Western nations have generally taken safe, affordable and reliable energy for granted. While there have been temporary supply shocks/interruptions, such as the 1973 and 1979 oil crises as well as the major blackouts in 1965 and 2003 affecting Ontario, Canada and the northeast United States, energy supplies – and the electricity grid in particular – have typically been stable.
However, events of the 2020s have disrupted this trend. Recent energy supply crunches, such as the Iberian Peninsula blackout in April 2025, the ERCOT blackout in 2021 and the rise in European natural gas and electricity prices in the aftermath of Russia’s invasion of Ukraine, have resulted in renewed calls for energy security and independence by many countries. The disruption has been compounded by soft warfare and geopolitical aggression (e.g., cyber and state-backed corporate espionage). For example, in April 2025, a hydroelectric facility in Norway experienced a cyber-attack, resulting in the release of 500 litres of water a second for four hours until the breach was noticed and stopped. Calls have grown ever stronger with the emergence of pervasive geopolitical uncertainty and technological change, such as the supply chain disruptions experienced during the COVID-19 pandemic, the emergence of large load artificial intelligence (AI) data centres, and the current volatility stemming from tariffs and economic relations with the United States and other economic powers.
Moreover, the policy direction of many nations (as well as households and businesses) towards decarbonizing energy supply has made achieving energy security and energy independence extremely challenging. Importantly, this policy direction involves fuel-switching through broad electrification of the economy (e.g., space heating, transportation, and industrial processes), as well as producing electricity increasingly from non-emitting energy sources (e.g., hydroelectric, solar, wind, and nuclear), and building energy storage facilities (e.g., batteries and pumped-storage).
As a result, the trend for many jurisdictions, critical economic sectors (e.g., transportation, communications, and agriculture) and essential public infrastructure – such as hospitals, water and wastewater treatment – is a much greater dependence on a single form of energy: electricity. In fact, the International Energy Agency (IEA) has indicated that “[o]ver the next decade, global electricity consumption is poised to grow six times as fast as total energy demand, driven not only by the conventional uses of electricity that power growing economies but also by newer sources of demand such as EVs and AI-focused data centres.”
This increasing reliance on electricity has significant consequences for energy policy, economic policy, security policy, and regulation.
The Implications for Policy and Regulation
Traditional economic regulation of energy (e.g., natural gas and electricity) utilities has typically focussed on approving prudent investments and protecting consumers from excessive rates. This has underpinned the “regulatory compact” where prudent investments are provided a regulated rate of return – providing investors and consumers with rate certainty. Capital investments were scrutinized with an objective to ensure that the state of infrastructure met required reliability and safety standards, but did not “overbuild” or “gold-plate” the network.
However, in this age of electrification and security (energy, economic, national), what constitutes “overbuilding” and “gold-plating” needs to evolve significantly and the old definition may no longer apply. Meeting increasing electrification from fuel-switching and its impact on load growth requires system expansion and potentially greater reliability. Becoming more dependent on electricity means the costs of supply interruptions will grow, potentially requiring more redundancies across the entire network to avoid and recover quickly from disruptions (particularly if those disruptions are due to active nefarious entities). Better ensuring uninterrupted supply and meeting growing demand will necessitate additional distribution, transmission, and generation (bulk as well as distributed energy resources (DERs)). Greater investments in physical and cybersecurity of critical energy infrastructure will be needed to meet growing expectations and demands for greater reliability and resiliency.
Jurisdictions are developing policies around these needs. With the addition of economic growth requirements, many jurisdictions are starting to recognize the negative economic impacts of “just in time” infrastructure build. Current utility regulation rarely considers the broader impact on economic growth of not having proactively built supply or connection capability for meeting a range of reasonable new load customers and load growth. In many cases this lack of incorporating some form of “economic reserve” (e.g., in excess of traditional reliability reserve margins for supply) in connection capability and supply when planning is more harmful than the short time period of stranded assets. As such, many jurisdictions are indicating that electricity infrastructure planning needs to be less reactive and built more in advance of forecast demand and supply expectations.
For example, in June 2025, the European Commission published a “Notice on a guidance on anticipatory investments for developing forward-looking electricity networks.” The Notice described “anticipatory investments” as:
“…investments into grid infrastructure assets that proactively address network development needs beyond the ones corresponding to reinforcements relating to currently existing grid connection requests by generation or demand projects. Anticipatory investments are forward-looking network investments based on identified medium- and long-term network needs, justified in network development plans, based on scenarios that project plausible trajectories of generation and demand capacities that support energy, climate and industrial policies, including the National Energy and Climate Plans.”
The Commission’s guidance states, among other things, that anticipatory investment is needed because:
“[i]nsufficiently dimensioned grids cause longer lead time for grid connections, postponing electrification as well as deployment of clean energy sources. That is due to the fact that grid development times are longer than those of generation and demand assets […] Better catering for anticipatory investments in network planning may significantly lower overall connection waiting times, help the providers of key components to scale up their manufacturing capacities and better plan investments […] underinvesting in grid infrastructure may become costlier to society in the medium term than making anticipatory investments under controlled scrutiny and risk management processes.” (emphasis added)
Similarly, in February 2025, the United Kingdom’s National Infrastructure Commission (NIH, since combined into the National Infrastructure and Service Transformation Authority) published a report, Electricity distribution networks: Creating capacity for the future. The report describes “proactive investment” as “[i]nvestment to increase the capacity of the network ahead of long-term need, with the objective of bringing forward consumer and system benefits. This is based on forward looking assumptions about supply and demand.”
