With all of this as a backdrop, it might seem odd that I am choosing to write about a potential scenario that goes in the opposite direction. Aside from the fact that I’m a bit of a contrarian, I think there are legitimate reasons to doubt the doom and gloom scenarios that have been accompanying the recent data center hyperbole. To be clear, I think it is ridiculous to offer public tax subsidies to the billion-dollar companies that are building (or leasing) these data centers, but if they are built in the right locations I think they are an essential element of the economic future of our country. While there are likely to be bumps in the road as all of this data center madness plays out, I think the long term prognosis for electrical power is relatively rosy.
This article is the third in a series that examines potential scenarios that would likely be disruptive to our cities and our society. None of the scenarios are guaranteed to occur or are even especially likely, but they are all reasonably plausible. Plausible enough – and disruptive enough – that they are worth thinking about as we prepare our cities for the future.
The “What If” Future of Electricity
Contemplating the possibility of electricity being both “plentiful and cheap” has both absolute and relative dimensions, and my scenario includes both. I think it is possible that the average cost per kilowatt hour – which for the U.S. City Average is approaching 20 cents – could fall by 25 to 30 percent over the next 10 years. Equally important, however, is that the only real alternative to electrical power, namely fossil fuels, could become constrained in its availability and expensive to use. Constrained and expensive enough, in fact, that electrical power becomes the default option for just about every power-related decision in our life.
As a simple example, my neighbor currently uses a gas-powered lawnmower to cut his grass and I currently use a battery-powered mower. My guess is that over time what he spends on gas, oil and the occasional tune-up is about what I spend on electricity and the periodic replacement of my battery. It is close enough that there is not a clearly obvious winner in terms of operational cost and the decision of which to use is likely to come down to other factors. But what if the annual cost of operation for my battery-powered mower was half as much – who would continue to buy gas-powered mowers? There might be a few use cases where it would still make sense, but the market for lawnmowers would rapidly shift.
So my “what if” scenario is as follows: what would happen if the supply of electricity was largely unconstrained, the price per kilowatt hour fell significantly, and the primary alternatives (coal, gas, oil and natural gas) were significantly more expensive? My previous two posts on “what if” scenarios had a time frame of roughly five years to perhaps ten years at the outside. This scenario would definitely skew toward the ten year end of that range – shifting our energy foundation simply can’t happen quickly. But I think it could happen eventually and I think the ramifications would be more significant than most people realize.
The Downside of Fossil Fuels
I don’t think the world is about to run out of oil or coal, but I think there are two trends which – either independently or together – could make fossil fuels much more expensive. The first factor is already playing out with the current war with Iran. Much of the world’s oil comes from the Middle East and that area seems likely to remain so politically unstable that prices could stay elevated for the foreseeable future. The Strait of Hormuz is being kept open only through the heroic efforts of the U.S. Navy. Even with U.S. escorts, the volume of oil through the Strait is subject to wild fluctuations and the current price of oil is roughly 15 percent higher than the five-year average.
What happens if the U.S. tires of spending millions of dollars per day maintaining its presence? In all likelihood, control would shift to Iran and its allies, and shipping would be either more constrained or would be subject to Iranian “tolls.”
At the same time, Saudi Arabia is fighting Houthi rebels in Yemen who are threatening to take control of the Bab al-Mandab Strait, another chokepoint for oil shipping. In addition, the Houthis recently launched drone and ballistic missile attacks against Saudi airports and Aramco oil facilities. None of this seems likely to be settled any time soon and, in fact, could get much worse if the U.S. commitment to the area wanes.
Outside the Middle East, things aren’t much better. In response to its invasion of Ukraine, the European Union has reduced imports of Russian natural gas. Russian gas now makes up roughly 12 percent of EU imports, down from close to 40 percent in 2021. The result has been higher prices and significant volatility in the worldwide natural gas market.
