Summary
| Electricity policy debates are dominated by two challenges: 1. Building enough capacity to power the U.S. industrial economy and support data center expansion. 2. Containing retail power prices and insulating American families from rate hikes. Fortunately, technical solutions are available and can be deployed—if policymakers act now. Policy change can enable a phased approach that addresses both challenges simultaneously: 1. Phase One (1-5 years): deploy improvements to system efficiency to increase the grid’s capacity and reduce strain. 2. Phase Two (3-7 years): upgrade existing infrastructure, adding capacity without major regulatory oversight. 3. Phase Three (5+ years): invest in new capacity, transmission, and other infrastructure to support economic growth. |
A Grid Caught Between Capacity and Cost
American electricity policy is caught between two competing pressures: building enough generation and transmission capacity to power a growing industrial economy—including the rapidly expanding data center sector—and keeping retail power prices from squeezing American families.
To meet surging electricity demand, the U.S. needs to add at least 100 GW of peak capacity, double regional transmission capacity, and increase interregional transmission capacity by more than five-fold in the next 10 years. Policy has been a systemic obstacle to building energy infrastructure; without big changes, industry will build less than what the economy needs and at greater expense.
While planning for investments to expand the grid’s capacity, policymakers must recognize that Americans are already under pressure from escalating residential electricity prices, which rose nearly 10% nationwide in 2025—more than three times the rate of inflation. Increased demand, extreme weather, geopolitical turmoil, and aging infrastructure are all contributing to price hikes. Some policymakers have reached for quick fixes to this complex problem, such as rate freezes, deferred investment, and data center bans, but these policies threaten long-term reliability and affordability.
The good news is that policymakers can expand grid capacity and contain costs if they start acting now. Several cost-effective technical solutions are available immediately that would lay the groundwork for larger investments needed in the mid- to long-term. These solutions unfold across three distinct phases.
In phase one, rapid-deploying improvements to system efficiency can increase the grid’s capacity and reduce strain. Phase two solutions leverage upgrades within existing infrastructure, adding capacity without triggering major regulatory oversight. These near-term solutions buy time for phase three: transformational investments in new capacity, transmission, and other infrastructure to support economic growth.
Delivering all these solutions is possible if policymakers move quickly. For each solution, there is a lag between enabling policy and implementation. For some policies, like meaningful permitting reform, policy change today will ensure that more projects come online in five or more years.
The upside is that the work is shared: many policymakers, from state public utility commissioners to members of Congress, can advance security, reliability, competitiveness, and affordability in the energy system. And as issues around electricity costs and policy climb into public view, policymakers are more motivated than ever to take on the difficult work of meaningful reform.
Phase One (1-5 years): System Efficiency
The electricity system is designed to meet peak power demand under extreme conditions that the U.S. sees in just a handful of hours each year. Most of the time, there’s considerable slack in the system—slack that smarter tools and better price signals can mobilize quickly at minimal cost to customers. Starting on these solutions now buys time and political support for more substantial system upgrades in Phase Two.
Grid-enhancing technologies (GETs) can increase power line carrying capacity, reduce congestion, and save ratepayers billions of dollars. They include solutions like dynamic line rating (DLR), which uses sensors and weather data to calculate a line’s real-time carrying capacity, and power flow controllers, which reroute power away from congested lines.
Virtual power plants (VPPs) aggregate distributed energy resources (DERs) like rooftop solar, home batteries, smart thermostats, and EV chargers, and allow grid operators to dispatch them like a traditional power plant. The North American VPP market has already reached 37.5 GW of flexible capacity, and DOE estimates that increasing VPP capacity to 80–160 GW by 2030 could defer up to $10 billion in annual grid costs.
Demand response (DR) programs compensate customers for cutting back on power usage during periods of peak demand, reducing stress on the grid and buying time for investments in new transmission and generation capacity. Estimates suggest that DR programs could meet over 10% of national peak electricity demand by 2030.
