PJM, the largest electricity grid operator in the U.S., serving 13 states including Pennsylvania, New Jersey, and Maryland, has received federal approval from the Federal Energy Regulatory Commission (FERC) to fast-track the review of up to 50 new power plant projects.
This decision follows President Donald Trump’s national energy emergency declaration and addresses growing concerns over surging electricity demand and potential power shortages in the coming years, driven largely by energy-intensive data centers. We believe this move is just the beginning of a significant modernization of the U.S. electrical infrastructure. It is likely to be followed by similar actions across the country, which will include easing permitting processes, expediting approval for new power plants (primarily natural gas-fired and nuclear), and possibly reopening dormant nuclear facilities.
As noted in previous reports, this signals a substantial wave of capex in both power generation (e.g., gas turbines) and transmission and distribution infrastructure (e.g., high-voltage cables and transformers). While recent order momentum has been strong for major power equipment suppliers such as GE Vernova and Siemens Energy, we anticipate this momentum will accelerate in the coming quarters.
Importantly, we expect these orders to come with favorable pricing and margin conditions in various segments of the market. For instance, Siemens Energy has hinted during its earnings call today at price increases in its gas turbine business that should also benefit from the introduction of reservation fees. The transformers market is also hot, with Bloomberg New Energy forecasting U.S. demand to surge by 65% by 2027, compared to 2023 levels, with lead times now approaching four years.
In conclusion, power equipment players, that make up the core of our Powering AI portfolio, have not been immune to the DeepSeek storm in January and are still trading 10% below their highs on average. But with all hyperscalers guiding their data center capex on the upside and the US PJM gunning for the approval of a large number of new power plants, we believe that the initial DeepSeek concerns were largely overblown.