The second factor is a potential rise in environmental costs associated with fossil fuels. On the one hand, oil companies are being attacked in court over their role in accelerating climate change. The City and County of Boulder, for example, are suing ExxonMobile and Suncor Energy to recover damages and mitigation costs related to climate-driven fires, floods and infrastructure damage. The Colorado Supreme Court ruled in favor of Boulder City and County, and the case is currently pending before the U.S. Supreme Court which is expected to rule in the summer of 2027. Justice Samuel Alito recently recused himself from the case, raising the possibility of a 4 - 4 vote which would leave the Colorado ruling intact. Sixty similar lawsuits across the country are currently paused awaiting the result, or are closely watching what happens. If the lawsuit is successful, expect the floodgates to open both domestically and internationally – and for the resulting payouts to be reflected in prices at the gas pump and in every fossil fuel derivative.
The oil and gas industry has generally benefited from a supportive Trump administration but that could change in 2029 if the Democrats regain control of the federal government. A Democratic administration could resurrect efforts to impose a tax on carbon emissions which would place oil, natural gas and coal at a price disadvantage relative to other sources of power. There are too many possible scenarios to go over here, but it is conceivable that a carbon tax could add $0.25 to $0.50 to a gallon of gas or $0.02 to $0.04 to the cost of a kilowatt of electricity from a coal-fired plant.
In short, there are storm clouds gathering over fossil fuels that threaten to tip the energy playing field in favor of electricity, particularly electricity generated from non-fossil fuel sources. None of this is guaranteed to happen, of course, but it is certainly possible.
Positive Trends for Electricity
There is one overarching goal in the electrical utility business these days and that is capacity. Keep in mind that from 2010 to 2020 the net on-grid electricity demand growth in the continental U.S. was essentially zero. Then from 2020 to 2025 demand increased by roughly 2 percent per year and growth is expected to be between 2 and 3 percent per year for the next 5 years. [3] That may not sound like much, but in an industry where adding capacity is often a painstakingly slow process, it is massive. After a decade where new capacity was simply replacing the most inefficient existing power plants, the focus now is on adding new capacity – even to the point of re-starting some plants that had been decommissioned. The trick will be figuring out how much capacity should be added in what locations, and what type of generating source should be used.
In the rush to get new data centers up and running, some power providers are grasping for any available straw, but concerns about prices are likely to enforce some discipline in many of those decisions. There are a lot of factors that go into the decision of what types of power plants should be added to the electrical grid, but in terms of cost per watt generated, the Levelized Cost of Energy (LCOE) is often used as a guide for new power plants. Here are the latest numbers [3] from Lazard, an industry consultant, expressed as dollars per unsubsidized megawatt hour:
LCOE Cost Range Midpoint
On-shore wind $37 - $99 $68
Utility Scale Solar $40 - $98 $69
Gas (Combined Cycle) $59 - $121 $90
Geothermal (Conventional) $67 - $111 $89
Coal $72 - $177 $124
Off-shore wind $105 - $167 $136
Gas (Peaking) $144 - $276 $210
Nuclear (Conventional) $175 - $255 $215
From these numbers, it is fairly obvious why no one in the U.S. has been building new coal power plants or conventional nuclear power plants. Even off-shore wind has lost its appeal without subsidies, except in locations with few other options. Conventional geothermal plants are limited to places where hot rock formations are near the surface – Iceland, for example, has lots of geothermal but there is not much in this country. Natural gas powered plants have appeal because the combined cycle type is the cheapest form of electricity that is “firm” (i.e. no issues with intermittancy). Even gas peaking plants have a niche despite their cost because they can be spooled up quickly when demand spikes, something every utility has to plan for.
Unsurprisingly, the generation capacity added in 2025 was 69 percent solar, 15 percent wind, 14 percent natural gas, and 2 percent everything else. The numbers are similar for the projected additions in 2026. [4] Solar is dominant not only because of its low cost numbers and “green” credentials, but also because it can be installed and brought on-line relatively quickly. Many of the other forms of generation have been bedeviled by supply chain issues or complicated environmental reviews.
