The Perfect Storm: A Global Analysis of Climbing Electricity Prices and Grid InstabilityExecutive Summary

The global electricity landscape is undergoing a profound and rapid transformation, marked by a convergence of unprecedented demand growth and systemic supply constraints. My findings are that the escalating cost of electricity and widespread fears of power shortages are not merely temporary phenomena but symptoms of a fundamental disconnect between a rapidly electrifying world and an aging, under-invested, and fragmented energy infrastructure.

Key drivers include a surge in demand from novel sources such as artificial intelligence and electric vehicles, coupled with the systemic friction of the energy transition, where the retirement of legacy power plants outpaces the integration of new, reliable capacity. This complex interplay is exacerbated by geopolitical instability and increasingly severe weather events, which strain a grid ill-equipped to handle such pressures.

A detailed examination of case studies in the United States, Norway, and Alberta, reveals that while the specific challenges vary by region, the underlying vulnerabilities are remarkably similar.

In the United States, a fragmented planning framework and chronic underinvestment in transmission infrastructure are creating localized price spikes and reliability risks. In Norway, a nation historically blessed with cheap hydropower, new international interconnectors are importing price volatility from the broader European market.

Meanwhile, Alberta's targeted moratorium on renewable energy projects has created a vacuum of investment, directly contributes to future supply shortages and encourages higher consumer costs. These examples demonstrate that the crisis is rooted in a failure of both policy and planning, where short-term decisions have long-term consequences for energy security and affordability.

My analysis concludes that without a fundamental re-evaluation of energy policy, grid modernization, and international cooperation, the upward trend in electricity prices and the risk of power shortages will not only persist but accelerate in the years to come.

1. A New Age of Electricity: The Global Convergence of Demand and Constraint

1.1 The Demand Tsunami: From Electrification to AI

The past year has marked a definitive shift in global electricity consumption, signaling the advent of a new "Age of Electricity". 

In 2024, global electricity demand surged by 4.3%, representing the largest year-over-year increase ever recorded, excluding only the post-recession recovery years. This growth rate notably outpaced both overall energy demand and GDP, underscoring a fundamental structural change in how energy is consumed. The International Energy Agency (IEA) forecasts that this acceleration will continue, projecting a 4% annual increase in global electricity consumption through 2027.

The forces behind this surge are not temporary; they are deeply ingrained in technological and economic shifts. The most significant of these are the rapid digitalization of society and the growing electrification of end-uses. While the proliferation of artificial intelligence (AI) and data centers are a significant new source of power consumption, the demand from air conditioning, particularly during extreme heat waves, is an even greater factor, as global cooling needs have surged. This is a critical part of the "bigger picture" of demand drivers.

In the United States alone, this new demand is expected to add the equivalent of California's current power consumption to the national total over the next three years. This type of demand is particularly significant because, unlike traditional consumer load that might fluctuate, data centers require a constant, predictable supply, which reduces the grid's overall operational flexibility.

Simultaneously, the widespread adoption of electric vehicles (EVs) and heat pumps is transferring a substantial portion of the transportation and heating load onto the grid. In addition, industrial and economic growth, particularly in emerging and developing economies like China and India, is projected to drive 85% of global electricity demand growth through 2027 as these nations industrialize and their living standards rise. 

The combination of these factors means that electricity demand is not just increasing; its very nature is becoming more concentrated and less flexible, making the grid more susceptible to price spikes during periods of scarcity. This poses a significant challenge for a grid that was designed for a different era of consumption.

1.2 The Supply-Side Challenges: Geopolitics, Climate, and Transition Friction

The unprecedented rise in demand is colliding with a complex web of supply-side challenges, ranging from geopolitical volatility to a lack of coordinated planning. The energy crisis triggered by the war in Ukraine and the subsequent departure from using Russian gas has driven energy costs to record levels in Europe, with wholesale electricity prices in Germany reaching more than six times their pre-crisis levels at the beginning of 2025.

These geopolitical tensions persist, affecting the availability and price of fuel sources and, in some cases, forcing a return to more carbon-intensive alternatives. Coal demand, for instance, increased by over 1% in 2024 to reach an all-time high, driven by its use in power generation.

