translates to a 2-year demand of 110-205GWh based on a 4-hour configuration. Compared to the 37GWh of electrochemical storage installation in the U.S. in 2024, a sustained growth rate of over 50% is required.

Solid oxide fuel cells (SOFC) also demonstrate flexibility advantages. SOFC products from companies like Bloom Energy in the U.S. feature small modularity, clean stability, and distributed flexibility, making them suitable for data center power needs. In November 2024, American Electric Power (AEP) signed a 1GW fuel cell supply agreement with Bloom Energy, but considering that SOFC has a capacity of only about 2GW, the scale is relatively limited.

Huatai Securities further pointed out that if the U.S. begins a rate-cutting cycle in the second half of the year, the demand for solar and storage installations will be driven by a "double hit": for every 0.5 percentage point decrease in interest rates, the equity return rate of solar and storage projects can increase by 0.5 percentage points; at the same time, the rate cut reduces the risk-free interest rate, further enhancing the relative attractiveness of investment returns for solar and storage projects