Power has become the defining challenge in data center development. U.S. data center power demand is projected to increase from approximately 31 gigawatts in 2025 to 41 GW in 2026 and could reach 66 GW by 2027. At the same time, grid interconnection queues in many major markets now stretch five to seven years, and more than half of developers report that securing power has become significantly more difficult over the past year. As a result, the traditional approach of selecting a site, filing for interconnection, and waiting for utility service is no longer practical in many locations.
Developers are adapting by making power strategy one of the first decisions in the development process. Many are investing in Bring Your Own Power solutions, including natural gas generation, fuel cells, and battery energy storage systems, to reduce dependence on constrained utility infrastructure. Behind-the-meter generation, once viewed primarily as a temporary solution, is becoming a long-term component of many projects. Some forecasts suggest that more than one-third of data centers could rely entirely on onsite power by the end of the decade. Small modular nuclear reactors are also attracting attention as a potential carbon-free baseload solution, although commercial deployment remains several years away.
Utilities are adapting as well. Rather than viewing behind-the-meter generation as competition, many are partnering with developers to integrate onsite generation with traditional grid service. That collaborative approach helps address immediate power needs while preserving long-term customer relationships. The relationship between utilities and developers is becoming much more strategic than it was only a few years ago.
Capital providers are also adjusting their approach. Investors are increasingly separating power infrastructure financing from traditional real estate financing, allowing different sources of capital to address different project risks. Financing structures for GPU infrastructure, land acquisition, and power assets continue to evolve, while forward-sale models allow developers to monetize projects earlier without transferring construction risk.
Geography is shifting alongside these financing and infrastructure trends. Texas is expected to exceed 40 GW of data center capacity by 2028, representing nearly 30 percent of projected U.S. demand. Meanwhile, traditionally strong markets such as California and Oregon face increasing pressure from limited power availability, longer permitting timelines, and more complex interconnection requirements. Developers are placing greater emphasis on locations where power can be delivered quickly and predictably.
Ultimately, reliable access to power has become one of the most important competitive advantages in the industry. Capital remains available, but projects that secure power early are in the strongest position to move forward. As technology, onsite generation, and financing structures continue to evolve, developers will need to remain flexible in how they approach future projects.