Four grids, four realities: risk insights for an evolving U.S. energy system

As North America’s energy transition accelerates, the realities of decarbonization and grid reliability vary dramatically by region. In the West, the California Independent System Operator (CAISO) is contending with solar saturation, fire risk, and interconnection delays. In the East, Pennsylvania, New Jersey, and Maryland (PJM) faces a surge in electricity demand from AI and data centers. Down South, the Electric Reliability Council of Texas (ERCOT) functions as a deregulated energy island with limited backup and high weather risk, while the SERC Reliability Corporation (SERC) must manage hurricane exposure, aging infrastructure, and a slower path to decarbonization.

One grid does not fit all

Each grid is under pressure. Each is evolving fast. And each presents distinct risk implications for insurers, developers, and large energy buyers.

Recent forecasts suggest the U.S. could require more than 1,000 new large-scale data centers within the next decade, with electricity consumption from these facilities projected to triple¹, rising from 4% of total U.S. usage today to as much as 12% by 2028, according to the Department of Energy. This rapid expansion is reshaping the power landscape, accelerating demand growth in both urban hubs and historically underbuilt regions.

Despite the shared challenge of rising demand, regional grid operators vary widely in how they manage new generation interconnection, creating stark differences in speed, cost, and reliability outcomes. ERCOT’s interconnection process leads the U.S. in speed and volume², but with limited systemwide planning, curtailment is rising and long-term resilience is at risk. PJM, by contrast, has suffered from severe delays and procedural bottlenecks, leaving it last in national interconnection rankings. These gaps highlight a core challenge of the energy transition: the absence of coordinated, forward-looking transmission planning across much of the U.S. grid.

Today, the buildout of AI and digital infrastructure is driving 24/7 load growth across the country, from Georgia to Northern California. Data center demand is only accelerating, and the infrastructure needed to support it is not evenly distributed. These geographic mismatches are shaping everything from underwriting strategy to siting feasibility, infrastructure investment, and the availability of risk transfer solutions.

At the same time, elevated risks—from energy security and geopolitics to climate volatility, cybersecurity, and permitting headwinds—are compounding the challenge of maintaining reliable power.

To navigate this new era of load growth and system strain, insurers and energy stakeholders need a clear view of how regional grids are positioned to meet demand, and where vulnerabilities lie. The Baldwin Group’s dedicated energy experts partner with clients across the energy and infrastructure value chain to help quantify these risks and tailor insurance strategies to meet evolving demands.

Electric power markets national overview

A spotlight on CAISO, PJM, ERCOT, and SERC

Why focus on these four grid operators? Because together, they reflect the scale, diversity, and systemic pressures shaping the future of U.S. electricity.

From California’s curtailment challenges to Texas’s isolated infrastructure, PJM’s potential capacity gaps, and SERC’s climate-exposed infrastructure, these regions illustrate just how uneven and interconnected the energy transition really is.

The journey to a sustainable, reliable grid across the U.S. is complicated and multifaceted. As energy transition efforts accelerate alongside surging data center demand and population growth, the stakes for grid reliability are rising fast. Insurance must evolve to meet this moment. Whether you’re building, buying, or underwriting power, understanding the localized realities of grid risk is essential.

Total data center electricity use from 2014 through 2028

Grid risk snapshot: key metrics and strategic pressure points

2024-29 GWh demand growth as a percentage of 2024 GWh demand

CAISO: A clean energy leader navigating systemic constraints

CAISO’s ambitious decarbonization push is colliding with the realities of rising demand, intermittent supply, and limited firm capacity. While California leads the U.S. in renewable deployment and storage investment, the grid’s growing reliance on weather-dependent resources, coupled with rapid electrification and emerging AI and data center load, is exposing critical vulnerabilities.

Curtailments, reliability warnings, and strained infrastructure point to a widening gap between policy ambition and physical readiness. In 2024 alone, CAISO curtailed approximately 3.4 million megawatt-hours (MWh) of solar and wind—a 29% increase over 2023⁶—underscoring growing pressure on grid flexibility and storage buildout. Recent investments, such as CAISO’s $6.1 billion transmission plan⁷, aim to integrate over 38 gigawatts (GW) of new solar and 4.7 GW of offshore wind by 2035, though permitting, siting, and implementation challenges remain.

In response to mounting reliability challenges, developers are shifting away from standalone renewables: as of 2025, 97% of solar capacity⁸ in CAISO’s interconnection queue is paired with battery storage, reflecting the market’s preference for hybridized resources that can help balance diurnal variability and reduce curtailment.