Meanwhile, climate change has emerged as a direct and immediate threat to grid stability. Extreme weather events, such as historic heat waves and deep freezes, are driving record peak demand for heating and cooling, straining power plants to their limits and causing transmission lines to droop under intense heat. The International Energy Agency (IEA) estimates that extreme weather contributed approximately 20% to the increase in electricity and natural gas demand in 2024. Droughts have also severely impacted hydropower generation in regions like Ecuador, Colombia, and Mexico, and have been a major factor in Norway's energy challenges.

A critical source of friction in the energy transition is the growing disconnect between policy goals and on-the-ground implementation. While there is a global push for renewable energy expansion, the pace of retiring legacy generation—such as coal in the UK and nuclear in Germany—is outpacing the ability to build and integrate new, reliable capacity.

This creates a system that is simultaneously becoming more intermittent due to its reliance on weather-dependent sources and less resilient due to the loss of consistent baseload power. This dynamic necessitates a greater reliance on more flexible, often gas-fired, power plants to balance the grid, which in turn drives up prices. This situation reveals that the cost of the energy transition is not just the price of new infrastructure but also the financial and reliability consequences of an uncoordinated and at times chaotic shift in the generation mix.

2. The North American Grid: A Labyrinth of Risk and Opportunity

2.1 The Fragile American Macro-Grid: A Case Study in Fragmentation

The United States faces a unique and profound challenge in its power system: it is the only major macro-grid in the world without a central, national-scale development plan. Unlike the cohesive, continental-scale grids of the European Union and China, the US system is a fragmented "labyrinthian bureaucracy" composed of three separate and largely isolated interconnections: the Eastern, Western, and ERCOT grids. This fragmentation is further compounded by a planning process that occurs across 12 different regions, each with limited coordination between them.

This lack of central planning has created systemic vulnerabilities. A significant portion of the grid—nearly a third of transmission infrastructure and 46% of distribution infrastructure—is at or past its useful life span. Despite the urgent need for modernization, the pace of high-voltage transmission buildout is dramatically insufficient.

The Department of Energy's 2024 National Transmission Planning Study implies a need to build roughly 5,000 miles of new high-capacity transmission per year to ensure grid reliability and support economic growth. In stark contrast, only 322 miles were completed in 2024, less than a tenth of the target and the third slowest year for such construction in the past 15 years. This shortfall means that new, low-cost power, such as from renewables, cannot efficiently reach consumers, leading to "congestion" on the lines and higher costs.

The PJM Interconnection grid, which serves 65 million people across 13 states, is a clear example of these national issues. The PJM grid has seen electricity prices reach record highs for two years in a row, with capacity prices climbing to levels that have caught utilities and regulators off guard. The primary driver is a combination of an "accelerating wave of generator shutdowns" and a massive interconnection backlog that is delaying the entry of new power plants, particularly solar, wind, and battery storage projects. 

While PJM's leadership acknowledges the challenges of growing demand and retiring generation, the grid operator is struggling to reform its processes. The lack of a unified national plan means that regions like PJM are left to address these complex, interconnected issues in isolation, often in a reactive and inefficient manner, which ultimately increases the risk of reliability events and raises costs for consumers.

2.2 Alberta's Unique Market and the Moratorium's Aftermath

Alberta's electricity market, a deregulated "energy-only" system where generators are paid solely for the energy they supply, provides a localized case study of how policy decisions can destabilize a market and contribute to rising costs. This model was designed to promote competition and affordability.

However, this framework was disrupted in August 2023 when the provincial government imposed a surprise seven-month moratorium on approvals for new renewable energy and battery storage projects. The official reason cited was a need to review the regulatory framework in response to concerns from municipalities and landowners regarding land use, "pristine viewscapes," and reclamation.

The immediate consequence of the moratorium was a wave of investment uncertainty that has since resulted in a significant loss of planned generation capacity. Over two years, 10.7 gigawatts (GW) of new renewables and battery storage projects were cancelled or withdrawn from the development queue, a capacity amount sufficient to meet 89% of the province's peak power demand. 

This is in stark contrast to the 11% cancellation rate for proposed gas capacity in the same period. These cancellations represent a loss of at least $33 billion in investment and would have generated an estimated $91 million annually in tax revenues for rural municipalities. The moratorium, in effect, created a vacuum of supply investment, which directly undermines the government's stated goals of encouraging investment and strengthening the grid.

