Utility Construction Assessment

Introduccion In the decades ahead, the need for more electricity will be fueled by the level and composition of expected economic growth. Artificial intelligence and cloud computing, for example, require massive, continuous power for data processing and infrastructure cooling. Simultaneously, the sweeping transition to electric vehicles (EVs) and electric building heating will shift traditional fossil fuel dependencies directly onto the electrical grid. Longer term, intensifying climate extremes will drastically increase the frequency and duration of air conditioning use, compounding the strain on utilities. Finally, spinoffs implementing AI, such as increased use of robots could further amplify electricity needs. The United States currently consumes roughly 4.1 trillion kilowatt hours of electricity annually. Since 1950, electricity consumption has grown by 1.0 trillion kilowatt hours every 16 years. The Energy Information Agency expects long-term electricity consumption growth to reach as high as 1.6% annually. If this materializes, the US electricity growth will reach 6.1 trillion kilowatt hours by 2050 – nearly a 48% increase from today’s level. And frankly, a lot of analysts expect that estimate to be on the light side.

At the same time demand is expected to accelerate, the supply side will be expanding and restructuring. Twenty years ago, roughly 50% of all electric power was generated by coal powered generators. Today, coal generated electricity accounts for only 17% of total power. While clean air regulations contributed to the decline, lower costs associated with natural gas prices, solar, and wind power reduced the expected ROI on coal fired plants and represented a powerful force in reducing reliance on coal. With the retirement of coal-based power generation and increased demand, the ability to power our electricity needs has become stressed. This stress was in-place even before the data center explosion in demand for power. The North American Electric Reliability Corporation (NERC), currently rates thirteen of its twenty-three assessment areas in North America at elevated or high risk of electricity supply shortfall within five years. Adding in data center needs, demand is climbing faster than new power generation can be brought online, and the reserve cushion the system has always carried is thinning. A thinning reserve means the system increasingly meets peak demand by curtailing it — asking households to conserve, paying industrial users to shut down, and, in the worst case, cutting service to keep the grid intact. Required Investment There is no doubt massive capital investments are required to build the electricity grid needed to supply the United States’ future needs. The investment required is not just new generating capacity. It includes an expansion and modernization of transmission lines and substations as well. All totaled, more than

$1.4 trillion is needed through 20351 . This represents a capital expenditure super-cycle that more than doubles the spending of the prior decade. Crucially, this investment must be deployed across three distinct, overlapping physical pillars to transform the grid from a fragile system into a resilient network capable of supporting the next generation of American economic growth.

Not all this translates into construction activity. Indeed, most of the spending goes to equipment. How much of the total investment goes to construction varies depending on the type of investment, but it could translate into more than $300 billion by 2035. This pace of construction is more than the data center construction activity that has materialized during the past five years. Keep in mind, utility construction, particularly among generating stations, tend to carry high cement and rebar intensities.

More than $560 billion in investment is expected for new generation plants to ensure there is enough physical electricity supply. Rebuilding and expanding America’s power generation portfolio requires an enormous foundation play. While natural gas plants are compact, utility-scale wind farms consume massive volumes of concrete and rebar for subterranean gravity foundations to keep the turbines stable.

1 We employ EIA projections regarding electricity generation by type. Current and 2035 generation levels by type of power are compares. We assume constant utilization rates, and infer the capacity expansion. From there, we estimate the cost to build a kilowatt hour of electricity capacity by plant type. Combining all that yields the investment required for power generation. Transmission and substation capacity requirements are based on their relationship to capacity. Costs per mile to build transmission lines are calculated. A similar approach is performed for substations. For a more detailed explanation, contact Ed.

Next-generation nuclear and Small Modular Reactors (SMRs) demand heavily reinforced, thick concrete containment structures.

According to the EIA, electric power generation is expected to increase from roughly 4.368 trillion kilowatt hours currently, to 4.659 trillion kilowatt hours by 2035 – representing a 10% increase. The power requirements are expected to be met by different generator sources including: natural gas (accounting for 36% of total electricity generated), solar and wind (34%), nuclear (15%), coal (9%), Hydro (5.5%), advanced (0.5%).

The cost of adding a kilowatt of power to the grid varies depending on the type of power generator. Based on average cost to add capacity by type with the capacity that is expected to materialize yields the estimated investment required for each type of electricity generator. Accordingly, solar and wind are expected to exceed $450 billion, nuclear at $40 billion, natural gas greenfield sites $42 billion, natural gas brownfield sites nearly $17 billion, and hydro $11 billion. Together, the total investment on power generation is estimated at $560 billion.