Phase Two (3-7 years): Uprate Existing Infrastructure
The next tranche of solutions come from increasing generating or transmission capacity using existing physical and regulatory infrastructure. These upgrades avoid the siting and permitting burdens of alternative investments in new capacity.
Reconductoring replaces existing lines with advanced conductors capable of carrying higher voltages. These projects can double carrying capacity in fewer than three years at half the price of installing new lines.
Nuclear uprates and restarts add generation capacity to existing nuclear facilities. These typically represent marginal improvements; in the last 50 years, 171 uprates have added 8 GW to the grid. Uprates require a license amendment from the Nuclear Regulatory Commission (NRC), a process that NRC aims to complete in a year or less. Another category of nuclear capacity additions—restarting recently shuttered reactors like Palisades (805 MW) and the Crane Clean Energy Center (835 MW)—could revive additional clean firm capacity.
Upgrading natural gas turbines similarly offers near-term capacity gain at existing sites. Aging gas plants use older, less efficient turbine configurations; upgrading or replacing turbines and other equipment could add capacity to the grid with minimal regulatory hurdles.
Co-locating battery storage at existing solar and wind sites has added 47 GW of capacity to the grid in only eight years. While standalone battery projects face multi-year permitting timelines and complicated interconnection processes comparable to new generation, co-located battery storage can, in some cases, leverage existing permits.
Phase Three (5+ years): Build New Infrastructure
Large-scale investment is essential to replace aging infrastructure, dramatically improve connectivity, and deliver next-generation technology solutions—but permitting, interconnection, and transmission planning have long stood in the way. Overhauling these policy obstacles is the big work that will determine whether new capacity comes online at the scale and speed the U.S. economy needs.
Permitting reform is essential for supporting large-scale infrastructure buildout. Energy projects take an average of 2.5 years to complete the NEPA review process, and transmission lines take 4.3 years. State and local opposition compounds this: from 2010–2021, 73% of energy projects that faced legal challenges were contested at the state or local level. Recent federal reform efforts have targeted litigation rather than aiming for large-scale, systemic reform.
The interconnection queue should allow grid operators to connect new projects to the system methodically while maintaining reliability. In reality, the queue is an obstacle to grid expansion. Approval timelines have doubled in recent years and 2,060 GW of generation and storage capacity are sitting in the queue—that’s nearly twice the power capacity presently operating. Time in the queue is exacerbated by a transmission system that is too small to accommodate rapid growth.
Robust interregional transmission can help grid operators maintain reliability, manage weather impacts, reduce power costs, and access more power resources in times of peak demand. Studies suggest that appropriate connectivity could save the U.S. power system nearly a billion dollars a year. Policy and market incentives, however, cannot enable the scale of interregional transmission necessary to build the larger, more dynamic, more reliable grid that the U.S. economy needs.
Why the Phased Approach Matters
Technical solutions can reconcile electricity affordability with the large-scale buildout the grid needs. Efficiency improvements, distributed resources, and infrastructure upgrades are lower-cost and faster to deploy than new capacity—and they can start bringing down electricity prices while the longer-term buildout gets underway. Soon-to-be released Council analysis found a maximalist approach to these solutions, bringing on every technically achievable improvement, could deliver more than 500 GW of new capacity.
The backlash against large load growth, new capacity, and grid investment is operating under the assumption that long-term investments must continue to significantly increase electricity prices. That’s not true. Major investments in new infrastructure are still necessary, but the costs can be strategically managed and distributed fairly across all ratepayers, including large loads such as data centers.
The three-phase framework is not a permission structure to move slowly on consequential long-term challenges. On the contrary, it is a mandate for policymakers at all levels of electricity governance to move quickly on the solutions within their jurisdiction.
The United States’ industrial ambitions are outpacing its electricity system. Policymakers who act decisively across all three phases can deliver an affordable, reliable, and competitive grid. Those who wait—or trade affordability today for underinvestment tomorrow—will face a harder problem later, at far greater cost.