To address the growing challenges of reliability and affordability, the province is undertaking a major revamp of its electricity market.This includes the implementation of a new "Restructured Energy Market" and policies like locational marginal pricing, which will make electricity prices vary based on real-time grid conditions and congestion. While these changes are intended to improve reliability, they are also forecasted to increase wholesale electricity prices by a minimum of 8% and potentially up to 30% by 2045. An increase in the price of natural gas, which will become even more crucial to the grid as low-cost renewable projects are stalled, could drive prices "even higher".

The Alberta case demonstrates a clear cause-and-effect chain: a targeted policy decision created market uncertainty and underinvestment, which directly limited future supply of the lowest-cost generation. This supply crunch is now forcing the province to adopt new market structures that are projected to raise prices for all consumers. For competitive retailers like Big Rock Power , which rely on a stable and affordable wholesale market, this trend will make it increasingly difficult to offer the "real savings" on utility bills that they have promised to their customers.

2.3 The Price of Grid Modernization

The escalating costs of electricity are inextricably linked to the immense capital investments required to modernize aging infrastructure and meet future demand. Across North America, the scale of this challenge is staggering, with costs projected in the hundreds of billions, and even trillions, of dollars.

In the United States, the scale of the necessary investment is particularly pronounced. The current depreciated value of the entire US electric grid—including power plants, wires, transformers, and poles—is estimated to be between $1.5 and $2 trillion. To replace it would cost nearly $5 trillion, with power plants alone accounting for about $2.7 trillion of that replacement cost. A significant portion of this infrastructure, nearly one-third of transmission and 46% of distribution assets, is already at or past its useful life span. 

In response to this need, the US Department of Energy has announced $13 billion in new financing opportunities through programs like the Grid Resilience Innovative Partnership (GRIP) and the Transmission Facilitation Program to help spur this modernization.

In Canada, the Independent Electricity System Operator (IESO) in Ontario forecasts that decarbonizing the grid to meet demand that is expected to more than double by 2050 could cost up to $425 billion over the next four decades. While this number is substantial, it also includes the costs of a "business-as-usual" scenario, meaning significant investments would be needed regardless of the decarbonization pathway. 

Overall, capital investments for solar, wind, and storage technologies to transform Canada's electricity grid are projected to total $700 billion over the next 25 years. A proposed Canada-wide high-voltage DC transmission line, which could foster interprovincial electricity trade and reduce the total amount of new generation needed, is estimated to cost between $30 billion and $40 billion but could deliver two to three times that amount in cost savings.

Alberta's transmission infrastructure is also facing a need for significant capital investment. The Alberta Electric System Operator (AESO) projects that transmission system capital spending from 2025 to 2045 could reach $3.2 billion if all planned projects proceed. This investment is projected to have a direct impact on consumer bills. The AESO estimates that the average residential consumer, who uses 600 kWh per month, will see the transmission portion of their monthly bill rise from approximately $25 in 2025 to $35 by 2045.

3. The Norwegian Paradox: Abundance and Affordability Betrayed by Interconnection

3.1 A Hydro-Powered Nation

For decades, Norway has been an energy anomaly. The country has enjoyed near-complete energy independence and some of the lowest electricity prices in Europe, thanks to its abundant and low-cost hydropower, which accounts for nearly 90% of its total electricity generation. The electricity sector is largely state-owned, and historically, this model has ensured that the profits from energy sales return to the government, allowing for subsidized and affordable power for the populace. This natural advantage has long been a source of national pride and a key economic asset.

3.2 The Price of Interconnection

This historical stability has been significantly eroded by a policy of increased electricity interconnection with the European Union and the United Kingdom. Two new undersea cables—one to Germany (NordLink) and one to Britain (North Sea Link)—opened in 2021. While these cables provide a lucrative outlet for Norway's surplus hydropower and allow it to import power when needed, they have also "imported price volatility into the Norwegian market".

When weather conditions are poor in Europe, and wind and solar generation plummets, demand for Norway's reliable hydropower surges. Because Norway is now integrated into the European electricity market, its wholesale prices are driven up to match the higher prices on the Continent.

