By David French and Laila Kearney
HOUSTON, March 31 (Reuters) – Several major European power companies are laying out big plans to expand in the United States, as the lure of explosive electricity demand from data centers outweighs a recent history of transatlantic growth setbacks.
The U.S. power market is drawing huge interest from companies both inside and outside the country’s traditional energy industry, as electricity consumption reaches record levels. Industry group Edison Electric Institute said in July that U.S.-regulated utilities alone are forecast to spend $1.1 trillion between 2025 and 2029 to support rising power demand.
European utilities and energy manufacturers have a checkered history with investing in the U.S., in some cases being forced to write off billions of dollars or divest suddenly undesirable assets in the face of changing politics and rising costs. However, they are among those eager to invest in power generation assets, transmission infrastructure and other areas of the aging U.S. electrical grid.
“The moment is absolutely unique, and I think we are ready for that,” Iberdrola Executive Chairman Ignacio Galan told the CERAWeek conference in Houston last week.
Iberdrola has earmarked the U.S. as its core growth area, and plans to spend much of its 58 billion euros ($66.46 billion) in grid investments through 2028 in the country.
The Spanish energy giant is not alone. Germany’s RWE said earlier this month it was allocating 17 billion euros of its 35 billion euro investment through 2031 on building renewables, natural gas generation and battery storage in the U.S., while Siemens Energy is spending $1 billion to expand its U.S. power plant turbine and grid manufacturing capacity.
CHECKERED HISTORY
Despite the U.S. investment zeal, there are many in Europe that have recently suffered setbacks when trying to expand in America.
Danish company Orsted has taken writeoffs worth several billion dollars since 2023, mostly due to delays and overruns tied to U.S. offshore wind developments. Others, including France’s EDF and British energy majors BP and Shell, spent years building renewable power projects in the U.S. but have recently sought to sell some or all of their assets as strategic priorities changed.
Iberdrola, through its U.S. arm Avangrid, spent three years trying to close an agreement to buy utility PNM Resources before calling it off in the face of stiff opposition from local regulators, who said the risks of the deal outweighed the promised benefits to state ratepayers.
The policy preferences of different U.S. administrations have forced European firms to be adaptable. U.S. President Donald Trump has been an adversary of renewable energy, particularly offshore wind, and favored generation using fossil fuels and nuclear. That spurred last week’s announcement by TotalEnergies that it would swap offshore wind leases for funding to develop U.S. oil and natural gas assets.
George Bilicic, vice chairman of investment banking at Lazard, said the size of the current U.S. opportunity dwarfed any concerns that European companies and their shareholders might have about past challenges.
“The U.S. needs investment,” he said. “There is abundant greenfield opportunity, and the power market remains fragmented. If you are wanting to pursue mergers and acquisitions, there are many opportunities.”
COMPLEMENTARY STRATEGIES
European power companies, arguably, are under more pressure than most to implement successful growth strategies.
The Iran war is the second massive energy challenge faced by Europe this decade. It follows the Russian invasion of Ukraine in 2022, which prompted a painful shift away from using Russian natural gas.
To the expanding U.S. power market, European companies bring capital at a time of vast spending needs and strong technical knowledge.
Natural gas is considered a key power source for generation linked to data centers, given its consistent output. Many Europeans have considerable experience in this area, including RWE, which runs one of the largest natural gas power fleets in Europe.
While data center growth has been most pronounced in the U.S., the artificial intelligence megatrend is also playing out in Europe and raising power demand on the continent.
Markus Krebber, CEO of RWE, said that while Europe and the U.S. have differences in energy policy, and fundamentals such as the amount of energy each imports and exports, both geographies are effectively building the same mix of power generation assets.
With the power sector now experiencing such strong growth for the first time in decades, having scale – in particular around supply chains – matters in satisfying this demand. Krebber said pursuing U.S. growth offered important diversification, with his company targeting an even split between spending in the U.S. and Europe.
“For us, the big move into the U.S. was not an individual decision, but a broader decision to have a balanced investment portfolio,” he said in an interview on the sidelines of the CERAWeek conference.
($1 = 0.8727 euros)
(Reporting by David French and Laila Kearney in Houston; Editing by Liz Hampton and Nia Williams)
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