The Power and Players Behind Economic and Real Estate Development

This shift wasn’t due to energy becoming less important, but rather, to gains in energy efficiency—particularly in areas such as lighting—and, crucially, the offshoring of many energy-intensive manufacturing operations. Meanwhile, countries such as China saw both GDP and energy use surge in tandem.

That dynamic is changing, and the US is entering a new era of energy consumption. Real estate developers, investors, and planners should be prepared to engage deeply with energy and electricity markets. Understanding how energy demand will shape where and how people live, work, and manufacture will be key to capturing opportunities in the evolving economy.

Generating and delivering electrical energy is an expensive, complex, and inherently risky endeavor with significant environmental implications. As a result, most utilities operate as monopolies or quasi-monopolies, a structure that has led to the development of a vast and layered regulatory framework overseeing every aspect of power generation, distribution, and pricing.

These dynamics, in turn, have fostered a deeply risk-averse and conservative approach to building and maintaining the infrastructure that powers our economy.

TYPES OF ELECTRICITY SUPPLIERS AND STRUCTURES

Large-scale electricity consumers, such as data centers and manufacturers, must navigate a highly fragmented network with more than two thousand electric utilities across the US. These include:

• Investor-Owned Utilities (IOUs) (e.g., Con Edison)
• Municipally Owned Utilities (e.g., Los Angeles Department of Water and Power)
• Electric Cooperatives (e.g., Pedernales Electric Cooperative, Jackson EMC, etc.)
• Federal Power Agencies (e.g., Tennessee Valley Authority)
• Independent Power Producers (IPPs) (e.g., Calpine)

Further complicating this landscape is the wide range of utility structures. Providers may be vertically integrated—managing generation, transmission, and distribution under one entity (e.g., Georgia Power)—or operate in more limited capacities. Some specialize solely in generation, others in high-voltage transmission (e.g., Transbay Cable), and still others in local distribution, delivering power to end users.

A single state can host multiple utility types with overlapping service areas. Washington State, for example, includes electric co-ops, municipal providers, and IOUs—each with distinct priorities and regulatory frameworks.  

When undertaking a new project that requires a significant commitment of electrical power, developers must navigate the typical hurdles associated with real estate development—such as zoning approvals, site plans, architectural reviews, traffic impact studies, community benefit agreements, and building code compliance.

Beyond these standard requirements, developers must also engage with the local utility provider to secure the necessary energy infrastructure. In cases where additional distribution facilities—such as transmission lines—are needed, coordination may extend to regional transmission organizations (RTOs), which are nonprofit entities responsible for managing the flow of electricity over large geographic areas (e.g., NYISO in New York and New England), as well as the owners of local “last-mile” distribution networks (e.g., Baltimore Gas and Electric).

These various entities often operate independently, and their priorities and processes may not align. All of them are subject to a complex web of regulations enforced by federal, state, county, and municipal authorities.

THE SHIFT IN ENERGY DEMAND

This intricate utility landscape is about to face even greater pressure. US electrical utilities are confronting a challenge they haven’t encountered in two decades: adding significant new power supply to meet demand.

Over the past twenty years, demand for electricity in the US has grown only modestly, driven in part by the widespread adoption of energy-efficient appliances, industrial equipment, and building systems, as well as the offshoring of mass industrial processes. But that trend is set to change. Goldman Sachs now predicts a 35% increase in US electricity demand over the next decade–a sharp contrast to the 8% growth seen over the previous twenty-year-period.[i]

Global electricity demand grew by 4.3% in 2024 and is projected to continue increasing at nearly 4% annually through 2027.[ii] Over the next three years, electricity consumption worldwide is expected to rise by an unprecedented 3,500 terawatt-hours—equivalent to adding more than the annual electricity use of the country of Japan each year.

This anticipated surge is driven by the accelerating electrification of industries, onshoring of manufacturing, increase use of heat pumps, electric vehicle adoption—and particularly—the growing electricity requirements of data centers, including the power used to generate Artificial Intelligence (AI) in data centers.

Forecasts suggest that the data centers and the demand from AI uses will be one of the main drivers of new investment. In fact, the Goldman Sachs analysis predicts that data centers may grow from less than 2% of US electrical usage today to perhaps 4% by the end of this decade, making up over 20% of the increased demand.

The forecast suggests a transformative period for the US power sector, requiring significant infrastructure investments and grid modernization to meet projected electricity consumption. Additionally, factories, electric vehicles, and data centers will increasingly compete for limited power resources, driving up prices and benefiting utilities and users with long-term power contracts already in place. 

REAL-WORLD ENERGY DEVELOPMENT SCENARIOS

The following case studies illustrate a range of real-world scenarios in which developers seek to secure substantial power commitments—highlighting how various utility structures and regulatory entities interact in the process.

Microsoft and Three Mile Island

Microsoft, like many major tech companies, is pursuing aggressive carbon neutrality—and even carbon negativity—goals while simultaneously increasing its energy consumption to support growing AI operations.

