Sightline Climate: Power shortages threaten U.S. data center projects

Venture capitalists have invested over half a trillion dollars into artificial intelligence startups over the last five years. However, a report by research firm Sightline Climate indicates that up to 50% of announced data center projects might be delayed, with access to power serving as a primary bottleneck. Out of 190 gigawatts—a unit of power capacity—worth of data centers tracked by the firm, only 5 gigawatts are currently under construction. For context, about 6 gigawatts of data center projects came online last year, while about 36% of projects saw their timelines slip in 2025. These delays may eventually affect large enterprises and other companies that use AI for their businesses.

Power demands are increasing. AI is expected to drive data center power consumption up 175% by 2030, according to financial analyst Goldman Sachs. To mitigate grid dependence, technology companies like Google and Meta are investing directly in energy projects, including wind, solar, and nuclear. For instance, Google is working with utility provider Xcel Energy on a project in Minnesota that blends wind and solar with a 30 gigawatt-hour battery developed by Form Energy. Grid-scale storage is expanding across the country; the U.S. Energy Information Administration projects that by the end of this year, the U.S. should have nearly 65 gigawatts of battery storage capacity. Capitalizing on this momentum, Form Energy is raising a $500 million round.

These grid constraints have driven up electricity prices across the country, prompting political attention. The Trump administration, sensing a “looming political crisis” regarding grid capacity, is urging technology companies to build their own power sources or pay higher rates. This pressure has accelerated interest in alternative power-management technologies. Startups are developing software and hardware to optimize power distribution, including:

• Power conversion developers: Amperesand, DG Matrix, and Heron Power are building new power conversion technologies.
• Power management software: Camus, GridBeyond, and Texture are developing software to manage electricity flow.

Additionally, investors are focusing on solid-state transformers—power electronics intended to replace traditional iron-and-copper transformers. While traditional transformers are reliable, they are increasingly bulky; once server racks reach 1 megawatt in power density, the required power equipment can occupy twice the space of the rack itself. Solid-state alternatives offer a more compact, flexible solution, providing investors with a strategic hedge against potential AI market volatility as broader electrification continues.

Why it matters

Energy constraints are emerging as a critical bottleneck for data center expansion, with a significant percentage of projects facing delays. This shortfall is driving tech companies to invest directly in power infrastructure, creating a new investment thesis for energy-tech startups.