EIA Sees Solar as Leading Grid Generation Growth This Summer

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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Whether the U.S. grid can support rising power demand from data centers, electric vehicles (EVs) and other sources remains to be seen. For 2025, the U.S. Energy Information Administration's (EIA) Short Term Energy Outlook (STEO) sees supply as relatively flat. Most new generation capacity will involve renewables, especially solar.

Overall electricity generation growth will likely be only 2% in 2025 and 1% in 2026, according to the STEO, which was released on January 24.

"The U.S. electric power sector produced a total of 4,155 billion kilowatt-hours (kWh) of electricity in 2024, up 3% from 2023," said the outlook report.

"We expect U.S. utilities and independent power producers will add 26 gigawatts (GW) of solar capacity to the U.S. electric power sector in 2025 and 22 GW in 2026. Last year, the electric power sector added a record 37 GW of solar power capacity to the electric power sector, almost double 2023 solar capacity additions," the report said.

Wind generation capacity is expected to rise by about 8 GW in 2025 and 9 GW in 2026. Both are slightly more than the 7 GW added in 2024, said the EIA.

However, Industrial Info Energy Market Strategist Geoffrey S. Lakings said that by listing solar farms by GW capacity, the STEO tells "a very incomplete story."

Solar's actual production related to its listed capacity leaves much to be desired, said Lakings. "The average capacity factor for solar power in the U.S. in 2022 was about 25%, and in 2023 it dropped to 22.1%." Capacity factor calculates the percentage of its electricity generation compared to its summer capacity (when daylight is at its longest). Aerial conditions of various kinds can reduce capacity. A sunny day can be compromised by a nearby dusty road. And a solar farm's region makes a difference in its output as well. Unsurprisingly, solar panels in the desert southwest see more sunshine than those in the rainy southeast or northeast.

Capacity is also affected by the presence or absence of a battery energy storage systems (BESS) to extend the facility's energy output. So the EIA's listing of raw capacity would not seem to indicate the amount of power expected to actually flow from these facilities, according to Lakings.

Industrial Info is tracking 277 solar-related power projects in the U.S., worth more than $61 billion, that are planned for completion in 2025 and 2026, and have a medium or high probability of moving forward as planned. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can click here for the project reports.

Natural gas capacity, which grew by 4% in 2024 over 2023, is expected to decline by 1% in 2025 and by 3% in 2026, to 1,692 billion kWh. The fuel will still be the single biggest provider of electricity, supplying 42% of the total.

A few new natural gas power projects are in the works, according to Industrial Info data, but any additions will likely be offset by plant closures. Industrial Info is tracking 13 U.S. natural gas addition projects, worth $1.29 billion, that are planned for completion in 2025. Subscribers can click here for the project reports. Industrial Info is tracking 10 U.S. natural gas power plant addition projects, worth more than $4 billion, that are planned for completion in 2026. Subscribers can click here for the project reports.

Nuclear
The EIA sees nuclear power generation rising by 2% in 2025, reaching 796 billion kWh, and reaching an even 800 billion kWh in 2026. In 2024, nuclear generation increased slightly over 2023 numbers. Upticks in 2025 and 2026 will be supported primarily by the addition of Southern Company's (NYSE:SO) (Atlanta, Georgia) two Vogtle power plants in Georgia, which began commercial operations in July 2023 and April 2024, along with the expected restart of Holtec International Incorporated's (Jupiter, Florida) Palisades power plant in Michigan, in October of 2025. Subscribers can click here for the project report.

Coal
For the oldest of workhorse fossil fuels, coal, the EIA expects coal power generation "to remain unchanged at around 640 billion kWh in 2025 and 2026. Coal-fired electricity generation totaled 647 billion kWh in 2024."

Costs Rising
Lakings quoted additional EIA data showing the expectation of higher wholesale electricity prices across the U.S., "with the notable exception of Texas and the Northwest." Prices are expected to average $40 per MWh over the next year, which is 7% higher year-over-year. California and the Southwest are expected to see the greatest increases.

Power to the People?
With solar as the only significant source of new generation, Lakings said significant challenges lay ahead for utilities this summer due to projections of growth in energy use, especially if the summer is as hot as the winter has been cold.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).