The utility sector stands at a crossroads. On the one hand, the sector faces the most significant load growth and affordability pressures in most of our lifetimes. On the other, shrinking federal and even state budgets to support low-cost power and grid innovation leave utilities with less room to maneuver.
Meeting that challenge requires a fundamentally different, entrepreneurial approach. It calls for problem-driven innovation, rapid testing and iteration, and creativity under real constraints. This is the only viable response to structural pressures reshaping the entire sector.
Utilities are built on a culture of 99.99% reliability. The rise of data centers, with their even higher reliability requirements, pushes those expectations further. In this environment, innovation can feel risky. Still, the bigger danger may be stagnation. Only through calculated innovation tied to measurable cost and reliability outcomes can utilities meet the demands of this moment.
There are many reasons that costs are going up. Despite many utilities’ statements about the potential for data center loads to reduce rates, most new grid-connected data centers will require significant T&D investment. Prices for transformers, cables, and other core equipment have doubled in just a few years. Meanwhile, extreme weather requires hardening, which requires money.
In some coastal states, electricity rates are now so high that the operating costs of an EV or a building heat pump can exceed those of fossil-based alternatives. Affordability has become the leading topic in board rooms of many utilities today — and a constraint as binding as reliability has always been. That financial pressure narrows what utilities can build and slows the pace of the transition.
What entrepreneurial thinking looks like in a utility context
In the face of pressures from both regulators and customers, utility entrepreneurship does not mean behaving like a startup. Utilities have obligations startups do not: reliability, equity, and public accountability. But three approaches from the entrepreneurial world translate directly.
- Problem-led innovation: The most effective entrepreneurs start with tightly defined problems. In the utility space, this means articulating system constraints with precision — such as interconnection backlogs, wildfire risks, or load growth bottlenecks — and aligning innovation efforts around them. PG&E’s recent R&D strategy work, supported by Realize 2050, illustrates this approach and shows how clarity of problem definition accelerates solution development.
- Rapid evaluation and iteration: The current pilot process often moves at a glacial pace, and many early partnerships never seem to escape “pilot purgatory.” Utilities need pathways for fast, low-risk testing using sandboxes, islanded microgrids, and digital twins that reduce evaluation cycles from years to months. Faster iteration avoids locking in unnecessary costs and enables earlier scaling of successful solutions.
- Creativity under constraints: The most successful startups thrive under scarcity. Constraints, when treated as catalysts, force prioritization and unlock efficiency gains that delay or even avoid costly system upgrades. The lesson here is that fiscal pressure can drive smarter, leaner innovation if utilities embrace it strategically.
The opportunity ahead
Consider a thought exercise: imagine if a utility’s total budget were cut by 10%, or 20%, or even 50%. What operational changes would be required to maintain reliability and affordability under those constraints?
Of course, we are unlikely to see 50% cuts in a world of massive load growth, but the exercise forces a clearer understanding of which activities drive the most value, which can be automated, and where legacy processes create unnecessary costs.
This is important because evolution is no longer optional. The grid’s complexity is reaching a point where human planning alone cannot keep up. Millions of distributed assets, intermittent generation, and rapidly changing load patterns are beyond the reach of spreadsheets and static models. This requires new technology; in a world of constraints, artificial intelligence is the most credible pathway to doing more with less.
That said, artificial intelligence will not replace human operators anytime soon. The near-term opportunity looks more like Garry Kasparov’s “centaur systems,” where human judgment combines with machine precision. But as autonomy levels rise, economics change dramatically. Shorter permitting timelines, real-time asset optimization, and predictive maintenance enabled by AI all flatten the cost curve, even as other forces keep pushing the cost of reliable service higher.
The path forward is not abstract. It looks like utilities defining system constraints with precision, creating rapid pathways for testing solutions, embedding AI into planning and operations, and using financial discipline to prioritize investments that lower long-term costs.
Do this well, and utilities become the pivotal actors in the next phase of the energy transition. Fail, and the sector faces rising costs, political backlash, and a slowing transition just as climate and electrification pressures mount.
The choice is not between innovation and stability. It is between entrepreneurial innovation that delivers both affordability and reliability, or mounting crises that offer neither.
Chris Richardson is a partner at Realize 2050, which works to make utilities and other incumbents think like entrepreneurs. Previously, he was a partner with ADL Ventures, a venture development consultancy; executive director and founder of Uptake Alliance, a NYSERDA-funded climate tech venture development program; and co-founder of The EV Button, a Department of Energy-funded EV infrastructure company that leverages underutilized infrastructure such as arenas to accelerate fleet electrification. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.