An estimated $530 billion in investment is also required to build and modernize high-capacity transmission lines to move power across state borders. Transmission Lines connect remote renewable energy and new power hubs to data centers and cities. To make these connections requires thousands of miles of high-voltage lines. Every single mile requires massive tubular steel towers or steel lattices anchored into deep, reinforced concrete pier foundations. If lines are pushed underground in urban corridors, they require continuous concrete duct bank encasements stretching for miles.

Finally, an estimated $336 billion investment is required to add and modernize localized substations and replace burning-out transformer hardware. Every new transmission line and major industrial user requires a substation node. These act as concrete fortresses, requiring thick, heavy concrete blast-pads to hold multi-ton transformers, heavy steel A-frames, and reinforced concrete security perimeters.

Selected Investments Underway

The utility investment super-cycle has already begun. All totaled, recently completed and ongoing grid investments total roughly $60 billion in total project spending. Construction spending roughly translates to roughly $7.5 billion. Consider the following list of selected major projects:

• Sun Zia Transmission project located in southwest recently finished construction and invested estimated at $11 billion. Sun Zia is a 550-mile high-voltage direct current (HVDC) line designed to harvest 3,500 megawatts of wind power from rural New Mexico and transport it across the desert directly to energy-starved power grids in Arizona and California. Construction spending is estimated at $450 million.

• TransWest Express is a $3 Billion 730-mile energy superhighway transmission project currently snaking its way through Wyoming, Utah, and Nevada. It connects a 3,000-megawatt wind farm in Wyoming to the broader Southwest grid. Construction spending for the project is estimated at $450 million.

• Chokecherry & Sierra Madre is a $5 billion power generating windfarm in Wyoming. This project is linked to the TransWest Express transmission grid, Construction spending is estimated at $750 million.

• Grain Belt Express is an $11 billion price tag. Spanning an incredible 800 miles, this HVDC line will connect wind-heavy western Kansas all the way to Indiana, traversing Missouri and Illinois. Total construction spending for the project is estimated at $1.65 billion.

• Valley Link Transmission Line is a $3.0 billion, 115-mile, 765-kilovolt project that moves power from the Ohio River Valley straight into Northern Virginia. Total construction spending for the project is estimated at $450 million.

• Portland Grid Modernization is a $1.2 billion multi-year upgrade of transmission lines, substations, and smart grid automation across Oregon. Total construction spending for the project is estimated at $180 million.

• Eldorado Modernization Program is a $483 million substation megaproject located in the Eldorado Valley in Nevada. Total construction spending for the project is estimated at $72 million.

• Champlain Hudson Power Express (NY): Activated June 1, 2026. Cost is estimated at $6 billion. Total Construction is estimated at $900 million.

• Greenlink Nevada: Latest estimated cost is approximately $4.2 billion. Construction is estimated at $630 million.

• Texas Permian Basin plan: Approved at an estimated $13.8B for the 765-kV option. The first Oncor/LCRA 765-kV line targets energization in 2030. Total construction spending is estimated at roughly $2 billion

Translating this into Construction and Cement Demand

Not all this investment will be focused on building facilities. Indeed, in most cases the bulk of investment will target the equipment – not brick and mortar. Translating these broad investments into construction activity required separating equipment expenditures from the physical construction required to build, expand and support the electric system. The construction share of investment is analyzed separately for each generating technology, recognizing that a natural gas plant, nuclear facility, wind farm and solar installation have very different construction requirements. Similar adjustments were made for transmission and substation investment. These construction estimates were then translated into cement consumption using cement intensities appropriate to each type of infrastructure.

Timing and Market Impact on Cement & Rebar Consumption

The super cycle of investment in public utilities has already begun. In addition to the projects identified earlier, Census’ Put-In-Place data has shown remarkable double-digit growth this year. It represents strong positive structural change that will characterize the market for years to come. That strong growth is expected to amplify the strong positive structural change that has materialized with data centers. Accumulated cement consumption from these investments could total 41.5 MMT by 2035.

While the private sector of the construction market is currently subdued under the weight of elevated interest rates, the cycle will wear on, inflation and interest rates will ease, and the private sector will eventually regain its strength – perhaps strengthened by the release of pent-up demand. This coupled with ongoing strength from data center and utility sectors suggests strong construction, cement and rebar demand lay ahead. This could be further amplified by a new strong infrastructure program. While strength will materialize throughout the United States, regions where data center and utility construction are prominent will likely show significantly stronger growth – namely the South Atlantic and South-Central regions.

This optimism carries with it a downside. Even in today’s high interest rate construction market, labor shortages are present. An estimated 150,000 shortfall in construction workers currently characterize the market. As the private sector recovers, and the twin structural trends of data centers and utility construction materializes, labor shortages are expected to intensify. Project delays, long backlogs, and a higher wage and project cost environment are likely consequences.