Installed battery capacity has expanded thirtyfold since 2018, reaching 15.7 GW statewide by early 2025⁹, including more than 13 GW from utility-scale projects, making batteries the top new resource added to the CAISO system for five consecutive years. Several large facilities have replaced or co-located at former gas plant sites, offering both emissions reductions and local reliability benefits.

To succeed, California must accelerate transmission buildout, streamline interconnection, incentivize flexible resources, and balance its decarbonization goals with the need for 24/7 reliability amid rising natural disaster risks and expanding digital infrastructure. Refinements to resource adequacy rules are helping unlock the full value of battery storage, though advocates say additional reforms are needed to support longer-duration storage and prioritize retirements of aging gas-fired plants.

PJM: A critical grid under growing demand pressure

The PJM Interconnection, the largest grid operator in the United States, is navigating a dual challenge: decarbonizing its energy system while managing a sharp increase in electricity demand. Driven by electrification, AI compute, and data center development, rising load coincides with the accelerated retirement of fossil fuel generation and sluggish integration of clean energy resources.

This convergence has created a tangible risk of destabilization. PJM now projects approximately 32 GW of additional electricity demand¹⁰ by 2030, stemming primarily from data centers, making it one of the most load-constrained grids in the U.S. over the next five years. PJM member utilities have requested over 17 GW of new large-load additions¹¹ in pipeline forecasts, despite limited signed contracts, highlighting the unpredictability of large-load growth forecasts.

Projections from PJM and regional utilities suggest that demand could outpace capacity within the decade, particularly if policy-driven generator retirements continue without adequate replacements. Federal regulators have grown increasingly concerned about the pace of PJM’s interconnection reforms. In July 2025, the Federal Energy Regulatory Commission (FERC) ordered PJM to revise¹² its study process to better comply with FERC Order 2023¹³. Additionally, capacity pricing swings have added further complexity. PJM’s most recent auction saw an 800% increase¹⁴ in clearing prices compared to prior years, triggering consumer backlash and mounting political pressure.

FERC’s action underscores the urgency of aligning infrastructure policy with rising demand realities. Slow permitting, interconnection delays, and limited infrastructure upgrades are preventing the clean energy pipeline from translating into operational resilience. Still, PJM’s rate base grew by 7.6% in 2024¹⁵, its first acceleration in five years. Stable returns on equity and targeted incentive adders are drawing private capital into the region’s grid infrastructure.

ERCOT: Market-driven growth meets system fragility

While CAISO and PJM navigate the tension between formal decarbonization mandates and rising demand from AI and electrification, ERCOT presents a different kind of stress test. In Texas, there is no top-down clean energy target, yet the state leads the nation in renewable energy generation¹⁶ due to market incentives, investor appetite, and land availability. ERCOT’s unique structure as an energy-only, deregulated, and largely self-contained grid means the stakes are different when demand surges, weather disrupts supply, or variability outpaces backup generation.

Wind and solar supplied nearly 36% of ERCOT’s peak demand in June 2024¹⁷, and rose to about 45% in June 2025, demonstrating the rapid growth and material contribution of renewables at critical load times. However, the grid is under mounting pressure from emerging technologies, like AI and crypto, which demand constant, high-load power.

New hyperscale AI data centers are exhibiting steep, unpredictable load ramps¹⁸ similar to steel mills, introducing variability that challenges real-time operations. Texas regulators recently approved curtailment rules requiring non-critical large loads to reduce consumption during firm load shed events, highlighting growing concern over uncoordinated load growth.

With no binding decarbonization goals, no forward capacity market, and limited interconnection to neighboring grids, ERCOT faces pressure from intermittent supply, rising structural load, and constrained regulatory tools to manage the mismatch. Additionally, without expanded investment in long-duration storage, hardened infrastructure, and improved planning frameworks, ERCOT’s market model may struggle to meet the demands of a digital-first economy.

SERC: Navigating extreme weather and delayed transition

The SERC region spans 16 states across the Southeast U.S., including Georgia, Alabama, the Carolinas, Mississippi, and Florida, and is characterized by older, vertically integrated power systems with slower rates of renewable adoption. While the pace of clean energy transition lags behind CAISO and ERCOT, structural electricity demand continues to grow, driven by electrification, urban growth, and emerging industrial and digital infrastructure.

The grid must also withstand increasingly frequent hurricanes, inland flooding, severe winter weather, and extreme heat events that test the resilience of infrastructure built for another era. In addition to hurricane and heat-driven disruption, climate stressors, like sea level rise, inland drought, extreme cold, and aging coastal substations, are elevating long-term vulnerability in the Southeast.

SERC’s slower pace of renewable adoption may delay the curtailment and intermittency issues seen in more renewable-heavy regions, but it also prolongs dependence on aging, high-risk assets such as coal plants, overhead distribution lines, and coastal transmission infrastructure. Despite a slower decarbonization trajectory, climate- and technology-driven demand is accelerating.

