As electricity demand surges to new heights, policymakers, utilities, and large electricity consumers are grappling with how to invest in the transmission system after decades of underinvestment. Current policy supports incremental buildout, which is reactive to new load and generation coming online. We are living with the costs of this approach: the transmission system is too small, brittle, and inefficient to provide reliable and low-cost power, support load growth, and integrate new generation. Recent emphasis on near-term affordability, instead of building out the grid, risks exacerbating these challenges.
New policy should support a different strategy: building ahead of demand. Proactively building a grid that is slightly oversized will enable faster growth, lower-cost power, and a more efficient electricity system. But it requires large-scale and immediate investment.
To weigh this policy shift, we can take lessons from two other countries that have taken starkly different approaches to grid investment: China and South Korea. China has committed to overbuilding transmission capacity to accommodate future demand, while South Korea has taken a more cautious approach, letting demand direct investment. Their experiences demonstrate the sharply asymmetric risks of underbuilding versus overbuilding the energy system.
China: building ahead of demand
China has employed a strategy of building its transmission system “moderately ahead of demand.” Its strategy has allowed it to integrate record-breaking gigawatts of clean power into the grid, provide reliable and affordable electricity, and support massive industrial and economic growth.
In recent years, China has invested more in its electrical grid than all other countries combined; the State Grid Corporation of China announced plans in January to invest an additional $574 billion in the electrical grid over the next five years. Building out transmission allowed China to integrate record-breaking amounts of new generation to the grid. In 2025, China accounted for nearly 60% of global electricity demand growth and consumed a third of the world’s electricity.
This record-breaking grid buildout has led to reliable and affordable energy. According to the China Electricity Council, power supply reliability across the country reached 99.9% in 2024, and the number of hours of urban blackouts has decreased by 97% since the 1990s. Meanwhile, the curtailment rate fell from 16% in 2012 to under 3% in 2022. As a result of increased generation and reliability, electricity prices for large industrial users have fallen 22% since their peak in 2015.
Cheap, reliable electricity has, in turn, supported China’s economic growth, industrialization, and dominance over strategic and energy-intensive technologies such as lithium-ion batteries and semiconductors. Many factors have contributed to China’s dominance over these two supply chains, including sustained state subsidies, control over the processing and refining of critical raw materials, and manufacturing at scale. But while electricity supply and prices have constrained manufacturing growth elsewhere (South Korea, for instance), abundant and cheap electricity has removed that constraint for Chinese producers. This has allowed China to build out electricity-intensive battery factories and semiconductor fabs faster than competitors and has provided companies with an incentive to stay and grow. China now controls over 80% of the lithium-ion battery supply chain and is on track to control 45% of global legacy semiconductor production capacity by 2027.
China’s electricity surplus is an advantage in the AI race as well. Goldman Sachs predicts that by 2030, China will have about 400 gigawatts (GW) of spare capacity, about three times the world’s expected data-center power demand at that time. U.S. data centers, on the other hand, could face an electricity shortfall of 44 GW.
South Korea: reacting to demand
South Korea’s experience illuminates the risks of underbuilding the transmission system. Like the U.S., South Korea has built transmission in response to electricity demand. It now has an undersized transmission system that constrains new energy generation, raises electricity prices, and limits industrial and economic growth.
In recent years, South Korea expanded its transmission system at an annual rate of just 0.34%, a lethargic growth rate that has diminished the value of electricity investments. From 2013 to 2023, renewable energy capacity increased sixfold, but generation only threefold, due in part to underdeveloped grid transmission and distribution systems that could not accommodate all that new power. By 2038, as much as 32% of South Korea’s solar and wind generation could be curtailed without improved transmission buildout.
The strain on South Korea’s grid translates into increased power prices, which have robbed Korean manufacturers of a crucial competitive advantage. In 2021, Korea’s industrial power rates were under $0.08/kWh—less than those of China or the U.S.—giving manufacturers a global edge in manufacturing semiconductor chips, steel, and other new technologies at low cost. In four years, they surged 75%, reaching $0.13/kWh in 2025, placing those advanced industries at risk and even driving some to invest in new facilities overseas. For example, Hyundai Steel announced this year that it would build a new electric arc furnace steel mill in Louisiana rather than in Korea, citing cheap and abundant local electricity.
Strained transmission and rising electricity prices are also hobbling the advanced industries driving global economic growth. South Korea’s global capacity share of advanced-node semiconductor manufacturing is projected to fall from around 31% in 2024 to 9% by 2032, as many manufacturers have fled to areas with cheaper, more accessible electricity. The Yongin semiconductor cluster, a planned $500 billion industrial fab site, provides a telling example. The project took six years to break ground due to delays in transmission line construction and is presently self-supplying about 1.9 GW of power to sustain minimal operations, far short of the 15–16 GW originally planned. The necessary infrastructure is expected to be completed in 2036. Researchers are now advising the government that “speed is what matters…substations and transmission lines must be built proactively before the fabs go into operation.”
Takeaways
China is not an economic model to emulate, but we can learn from its proactive approach to grid development. Buildout of transmission capacity ahead of demand has allowed massive amounts of new, low-cost generation to connect to the grid quickly; lowered electricity rates; and supported rapid growth in electricity-hungry sectors like batteries, semiconductors, and data centers. On the other hand, South Korea’s reactive approach to building transmission infrastructure has led to increasing electricity rates and loss of manufacturing to countries with cheaper electricity.
Even as American policymakers emphasize a manufacturing resurgence, our approach to building our own grid seems to be leading us in the same direction as South Korea: underinvestment, high costs, and threats to industry. The South Korean experience is more than a cautionary tale—it’s a familiar one. In South Korea, local opposition to projects is one of the biggest sources of delays, impacting 70% of projects since 2010, sometimes by up to 11 years. Local opposition to transmission and energy projects is infamously one of the biggest sources of delays in the U.S. as well. And while transmission buildout in the U.S. has not dropped to the same extremes as South Korea’s, recent reports from FERC reveal that buildout has slowed in the last decade and is lagging far behind national needs, jeopardizing U.S. industry. Insufficient transmission is cited as one of the leading causes of delays for data centers in the U.S. Without changes, we likewise risk losing manufacturers to our competitors.
Building ahead of demand comes with some key challenges—namely, who should foot the bill? The U.S. has historically left developers to supply their own transmission, an approach that accommodates local transmission (albeit slowly), but fails to encourage sufficient investment into long-distance, interregional transmission. China and South Korea each demonstrate, in their own way, that transmission doesn’t build itself—it takes deliberate planning and capital committed ahead of need. U.S. electricity remains reliable and cheap. Keeping it that way will require replacing this reactive model with a proactive one, built not only to meet demand, but to strengthen the industrial base.