The Utilities Analyst Who Says the Data Center Demand Story Doesn't Add Up - Odd Lots Recap

Podcast: Odd Lots

Published: 2026-02-02

Duration: 46 minutes

Guests: Andy DeVries

Summary

Andy DeVries argues that the utilities sector is poised to overbuild infrastructure significantly beyond what is needed to support data center growth. He highlights that the anticipated demand from data centers and the current capacity being developed could result in substantial oversupply.

What Happened

Andy DeVries, head of utilities and power at CreditSights, presents a contrarian view on the anticipated surge in demand for utilities driven by the data center boom. While data centers are predicted to require up to 95 gigawatts of power by 2030, DeVries points out that utilities are already working on connecting 110 gigawatts, suggesting an eventual oversupply. He highlights that utilities, traditionally stable investments, are now experiencing accelerated growth rates of up to 8% annually due to this demand.

DeVries explains that the current forward power curve in Texas is flat, indicating no significant increase in energy demand. He also notes that natural gas prices are expected to remain stable, with a slight decrease projected by the end of the decade. The cost of building power plants has skyrocketed, with new combined cycle gas plants now costing $3,000 per kW, up from $1,000-$1,200 per kW a decade ago.

The episode delves into the financial dynamics of the data center industry, where private credit is playing an increasing role. Notably, Pimco profited $2 billion from a Meta data center deal in Louisiana, structured off-balance sheet to potentially allow liabilities to be walked away from. This financial structuring raises skepticism reminiscent of Nortel's vendor financing from the past.

DeVries discusses the challenges faced by regional transmission organizations like MISO and ISO New England, which are grappling with coal dependency and high power prices. He emphasizes that these issues highlight the complexities of integrating new energy sources into the existing grid infrastructure.

The conversation touches on the future of nuclear power, with small modular reactors (SMRs) gaining interest from big tech as a potential solution. However, DeVries cautions with the example of the Vogel nuclear plant, which significantly exceeded its budget and timeline, costing $32 billion and completing ten years late.

Finally, the episode addresses the rapid advancements in AI efficiency, which are outpacing expectations. This improvement in AI technology is driving down processing costs and exceeding performance benchmarks, influencing the energy demand landscape further.

Key Insights