Recent reliability assessments indicate growing load obligations across the SERC footprint²⁰, driven by economic development, electrification, and the early stages of industrial and data center expansion. To remain reliable, SERC utilities and regulators will need to accelerate grid hardening, expand transmission, and invest in flexible, distributed resources.

Stakeholder efforts to integrate data center flexibility are also emerging. Initiatives such as EPRI’s DCFlex initiative²¹ are testing ways for hyperscale operators to align energy use with grid conditions, potentially easing peak strain and reducing infrastructure costs. Additionally, academic and regulatory partnerships are helping utility commissions and state officials evaluate the implications of rising demand and shape coordinated, data-driven policy responses.

Coordinated solutions for a fragmented grid

While each grid region faces unique challenges, several core stressors cut across geographies and technologies. Load is accelerating as AI, electrification, and industrial growth drive 24/7 demand, compounding the strain on grids not built for this scale or intensity. Clean energy is scaling quickly, but without firm backup, creating capacity imbalances and intermittency risk, especially in regions where interconnection delays and transmission bottlenecks limit access to new generation. These constraints are driving a shift toward on-site, nested, and private power strategies.

Aging infrastructure meets a changing climate

Many transmission systems are aging, inflexible, and unprepared for the bidirectional power flows, extreme weather, and distributed assets defining the future. Permitting and regulatory friction continues to slow resilience upgrades and clean energy deployment, even as climate volatility increases both the frequency and severity of grid disruptions. In hyperscale environments, the risks are more concentrated: phased construction timelines, elevated fire risk, water usage, and equipment loss all threaten uptime.

Recent emergencies underscore the urgency

In June 2025, extreme heat pushed PJM close to capacity limits, triggering emergency alerts and widespread demand response. FERC Chairman, Mark Christie, warned²² that “some of our systems really came close to the edge,” emphasizing the growing risk of supply shortfalls during peak conditions. Grid operators increasingly rely on demand flexibility to avoid blackouts, but structural shortfalls in dispatchable capacity remain a central reliability challenge, especially as older assets retire faster than new firm resources come online.

Grid-enhancing technologies offer near-term optimization

To improve transmission efficiency without waiting for large-scale buildouts, stakeholders are increasingly turning to grid-enhancing technologies (GETs), such as dynamic line ratings and topology optimization tools. These solutions can unlock latent capacity on existing lines, easing congestion and accelerating renewable integration. While federal regulators encourage their use²³, adoption remains inconsistent, prompting calls for stronger policy signals and clearer cost-recovery pathways.

Environmental and political resistance is growing

Environmental stressors—from extreme heat to water scarcity—are now long-term operational factors. Community and political resistance are rising, particularly in regions already under energy strain or where developer sustainability goals clash with grids tied to legacy fuels. Fears over reliability, cost, or land use can stall decarbonization, while AI workloads intensify local grid and water stress. Project-level delays increasingly stem from trust gaps with local stakeholders and permitting friction. Developers who engage late with fire marshals, transmission planners, or local leaders face greater risks of redesigns, stalled approvals, and insurability challenges. Insurance must now account for stakeholder risk and soft cost overruns that can derail otherwise viable builds.

Cost-sharing tensions add friction to regional planning

As transmission investments scale across regions, concerns are emerging over how costs are distributed. States with slower clean energy adoption worry about subsidizing infrastructure driven by their neighbors’ decarbonization goals, raising questions about fairness, cost allocation, and local benefit. Some industry stakeholders have proposed establishing an independent transmission monitor to enhance transparency, improve accountability, and ensure that planning decisions prioritize consumer benefits. Effective planning will require not only coordination across grids but also mechanisms that equitably balance systemwide reliability with local accountability.

Location is becoming a proxy for emissions risk

Carbon intensity and site selection are now underwriting factors, with regional emissions varying. This is accelerating interest in nuclear solutions like small modular reactors (SMRs), which offer 24/7 clean power but introduce new thermal integration, cooling, and insurability challenges.

Policy shifts add to planning complexity

Policy uncertainty is adding complexity to long-term grid investment and energy procurement decisions. While some federal actions have slowed renewable deployment or disrupted supply chains for grid equipment, state mandates, corporate sustainability goals, and favorable market economics continue to drive clean energy demand. Stakeholders must navigate a dynamic landscape where regulatory headwinds coexist with strong structural tailwinds.