Thus, the first reason I am bullish on electrical power is that the mix of generation sources is steadily skewing toward clean, cheap renewables. The current mix is still dominated by fossil fuels (natural gas plus coal accounts for 56 percent of generating capacity), but that is steadily changing. Although utilities are currently so desperate for power that no plant is being turned off regardless of age, I think we will eventually return to decommissioning old, inefficient plants in favor of cheaper sources which will bring down the average cost per kilowatt hour.
The bursting of the AI bubble. The second reason I am bullish on electrical power is that I think we may soon be facing a glut of generating capacity. Currently, power providers are building new capacity as fast as possible to serve the flood of data centers being proposed to serve the insatiable demands of artificial intelligence. And while all of that may come true, I think there is a decent chance that the AI mania will deflate into a more pedestrian rate of expansion, leaving many data center developers – and their electricity suppliers – holding assets that are drastically underutilized.
To begin with, artificial intelligence hasn’t really proven its long-term value in most businesses. Everyone sees the potential, but much of what is being produced is referred to as “AI slop” because it isn’t really adding much to revenue or profit. In addition, there are still troubling examples of AI “hallucinations” and rogue actions that are raising concerns about reliability and legal liability. An AI agent that hacks into another company might be efficiently solving the problem it has been given, but at what legal or ethical cost? The technology is so new that operational guide rails and testing protocols are not fully matured. This could lead to both a political and legal backlash that stunts the expected growth.
Second, it is possible that the bulk of artificial intelligence services will become a commodity that has to compete on price rather than a premium service that can charge top dollar. There may be a small handful of companies with the best technology that grab the top tier clients with the most demanding use cases, but all the rest may be also-rans that struggle to generate enough revenue to justify the billions they spent on R&D and data center construction. There are already “open weight” models that have lower token costs and greater configuration ability. They might not have the raw power of the best AI models but they might be perfectly fine for the more mundane needs of many companies. The also-rans may end up with data centers and power generation commitments that they can’t use profitably which may force them to sell at fire-sale prices.
New power generation technologies. There always seems to be some new technology that is going to revolutionize power generation, but reality seems to puncture most of those dreams. Some are so technically challenging (e.g. fusion energy) that they are decades away at a minimum. Others face such lengthy environmental and safety reviews (e.g. small, modular nuclear reactors) that I’m not convinced they will ever be more than a niche solution.
But there is one technology that I think has significant near-term potential: enhanced geothermal systems. As mentioned above, traditional geothermal power depends upon super hot rock formations near the surface which severely limits the available locations. In contrast, enhanced geothermal uses oil drilling techniques to create artificial fracture networks in deep, impermeable rock formations often two to three miles below the surface. This is combined with horizontal drilling to create a network inside of high-temperature rock layers. This approach vastly expands the number of possible plant sites. [5]
Cool water is pumped in through one set of wells and pumped out through another set after it has gained enough heat to be converted to steam. That steam is used to spin turbines and generate electricity before being cooled and recycled. In Utah, Fervo Energy is currently generating 33 megawatts of power using this technology and expects to ramp up to 100 megawatts by the end of the year, and nearly 500 megawatts by 2028. Widespread adoption is still a few years away, but could be a significant source of firm, green energy within five to ten years. Generating costs could eventually reach $60 to $80 per megawatt hour.
New long duration energy storage options. I have written previously about the rapid adoption of battery storage facilities being added to the grid. Total battery storage in 2020 was less than 2 gigawatts, but is currently over 50 gigawatts and shows no signs of slowing down. What is happening now is that longer duration forms of energy storage are beginning to come on-line. Instead of a facility having a few hours of energy stored, the long duration facilities can discharge energy for a day, multiple days or even a week. Electrochemical, thermal storage and even compressed air are in the mix of technologies being used, in addition to traditional batteries.
There are two primary reasons why this will positively affect the price of electricity. First, there are periods of time when there is too much electricity because supply exceeds demand or because of transmission congestion. When that happens, power producers are ordered to curtail (or throttle back) their production. This includes the cheapest forms of power (wind and solar) which at times can be losing 10 to 20 percent of their potential output. Long duration storage allows all of this electricity to be captured thus maximizing the impact of the low cost producers.
