Rising electricity demand driven by artificial intelligence workloads has pushed the US electrical grid into public focus in 2025, as higher prices, capacity concerns, and environmental pressure converge with a new wave of software-focused energy startups seeking to manage strain without major infrastructure expansion.
Electricity Demand And Pricing Pressures Intensify
Electricity rates in the US have risen 13% this year, driven in part by rapid growth in AI-related power consumption. Data centers are emerging as a major source of demand, with some operators repurposing supersonic jet engines for backup generation and exploring long-term concepts such as space-based solar power.
Power use by data centers is projected to nearly triple over the next decade. That outlook has fueled consumer frustration over pricing and prompted environmental groups to call for a nationwide moratorium on new data center projects. Utilities, traditionally operating with limited public attention, are now under pressure to upgrade grid infrastructure and add new power generation capacity while managing uncertainty over long-term demand.
Software Startups Target Spare Grid Capacity
Amid these pressures, several startups are positioning software as a way to unlock existing grid capacity. Companies including Gridcare and Yottar argue that unused capacity already exists but is difficult to identify and access.
Gridcare aggregates data on transmission and distribution lines, fiber-optic networks, extreme weather risks, and community sentiment to help identify viable locations for new energy-intensive projects. The company says it has already identified sites that had previously been overlooked by utilities.
Yottar focuses on matching known capacity with the requirements of medium-sized energy users, aiming to shorten connection timelines during the current data center expansion.
Virtual Power Plants And Distributed Storage
Other startups are using software to aggregate distributed battery assets into virtual power plants. These systems allow fleets of batteries to supply power back to the grid during periods of peak demand.
Base Power is building a virtual power plant in Texas by leasing batteries to homeowners at relatively low prices. Homeowners use the batteries for backup power during outages, while Base Power can aggregate and sell the stored capacity to the grid to help prevent outages.
Terralayr is pursuing a similar approach in Germany, using software to bundle distributed storage assets already installed on the grid rather than selling batteries directly.
Coordinating Distributed Energy Resources
Several firms are developing software layers to better integrate distributed energy sources. Startups including Texture, Uplight, and Camus are building systems designed to coordinate wind, solar, and battery assets so they operate more consistently and contribute more effectively to grid stability.
Grid Modernization Efforts By Major Technology Firms
Large technology companies are also working on software tools for grid modernization. Nvidia has partnered with Electric Power Research Institute to develop industry-specific AI models aimed at improving grid efficiency and resilience.
Google is working with grid operator PJM Interconnection to use AI systems to help process a growing backlog of requests from new electricity generation sources seeking grid connections.
Adoption Constraints And Near-Term Outlook
Utilities have historically been cautious about adopting new technologies due to reliability requirements. They have also faced resistance from regulators and ratepayers when investing in large, long-lived infrastructure projects that affect affordability.
Software-based solutions are lower cost and faster to deploy, but must meet reliability standards before being widely adopted. While these changes are not expected to occur immediately, 2026 is seen as a period when some of these approaches could begin to see broader implementation as demand growth continues.
Featured image credits: Pexels
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