The outlook for the power generation sector in 2025 promises a continuation of the energy transition, though there’s plenty of debate about the direction of the industry. Advocates for renewable energy, particularly in the U.S., are concerned about how the incoming Trump administration—with its support for fossil fuels—could impact the growth of clean technologies. Utilities continue to wrestle with regulatory uncertainty, knowing that emissions standards for power plants will likely continue to be in flux, and the permitting process for energy projects will also see more change. Analysts mostly agree that natural gas will be a winner, with more gas-fired power plants being built, and the market for exports of liquefied natural gas (LNG) growing. The U.S., already the world leader in natural gas production, will likely grow its already record output. There’s also widespread agreement that demand for electricity will continue to rise, driven by the need to power artificial intelligence (AI) and data centers. The International Energy Agency recently said it expects global electricity demand will grow by 4% in the coming year.
Price Volatility
Financial experts involved in energy markets expect prices will remain volatile, not only in 2025 but for at least a few years to come. Moody’s Investors Service recently said that power reliability costs associated with increased deployment of renewable energy could rise to $435 billion worldwide by 2030. Nuclear power is expected to continue its resurgence as more countries look to install reactors. Growth, though, likely will be dependent on government support, due to the costs associated with design and development of nuclear technologies. Demand for power, and how to meet the increasing need for energy, were among the topics discussed by executives who in recent weeks have provided POWER with their insight about what to expect from the energy industry in 2025. Energy storage, renewables, supply chains and more were all mentioned as key issues to watch in the coming year. Andrew Tang, vice president, Energy Storage and Optimization for Wärtsilä Energy, told POWER that grid-scale battery energy storage will need to grow to support decarbonization of the power generation sector. “In an effort to reach these goals, (e.g. ambitious climate targets from COP29 and the rapid expansion of AI infrastructure), energy storage projects will continue to grow in size and scope,” said Tang. “The size of energy storage projects has been steadily increasing to the multi-gigawatt-hour scale and will continue to do so next year. Energy storage systems will continue to be increasingly geared towards energy shifting, driven by the ever-growing penetration of intermittent renewable energy generation and the concomitant need to store energy for dispatch in times when supply and demand are mismatched.” Tang continued, “At the same time, dedicated renewables firming requirements are popping up in a diversity of markets globally. As these projects move closer to population centers, addressing challenges like noise mitigation and fire safety will become even more critical.” Tang said storage will be key to continued deployment of renewable energy resources. “The growth of energy storage will continue alongside the drive for renewable energy expansion. We’ll see the supply chain evolve in 2025, with the industry moving toward further diversifying manufacturing resources to ensure that supply meets both customer cost and market requirements.”
States, Business Take on More Responsibility
Al Subbloie, founder and CEO of Budderfly, a company involved in energy efficiency, distributed energy networks, and VPPs, told POWER: “In 2025, the evolving political landscape will change the momentum of our energy transition. Almost immediately, we will see states and private businesses take on greater responsibility as federal incentives face uncertainty. “This shift will also prompt a more strategic approach to how we deploy energy solutions, with a deeper focus on creating both environmental and economic benefits. Energy efficiency will be a cornerstone of this—not just because it’s the ‘right thing to do’ but because it delivers undeniable ROI [return on investment]. As a result, I expect the next wave of energy efficiency will be powered from the middle market up. These organizations will increasingly turn to new innovations that boost their bottom lines, align with customers’ growing sustainability demands, and help us advance our climate goals.” Ahmad Ghahreman, CEO, president and co-founder of Cyclic Materials, a group involved in the recycling of rare earth elements (REEs), said, “REEs are vital to developing many devices and products from data centers and wind turbines to cell phones, electric vehicles (EVs), and power tools. In 2025 we will see a massive shift in the recycling of REEs. While EVs and clean energy will remain the biggest drivers of demand and most significant sources of recycled REEs, the robotics industry will grow to become a major player in the market. “With companies striving to meet their ambitious carbon reduction targets for 2030, the race to reduce carbon footprints and landfill waste is on. Nowhere is the drive for circularity more critical than in key metals markets, where recycling doesn’t just benefit the environment—it also tackles supply chain risks and geopolitical pressures head-on.”
Virtual Power Plants
Mathew Sachs, a senior vice president for CPower working on strategic planning and business development, told POWER about the factors that will drive the growth of VPPs. “The number-one driver for VPPs is going to be load growth driven by computing and facility load for AI and data centers. AI is like a modern-day Manhattan Project. It’s become imperative for the U.S. to lead, for both security and economic reasons. Given the security concerns, we would not be surprised to see the federal government get involved to ensure there’s enough power for AI.” Sachs said, “Wherever the supply comes from, we will have to deal with transmission and distribution constraints within the existing grid infrastructure. However, we can’t rapidly build out infrastructure, so we’re going to have to rely on resources we already have in the near-term. That means turning to VPPs, which can meet increases in demand now.” Ken Schisler, senior vice president, Law & Policy for CPower, said, “Improving access to data is a key enabler of growth that is often overlooked in VPP deployment. However, data access issues have become a federal and state concern. The more that states and the Federal Energy Regulatory Commission do to make data accessible, the more scalable VPPs will be across the country.” Schisler noted the challenges for the energy industry around power generation, transmission, and distribution. “Roadblocks that were erected by the regional transmission organizations (RTOs) and independent system operators (ISOs) in their efforts to facilitate participation by distributed energy resources (DERs) under FERC Order 2222 will become evident and participation will be slow. Although you may hear that DER participation models have been approved and implemented and that participation will be starting in the next year or two, the fact is that those models are far from being perfect and fulfilling FERC’s vision. And because the RTOs and ISOs implementation of Order 2222 have fallen well short of that vision for promoting participation in VPPs, the impacts will start to be seen.”
Impacts for the Building Industry
Amit Gupta is founder and and CEO of Aeroseal, a group that provides advanced air sealing solutions for sustainable buildings and homes. Said Gupta: “In 2025, the building industry will see even more transformation as proven solutions for energy retrofits like heat pumps, better insulation, and advanced weatherproofing are used to improve existing buildings without costly overhauls. Retrofitting commercial properties can cut energy use by up to 40%, lower emissions in older buildings by up to 70%, and create over 100,000 U.S. jobs each year—making them a growing focus for stakeholders in commercial real estate. “With rising utility costs putting financial strain on property owners and homeowners, there will also be more demand for climate-resistant materials and innovative designs to reduce the impact of extreme weather and keep heating and cooling costs down,” said Gupta. “While federal climate policies may fluctuate in coming months, state governments and private sector leaders will step in to sustain progress—not just because it’s the ‘right thing’ to do but because it delivers value and better business outcomes. As such, the demand for proven, scalable solutions will only continue to grow, and 2025 will see even more innovation and collaboration to meet these needs.” —Darrell Proctor is a senior editor for POWER.