Risk transfer at the speed and scale of energy transformation

These shared stressors demand insurance strategies that move beyond site-specific hazards. Developers, energy buyers, and insurers must adopt a more integrated approach, one that reflects regional nuance and aligns coverage with national trend in system strain, investment risk, and operational complexity. The Baldwin Group partners with clients to design forward-looking insurance strategies that match the scale and urgency of today’s power landscape.

Visibility into emerging exposures

As load shapes shift and extreme weather events escalate, traditional risk models are no longer sufficient. The rise of always-on demand, distributed energy, and AI infrastructure introduces new vulnerabilities across every layer of the grid.

Together with you, we:

• Identify gaps tied to curtailment, outages, DER volatility, and interconnection
• Assess exposure to fire, overheating, water damage, and siting risks
• Model latency and multi-tier infrastructure dependencies
• Address uninterruptible power supply (UPS) reliability, dual-fed substations, and emergency power
• Implement parametric, weather-triggered, and uptime-contingent coverages
• Evaluate risks from nested generation, renewable hubs, and SMRs
• Analyze SMR-specific risks: thermal exchange, water stress, and compliance
• Anticipate AI-driven exposures tied to inference complexity and cooling needs
• Assess risks of automation, sensors, and digitally dispatched infrastructure

Enabling clean energy and storage innovation

New technologies often lack the operational history that underwriters rely on. Still, insurance plays a critical role in accelerating adoption.

To safeguard the success of your projects, our advisory teams:

• Structure insurance for performance guarantees and emerging tech degradation
• Engage specialty markets and phase coverage as projects scale
• Manage risks from green materials, hybrid systems, and circular practices
• Assess on-site and nuclear generation risks, including modularity and planning
• Provide tech performance insurance where warranties fall short
• Support investor alignment on sustainability and clean energy strategies
• Assess fire and thermal risk in utility-scale batteries to support resilience

Supporting capital deployment and project bankability

Risk transfer is often essential to unlocking investment.

For high-risk geographies or emerging tech segments, count on our experts to:

• Design builder’s risk, delay in start-up (DSU), and wrap-up programs for energy and digital builds
• Address permitting, ESG criteria, and lender-aligned insurance hurdles
• Structure shared risk ownership across developers, vendors, and energy partners
• Navigate political and regulatory risk across borders and public-private partnerships (PPPs)
• Evaluate capital access, carbon scoring, and location-based insurance pricing
• Enable portfolio-scale coverage and track evolving AI infrastructure risks
• Align capital with siting feasibility, permitting risk, and climate exposure

Power procurement and reliability advisory

In a strained grid environment, energy buyers face growing reliability risk.

We evaluate exposures tied to procurement contracts, service level agreements (SLAs), and operational dependencies by helping you:

• Assess power purchase agreement (PPA), utility, and clean energy contract risks
• Evaluate curtailment, congestion, and interconnection exposure.
• Advise about carbon intensity and regional grid mix
• Design BI coverage for outages and delivery failures
• Structure contingent BI linked to grid volatility
• Mitigate diesel backup exposure and environmental risk
• Guide coverage for private or nested generation ecosystems
• Evaluate virtual power plant (VPP) participation and dispatch performance

Bridging energy and digital infrastructure strategies

As AI growth and grid modernization converge, energy and insurance decisions must be coordinated.

For data centers, digital campuses, and industrial hubs, we:

• Align insurance with siting, grid dynamics, and co-location risks
• Structure coverage for uptime, SLAs, and interdependent sites
• Scale coverage across edge, core, and interconnected campuses
• Plan for phased construction, heat risk, and equipment delays
• Use parametric and captive models for local climate volatility
• Model fire, cooling loss, and outage scenarios
• Integrate NERC CIP and cyber-physical controls
• Adjust coverage for AI hardware and density-specific risks
• Evaluate Scope 2 and procurement-linked emissions exposure
• Incorporate nuclear generation into continuity and ESG planning
• Consider VPP-enabled load control at smaller commercial sites

A catalyst for resilience, growth, and innovation

The grid is evolving fast, but so are the tools to manage risk. With deep energy sector insight and broad market access, The Baldwin Group helps clients move from exposure to advantage, transforming insurance into a strategic tool for resilience, growth, and innovation in an uncertain energy future. We help clients keep pace with the infrastructure demands of tomorrow while building the insurance solutions they need today.

Insurance solutions that power what’s next

As the electric grid becomes a more central axis of climate resilience, digital infrastructure, and economic growth, insurance must evolve from a reactive tool into a proactive planning mechanism. That means partnering early, modeling deeply, and designing coverage that reflects the interconnected and increasingly interdependent nature of the U.S. energy system.

Our energy and infrastructure experts work across regulated and deregulated markets to help clients de-risk grid exposures, quantify emerging threats, and structure insurance strategies that scale with the evolving energy economy.