Second, long duration storage would allow a drastic reduction in the use of natural gas peaking plants during periods of very high demand. Long duration storage facilities could be “charged” during times when electricity is cheap and discharged when demand spikes, thus minimizing the need for gas peaking plants. Electricity from these peaking plants is among the most expensive sources on the grid, meaning that total generating costs go down significantly.
The continued rise of solar power. One of the reasons that solar power is so popular as an energy source is that it is the only major source of electricity that has dramatically reduced its cost of production. Between 2012 and 2025, solar costs have deflated from $4,000 per kilowatt to $800 per kilowatt. Sixty percent of that deflation came from the scale-up of manufacturing. The rapid rise in the number and size of installations resulted in manufacturing falling from 50 percent of the total installed cost of a utility-scale project to 25 percent. [6]
The other 40 percent of the deflation has been the result of efficiency gains in solar cells and panel design. Solar cell efficiency has risen from 15 percent in 2012 to 23 percent currently. The good news is that further improvements are expected over the next ten years, although the rate of improvement may flatten out. Heterojunction technology (combining multiple layers of silicon to form a hybrid solar cell) and tandem perovskite panels (combining a synthetic perovskite crystal top layer with a traditional silicon bottom layer to capture a much broader range of the solar spectrum) are two of the more promising technologies.
The bottom line. As I pointed out before, none of this is guaranteed. But if my scenario plays out as described above the result is a short-term glut of electricity, followed up by a shift toward increasingly efficient renewable supply sources, and supplemented by operational peak shaving enabled by better energy storage options. All of this takes place while fossil fuels are under a variety of price pressures. In a nutshell, electricity becomes cheap and plentiful (at least in a relative sense).
The Impact on Cities and Our Society
As with any substantial shift in the cost of something fundamental to our lives – such as food, rent, health care or energy – people’s behavior would change fairly quickly. Although a shift in energy costs might result in behavior changes that take somewhat longer than average since expensive appliances and equipment are involved, it would happen eventually. Many of the changes would, I think, be largely beneficial but others would be more challenging or even outright dangerous.
To begin with, households would shift from fossil fuel powered options to those powered by electricity – heat pumps instead of gas furnaces and gas water heaters, induction stoves instead of gas stoves, electric dryers instead of gas dryers, and even electric cars, trucks and buses instead of gas or diesel powered vehicles. This shift is underway already, but if the playing field of price tilts toward electricity, the shift will accelerate and become more widespread.
I think this behavioral shift would end up saving most households some money, particularly if a household gets to the point where they can disconnect from their natural gas (or propane) supplier. It would not be a life-changing amount, but maybe $50 to $100 per month. The thing is, no one likes paying their natural gas bill or their electric bill, so if those go down (or go away) there might be an increase in joy that is disproportionate to the amount of money saved. I know that might sound weird, but what we spend our money on affects our attitude toward life. Money spent on utilities which brought me virtually no enjoyment can now be shifted to something that I actually like spending money on, so my outlook on life improves which is good for our society and the cities where people live.
On top of all that, a reduction in the amount of fossil fuel being used would make many people feel better about supporting the health of the planet and would make the air that we breathe cleaner to boot. The impact on air quality of reducing the number of gas powered vehicles is fairly obvious, but there is growing (albeit debatable) evidence that gas stoves and other appliances can cause breathing problems, particularly for children.
Unfortunately, not all of the ripple effects would be positive. The oil and gas industry would not go away because it is firmly entrenched in many aspects of our economy. Many of the items we use every day incorporate fossil fuel derivatives either directly or indirectly. However, the oil and gas industry would probably take enough of a hit that some of the businesses that are only marginally profitable now would end up closing. This means that some people would lose their jobs, although I think that job gains on the electrical side of industry would largely offset that. More concerning is that fossil fuel businesses that go bankrupt are reasonably likely to leave behind sites that are either heavily polluted or have the potential to cause pollution in the future.