This has led to dramatic price spikes for Norwegian consumers, with some areas experiencing rates that were 20 times higher one week than the week before. In one instance, in mid-December, prices in southern Norway reached NOK 13.16 per kilowatt-hour, or over $1 per kilowatt-hour, far exceeding the cost in neighboring countries and marking a historic high.

3.3 The Political and Social Fallout

The result has been a wave of public and political backlash. The sentiment is that Norwegian citizens are being asked to endure high domestic prices to subsidize German industry, a situation described as "politically toxic". Numerous political parties are now campaigning to renegotiate or even scrap existing interconnectors and have stated their opposition to new ones.

The Norwegian situation highlights a critical flaw in the broader European energy transition. By accelerating the decommissioning of reliable baseload power (coal and nuclear) in countries like Germany and the UK, these nations have created a system that is increasingly dependent on the intermittent supply of renewables. When the wind doesn't blow and the sun doesn't shine, they must turn to imports from neighbors like Norway. The research notes that this foray into intermittent power "has not proved fruitful and added huge costs to consumer bills". 

Norway has effectively become the de facto "battery" for Europe, but its citizens are now paying the price for Europe's lack of investment in its own grid and backup generation. This demonstrates that the true cost of renewable energy is not limited to its "levelized cost of electricity" but must include the "holistic system costs" of transmission, storage, and the need for reliable backup power.

4. A Synthesis of Drivers and the Continuing Upward Price Trend

The escalating prices and fears of power shortages observed around the world are not isolated events but rather the result of a powerful confluence of systemic and policy-driven factors. The analysis in this report points to a "perfect storm" of forces that are reshaping the global energy landscape.

4.1 The Confluence of Factors

The primary drivers of this crisis can be synthesized into a few key themes:

• Massive, Inelastic Demand Growth: The nature of electricity demand is changing dramatically, driven by new, power-hungry technologies like AI and the rapid electrification of key sectors such as transportation and heating. This new demand is not only massive in scale but also relatively inflexible, putting immense pressure on the grid's ability to respond to fluctuations.

• Infrastructural and Planning Failure: From the fragmented and aging US grid to the lack of coordinated grid integration across Europe and within Norway , the existing infrastructure is simply not equipped to handle the demands of the modern world. Chronic underinvestment in transmission and an outdated regulatory framework have created bottlenecks that prevent the efficient flow of power and inhibit grid resilience.

• Policy-Induced Underinvestment: Specific policy decisions, such as Alberta’s moratorium on renewables, have directly deterred billions of dollars in investment and cancelled low-cost power projects. This has created a future supply vacuum that will almost certainly lead to higher prices, demonstrating how policy uncertainty can translate directly into a tangible cost for consumers.

• Geopolitical and Climate-Related Shocks: The war in Ukraine and increasingly severe weather events are adding a layer of unpredictability and risk that legacy energy systems cannot absorb. These shocks are not exceptions but are becoming a constant feature of the energy landscape, demanding a more robust and adaptable grid.

4.2 Forecasting a Volatile Future

The evidence overwhelmingly points to a continuing upward price trend for electricity. The IEA forecasts a 4% annual increase in global demand through 2027. The PJM Interconnection grid has already seen record highs for two consecutive years, while Alberta’s own market operator, the AESO, forecasts that a new market structure will raise wholesale prices by a minimum of 8% by 2045.

The current situation is not a temporary blip but the result of deep, systemic challenges. As the world becomes more reliant on electricity, the vulnerabilities of an outdated and poorly coordinated grid become more pronounced. Without fundamental changes to how energy systems are planned, funded, and managed, the upward pressure on prices and the risk of power shortages will not only persist but accelerate in the years to come.

5. Conclusions and Recommendations

The global crisis of rising electricity prices and supply concerns is a complex, multifaceted problem that cannot be attributed to a single cause. It is the result of a profound mismatch between a new era of unprecedented demand and an outdated, vulnerable infrastructure and policy framework. The analyses of the US, Norwegian, and Albertan electricity markets reveal that while the symptoms are similar—high prices and reliability fears—the underlying causes are distinct, highlighting the need for tailored, yet coordinated, solutions.