The NIH report noted further that proactive investing is required because:
“[f]undamentally, the challenge is that the risks of falling behind demand now outweigh the potential downsides of building ahead of need […] A proactive approach to network investment would smooth and likely reduce overall consumer costs over the longer term due to increased cross programme efficiencies and strategic partnerships with the supply chain […] Proactive investment in the distribution network will also bring wider system benefits to society and the environment. Major government priorities, such as housebuilding, are dependent on the effective growth of the distribution network […] The additional costs associated with preparing the distribution network must therefore be viewed in light of these wider consumer, societal and system benefits.” (emphasis added)
In sharp contrast to past decades, both reports incorporate broader public policy goals (e.g., economic growth and the environment) to conclude that underinvestment in the network is potentially riskier than overinvestment.
However, as noted at the outset, there are goals related to energy security that also warrant proactive system investment. For example, the IEA has stated that “[a]s a result of the increasing electrification of the energy sector, ensuring a reliable and secure power supply is more important than ever. Yet new threats are emerging, from a rise in cybersecurity threats to more frequent climate impacts on infrastructure,” and noted further that “[c]ountries are implementing a wide range of solutions to tackle these issues. These include enhancing cross-border grid infrastructure and power trade, adapting regulatory frameworks and market designs to better integrate renewables, scaling up energy storage, reinforcing supply chains, and building resilience against cyberattacks and extreme weather events.”
The challenge is relatively clear, but the solution is somewhat elusive because it requires a fundamental change to past policy and regulatory approaches to energy infrastructure.
What Needs to Change?
The challenge of how concepts such as “proactive” planning can be achieved is being actively investigated and put into practice by many parties.
For example, in 2024, Pacific Northwest National Laboratory (PNNL) and RMI conducted a workshop “to explore novel and proactive approaches to electrification and load growth while minimizing risks and costs to customers.” The workshop report noted that participants identified numerous challenges as well as potential short- and long-term solutions (see table below). Some of the key themes cited include improving and better coordinating planning processes (e.g., between gas and electric), clear and consistent direction from regulators on how utilities should incorporate uncertain loads into forecasts, considering the role of the ratepayer versus the taxpayer for investments driven by broad public policy objectives (e.g., environmental and economic competitiveness), evolving new ways to review and classify infrastructure investments based on risk during a rate proceeding, and developing new ways to allocate costs and risks between large loads (e.g., date centres) and other classes of customers.
An example of putting proactive investment into practice comes from New York, where the New York State Public Service Commission (PSC) initiated a Proactive Planning for Upgraded Electric Grid Infrastructure proceeding in August 2024, involving the State’s major investor-owned electric utilities. The proceeding (still ongoing) is intended to develop a “long-term coordinated planning process to study and identify necessary upgrades to support electrification.”
The PSC’s Order further noted “that there is a need to address urgent upgrade projects on an earlier time frame, while a statewide proactive planning framework is developed.” As a result, the PSC gave utilities the “opportunity to develop a proposal that identifies these needs and includes details sufficient to enable Commission consideration of these urgent upgrades. Each utility that identifies Urgent Upgrade Projects shall file a proposal that shall be of rate case quality with appropriately supported costs estimates.”
The PSC received applications from four utilities for 65 projects. In June 2025, the PSC order that it had approved 29 projects, requiring the utilities to file quarterly status reports on the projects (and upon completion).
In an announcement accompanying the order, the PSC stated that “[t]he combined projects valued at $636.2 million will enable 642 megawatts (MW) of electrification upgrades, accelerating the decarbonization of the transportation and building sectors […] The urgent grid upgrade projects would expand grid capacity in many areas of the state, relieving urgent constraints on an accelerated basis while a broader, unified planning framework is developed […] This action was taken under the Commission’s innovative proceeding on proactive planning for upgraded electric grid infrastructure. The proceeding is designed to develop novel utility planning methodologies that capture new loads arising due to electrification on a more granular locational and temporal basis.”
Conclusion
The IEA’s April 2025 Summit on the Future of Energy Security featured wide discussions of the increasing importance of energy security with participants highlighting the:
“…critical leadership role of policymakers in establishing long-term strategic visions, improving strategic planning, reforming regulatory frameworks and market design to provide the predictability needed for driving investment [as well as] how energy security is inextricably linked with economic security, national security, and climate security.”
These observations have profound implications for public policy and regulatory policy regarding energy systems, especially the electric grid. Evolution of planning and procurements must include some consideration for an “economic reserve” investment to support customer growth needs, while also recognizing that greater security of the electricity network is critical to long-term success of the economy.
Jurisdictions that invest in building technical expertise coupled with the political will to proactively tackle this integrated policy challenge in a rigorous, prudent and expeditious way will likely achieve outsized economic rewards for many years going forward.
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