To help balance these priorities, Microsoft signed a twenty-year power purchase agreement (PPA) with Constellation Energy to buy 835 megawatts of nuclear power. The energy will be generated by restarting the long-shuttered Three Mile Island nuclear power plant, which is slated to reconnect to the PJM grid in 2028. The electricity will power Microsoft’s data centers across the Mid-Atlantic and Midwest regions served by PJM. Constellation has stated that, under the agreement, Pennsylvania taxpayers and ratepayers will not bear the cost of the plant’s restart. However, the company plans to pursue federal funding through the Inflation Reduction Act to support the refurbishment.[iv]

This type of power deal is the simplest from a regulatory and political standpoint, as it leverages existing infrastructure, expands grid capacity, maintains stakeholder relationships, and enables Microsoft to claim 100% carbon-free energy use.

Constellation Energy vs. Baltimore Gas and Electric Company (BGE)

Further south in Maryland, Constellation Energy has proposed reconfiguring and potentially expanding one of its existing nuclear facilities to accommodate on-site data center development. The plan envisions building data centers “behind the meter” at the company’s 1,756-megawatt Calvert Cliffs nuclear plant—meaning that the facilities would draw power directly from the plant rather than from the public grid.

Constellation argues that this setup would provide tech companies with access to carbon-free energy without burdening the existing grid, while requiring private developers to cover the costs of any necessary distribution infrastructure upgrades. The proposal, however, has sparked controversy.

Baltimore Gas and Electric, which operates the local electric grid and would forgo revenue from distributing electricity to the proposed data centers, has filed complaints with regulators to block the project. BGE contends that bypassing the grid would be unfair to current ratepayers and that widespread adoption of behind-the-meter developments could undermine grid stability. The Maryland Public Service Commission is currently reviewing the proposal and will ultimately decide whether the project can proceed.[v]

This type of behind-the-meter configuration could represent the future of data center and other energy-intensive industrial development. However, the Calvert Cliffs case highlights the regulatory, economic, and infrastructure challenges of directly integrating major energy consumers with existing power generation facilities.

TerraPower and Data Center Energy Innovation

TerraPower, a nuclear innovation company, is partnering with several major data center operators to explore the use of advanced small modular reactors (SMRs) to power data center campuses.

Through a series of strategic agreements and memoranda of understanding (MOUs), TerraPower is evaluating the deployment of its Natrium reactor technology—an advanced nuclear design that combines a sodium fast reactor with molten salt-based energy storage. The goal is to enable behind-the-meter, carbon-free power generation directly on or adjacent to large-scale data center campuses.

Initial efforts are focused on regions where energy demand is rapidly increasing and regulatory environments are becoming more supportive of next-generation nuclear technologies.

This case study highlights the growing trend of integrating innovative power generation solutions into energy-intensive infrastructure, with advanced nuclear emerging as a viable path to achieving carbon-free reliability at scale.

BUILDING THE FUTURE AT THE INTERSECTION OF ENERGY AND INNOVATION

Whether a developer is navigating traditional grid relationships, pioneering behind-the-meter solutions, or exploring next-generation nuclear technology, success hinges not just on engineering or policy—but on people. Like any other industry, cultivating strong relationships with stakeholders is essential. Ultimately, energy isn’t just a service, it’s the foundation of our digital economy, our cities, and our future. Understanding its evolving and growing role, how it’s sourced and supplied, is not an option for those shaping the built environment. Those who can bridge the gap between innovation and collaboration will power not just their own projects—but a new era of sustainable development.

SUMMIT #18

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Note from the Publisher

Gunnar Branson | AFIRE

Sector Intersection: Exploring the Convergence of Energy and Commercial Real Estate

Benjamin van Loon | AFIRE

Powering Future Development: The Power and Players Behind Economic and Real Estate Development

Jeff Kanne + Darob Malek-Madani | National Real Estate Advisors

US Solar in 2025: What Matters in the United States for Solar Investors

David Wei | SolarKal

Decentralized Energy: Energy Systems, Decentralization, and the Built Environment

Dr. Michael Ferrari | AlphaGeo

Let’s Be Honest – It’s About NOI

Kevin Berkemeyer | Station A

Targeted Investment: Untangling the Building and the Grid

Elena Alschuler + Marisa Mendenhall + Haya El-Merheby + Brian Klinksiek + Julie Manning | LaSalle Investment Management

Faring On Adoption: How Does US Commercial Real Estate Fare on Green Energy Adoption?

Andrea Savio | Georgetown University

Powering the Future: Energy, Trade, and Climate Risks in Global Real Estate

Tanja Milosevic | Grosvenor

Root Causes: An Honest Addressing of the Climate Crisis

Asaf Rosenheim | Profimex

Grid-Interactive Multifamily: Beyond Efficiency: Multifamily Buildings as Energy Assets

Thomas Stanchak | Stoneweg

Power as a Platform: The Role of Real Estate in the Grid of the Future

Susan Uthayakumar | Prologis

Unlocking Abundance Together: How Real Estate and Energy Stakeholders Can Power Growth and Investment

Derek Kaufman + Joshua Seawell | Inclusive Abundance + Mike Kingsella | Up for Growth

Investing in Tech Adjacencies: Leveraging the National Tech Buildout Beyond Data Centers

Tom Kennedy + Luigi Cerreta | JP Morgan

Navigating the Labyrinth: The US Regulatory Landscape at the Intersection of Nuclear Energy and Data Centers

Amy Roma + Chip Cannon + Porter Wiseman | Hogan Lovells

Transmission Alley: Rural Real Estate, Railways, Renewables, and the Future of Data Infrastructure

Michael Maloff + Gary Goodman | Dentons