Based on this analysis, the following conclusions and recommendations are critical for navigating this new energy landscape:

• Accelerated Grid Modernization and Transmission Buildout: The fragmentation of the US grid and the resulting transmission bottlenecks are a major impediment to affordability and reliability. A proactive, long-term, and multi-value regional transmission planning approach is urgently needed. This is not merely a technical fix; it is a critical step toward creating a more resilient and efficient system that can share resources across regions during periods of stress and deliver low-cost power to consumers.

• Re-evaluation of Market and Policy Frameworks: Policymakers must create stable, predictable frameworks that incentivize investment in all forms of reliable and affordable generation. The case of Alberta demonstrates that policies, even those intended to address local concerns, can have a chilling effect on investment, ultimately worsening the very problems they seek to solve. Regulatory structures must properly account for the "holistic system costs" of intermittent power sources and ensure that the transition to a low-carbon grid does not compromise reliability or affordability.

• Diversified and Resilient Energy Mixes: The Norwegian paradox underscores the risk of relying too heavily on any single energy source, even an abundant one. A balanced and diverse energy mix, which includes a portfolio of reliable baseload power (such as nuclear), flexible gas-fired plants, and a variety of renewable sources, is essential for stability. This mix allows for a grid that is both low-carbon and resilient enough to withstand the shocks of extreme weather and geopolitical instability.

• A Shift from Reactive to Proactive Planning: The current approach to energy policy is often reactive, responding to crises as they emerge rather than anticipating and planning for future needs. The transition to a new age of electricity demands a fundamental shift toward proactive, integrated infrastructure planning that coordinates power generation, transmission, storage, and demand management. Without this change, the global energy system will remain susceptible to the ongoing pressures of accelerating demand, climate change, and geopolitical risk.

6. Frequently Asked Questions

Q1: Why is global electricity demand increasing so rapidly?

A1: Global electricity demand is being driven by a combination of factors, including the rapid expansion of data centers and the growing use of artificial intelligence (AI). At the same time, the widespread adoption of electric vehicles and heat pumps is shifting power consumption from traditional fuel sources to the electrical grid.

Q2: What is the main problem with the US power grid?

A2: The primary challenge for the US grid is its fragmentation. It is the only major macro-grid in the world without a central development plan, consisting of three largely isolated interconnections with planning fragmented across 12 different regions. This lack of coordinated planning and an aging infrastructure have created systemic vulnerabilities.

Q3: How did the Alberta renewable energy moratorium affect the market?

A3: The surprise seven-month moratorium on new renewable energy projects created significant investment uncertainty, leading to the cancellation or withdrawal of 10.7 gigawatts of planned generation capacity. These cancellations represent a loss of at least $33 billion in investment and would have provided enough power to meet 89% of the province's peak demand.

Q4: Why are electricity prices so high in Norway, a country with abundant hydropower?

A4: While Norway has historically had cheap hydropower, the construction of new undersea cables connecting it to the European and UK grids has "imported price volatility into the Norwegian market". When a lack of wind and solar generation in Europe leads to high demand, Norway's wholesale prices are driven up to match those higher prices.

Q5: What is the "Rate of Last Resort" in Alberta?

A5: The "Rate of Last Resort" (ROLR) is the new name for the Regulated Rate Option (RRO) in Alberta. It is a rate set by the government, now on a bi-annual basis, to protect consumers who are not on a competitive electricity contract from unpredictable power price spikes.

Q6: How much will it cost to modernize the US power grid?

A6: Replacing the entire US electric grid would cost nearly $5 trillion, with its current depreciated value estimated to be between $1.5 and $2 trillion. The Department of Energy has announced $13 billion in new financing opportunities to help with this modernization.

Q7: What are some solutions to the current grid challenges?

A7: There is no single solution, but a mix of approaches is needed. These include investing in a diverse energy mix that includes renewables, flexible gas plants, and nuclear power; scaling up energy storage to manage the intermittency of renewables; and modernizing grid infrastructure to improve reliability.

Q8: What is Big Rock Power's role in the Alberta electricity market?

A8: Big Rock Power is a competitive electricity retailer that offers a variety of services to residential, small business, and farm consumers across Alberta. The company, which has been operating since 2011, provides different rate options, including fixed-rate plans, variable-rate plans, and a "Solar Club" for micro-generators. As a competitive retailer, Big Rock Power operates within the provincial market framework, which is currently undergoing significant changes intended to improve reliability and long-term affordability.