Energy Revolution & Electrification
By Vigilant Wealth Management on July 30, 2025
This is the fourth in a series of bi-monthly posts on Secular Investment Themes (SITs). The objective of these posts is to provide the reader with a better understanding of how Vigilant incorporates our thinking on broader economic trends and themes into the investment research process. The Investment Policy Committee (IPC) focuses on identifying long-term trends that reflect the priorities of society, believing that investments in companies that are aligned with these themes have the potential to deliver favorable risk-adjusted returns. Key factors in identifying these trends include demography, consumer preferences, geopolitical landscape, innovation, monetary policy, fiscal spending, and capital investment priorities. We have identified five key SITs expected to attract significant capital spending from governments and private enterprises.
Energy Revolution & Electrification
The global energy and electricity landscape is evolving rapidly, transforming how fuels are collected, processed, stored and transported. A key driver of this transformation is the expectation of much higher electricity demand in the next few decades.
Our Secular Investment Themes often intersect. Prior pieces on Infrastructure & Resource Security and Digitalization & Big Data both influence, and are influenced by, the Energy Revolution & Electrification theme. Vigilant’s Investment Policy Committee (IPC) collaborates across sectors to explore these dynamics.
Our focus of late has been on the following research areas within this theme:
- Recent Trends in Energy & Electricity Mix
- Future Energy & Electricity Demand
- Future Energy Supply
Recent Trends in Energy & Electricity Mix
When we think about investing in energy and electrification, it’s helpful to consider how supply and demand have evolved over time. According to the International Energy Agency (IEA), which is comprised of members from most industrial nations, global energy demand increased by 15% over the past decade. Forty percent of that growth was met by renewable sources. However, in developed economies, overall energy demand declined by 0.5% per year, implying that emerging and developing economies are the primary source of growth. That seems sensible as those countries account for 85% of the world’s population, lag behind in living standards, and, therefore, have significant gaps to close in per capita energy consumption.
From an investment perspective, it’s also important to note how the energy generation mix has changed within countries. The chart below shows the recent mix of fuels in electricity generation:
In developed economies like the U.S. and Europe, there has been a move away from coal powered electricity to fuels like natural gas. This transition has been supported by two major developments:
- U.S. well productivity has undergone a significant transformation in the last twenty years. The U.S. has gone from being a small producer of oil and natural gas to one of the largest.
- The U.S. has transitioned from producing no liquefied natural gas (LNG) to generating over 20% of the world’s exports.
With its growth in oil and gas production, the U.S. share of power generation from coal has declined from more than 50% in 2000 to less than 20% today. Meanwhile, natural gas fired electricity generation in the U.S. has grown from under 20% in 2000 to 42% last year. Renewable energy has also expanded rapidly in the last five years, particularly solar, in many regions around the world.
Future Energy & Electricity Demand
When considering investment opportunities in the evolving energy mix, it’s important to assess how electricity demand might change in the future. Electrification has been happening for more than a decade, with electricity demand growing nearly 3% per year, double the rate of overall energy demand growth. More recently, electricity has become an even stronger growth story driven by electric vehicle adoption and, increasingly, by the electricity demands from data centers.
McKinsey & Company estimates that electricity demand from data centers will rise by 9% annually, reaching 35 gigawatts (GW) by 2030¹. Boston Consulting Group is even more confident, projecting the increase is 15%-20% per year². Because of these trends, the IEA expects that electricity demand growth will exceed overall energy demand, which puts companies providing either the fuels or infrastructure to electricity in focus for us.
Hyperscalers, or large companies who build and operate their own large data centers, are expected to account for a large share of the increase in electricity demand. Co-location data centers, which often build on-site power generation capacity will also require equipment, services and fuels. Co-location data centers will be necessary as the existing U.S. electricity grid may not initially be able to handle the transmission needs of the new demand.
Beyond the U.S., 80% of the demand growth for electricity will come from emerging and developing economies according to the IEA. China alone, driven by its rapid adoption of EVs, is expected to account for more than half of that growth.
Future Energy & Electricity Supply
We believe that future energy demand and electricity generation needs will be met through a diversified mix of energy sources, including:
- Natural Gas
- Renewable Energy
- Oil (but at a slower rate of growth)
- Nuclear Power
Many in the energy sector believe that there will need to be this kind of “all hands on deck” solution to fuel the higher electricity generation to meet demand.
Solar and wind electricity generation is growing at a fast rate, but those sources still require some type of storage solution due to intermittency issues (e.g. cloudy days, nighttime or low wind). To date, we have favored investments that capture multiple aspects of the renewables value chain, including utilities or infrastructure companies, rather than focusing solely on “pure plays.”
Natural gas has become the primary fuel powering electricity generation over the past decade and is expected to remain a key component of the energy mix. In the U.S., natural gas is abundant, relatively cheap to extract, and has gained favor due to its lower carbon emissions (especially compared to coal). Natural gas offers several current advantages, including its availability and its transportability. On the latter, data centers are being designed to co-locate natural gas fired electricity onsite.
Conclusion
At Vigilant, we believe that companies participating in the trends of higher electricity demand, increased fuel production, more energy infrastructure and rapid growth of data centers represent attractive opportunities for the portfolio. Demand for natural gas, both domestically and internationally, is expected to remain strong. Companies serving that growth can include energy service firms, infrastructure providers, LNG producers, and pipeline companies.
For example, according to the EIA, global LNG export capacity is expected to increase by 50% by 2030. Between data centers growth and rising LNG export capacity, natural gas production could grow by as much as 30% by 2030 compared to 2023 levels, according to the EIA.
This underscores the importance of infrastructure. Currently, there is not enough interstate pipeline or storage capacity to support this level of growth. It’s similar to the situation in electricity infrastructure. There is simply not enough generation or transmission capacity to meet the expected surge in demand. Along with the providers of fuels for energy, companies helping to fill these infrastructure gaps in energy and electricity remain a key area of interest for us.
¹ Data as of January 17, 2023
² Data as of June 28, 2024
U.S Energy Information Administration (EIA)
International Energy Agency