Cities and states with economies that lean heavily toward the oil and gas industry would not only see their economy take a hit, but could also end up stuck with brownfield properties that not only aren’t paying taxes but which residents might insist be cleaned up with taxpayer dollars. A city littered with polluted industrial sites that are not paying taxes will have a harder time transitioning to new forms of economic growth.
Finally, and perhaps most importantly, I worry about the thousands and thousands of miles of natural gas pipelines that wind their way through just about every neighborhood in just about every city in this country. Many of those pipes are nearing the end of their useful life and gas companies have started the expensive and disruptive process of replacing them. What happens to those efforts if more and more customers make the transition to all electric appliances and HVAC systems, and disconnect from the gas network?
This wouldn’t happen all at once, of course, but a drop in the customer base by 20 or 30 percent over a five or ten year period would likely be devastating to the economics of a natural gas utility. How would they maintain a distribution system if three out of every ten households no longer sends them a monthly payment? If they raise rates to compensate, that would only drive customers away faster. If they reduce system maintenance efforts, that could lead to leaks which would likely result in more fires and explosions – a recipe for lawsuits that could push them to the brink of bankruptcy.
One option, I suppose, would be to withdraw service from neighborhoods that fall below some threshold of natural gas participation. In other words, the last few customers would have their service involuntarily cut off in order to keep the utility company solvent. Those customers, of course, would be rightfully angry and would be facing a lump sum cost for replacing gas appliances that could run into five figures. I’m not even sure if this strategy would be legal given that most utilities have an obligation to serve any customer that requests service, but major lawsuits would be inevitable.
Aside from a small handful of government owned systems, cities have no direct responsibility or control over natural gas companies or their distribution networks. But this is the type of disaster that could end up in their laps no matter how much they try to avoid getting involved. Unfortunately, I have absolutely no idea how to wind down a natural gas utility system safely without making lots of people angry and costing lots of tax dollars.
Conclusions
I think the odds that my “what if” scenario will play out as I’ve described are distinctly less than 50/50, but it is plausible enough that I think it is worth considering what might happen. There is so much oil and gas infrastructure in this country and it is so intertwined with the economy of so many cities and states that the impact could be substantial in some locations. Still, the income boost to most households would ripple throughout our society in positive ways, and the potential reduction in greenhouse gas emissions might slow the rate of global warming.
Finally, there are almost always unforeseen secondary and tertiary effects whenever there is a shift in one of the fundamental cost structures in our economy. In this case, I think the ripple effects are more likely to be good than bad. People will find ways to take advantage of the new price structure in ways that we can’t easily foresee. The relative abundance and affordability of electrical energy will make something happen that wouldn’t have been economically feasible before. Perhaps I’m suffering what Alan Greenspan once called “irrational exuberance” but in this instance I’m bullish on the future.
Notes:
1. “Average Price: Electricity per Kilowatt-Hour in U.S. City Average”; Federal Reserve Bank of St Louis; September 2026; https://fred.stlouisfed.org/series/APU000072610
2. Caitlin Ritchie; “Electricity Rates by State: October 2026”; Save On Energy, LLC; https://www.saveonenergy.com/electricity-rates/electricity-rates-by-state/
3. “LCOE+: Levelized Cost of Energy”; July 2026; Lazard
4. Kevin Tillmann; “America’s Electricity Generation Capacity: 2026 Update”; May 2026; American Public Power Association
5. Colton Poore; “Enhanced geothermal systems: An underground tech surfaces as a serious clean energy contender”; July 2025; Princeton University, School of Engineering and Applied Science; https://engineering.princeton.edu/news/2025/07/07/enhanced-geothermal-systems-underground-tech-surfaces-serious-clean-energy-contender
6. Rob West; “Solar Costs: A Breakdown Over Time”; Thunder Said Energy; April 2026; https://thundersaidenergy.com/downloads/solar-costs-a-breakdown-over-time/
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