According to a new report from Wood Mackenzie, 25 GW of new capacity was added to the U.S. funnel in the final quarter of 2025. Despite the quarterly slowdown, the year closed with a disclosed pipeline of 241 GW, representing a 159% increase from the start of the year.
Approximately 33% of the total pipeline is currently under active development. However, the market is struggling to keep pace with new commitments as load queue constraints weigh on developers. This supply-demand mismatch is forcing a shift in contracting, as AI data centers rewrite the solar PPA playbook to prioritize speed-to-market and firm power over the lowest possible strike price.
“Developers shifted to focusing on the existing pipeline at the end of last year as opposed to new projects,” said Ben Hertz-Shargel, global head of grid edge for Wood Mackenzie. “Much of the planned capacity belongs to new developers with a small number of massive, speculative projects, disproportionately targeting the South and Southwest.”
Capex and cost dynamics
Capital expenditure growth from the largest developers is projected to decelerate in 2026, marking the first slowdown since 2023. Major developers are expected to invest $94 billion more than in 2025, which represents only 58% of last year’s growth rate.
The report noted a shift in cost structures. While per-megawatt costs declined in Q4 2025, rack power densification has caused costs per square foot to rise. This trend reflects an industry shift toward energy-dense facilities designed to maximize efficiency and reduce latency.
The high stakes of these projects have led to a surge in market activity, as U.S. solar-plus-storage M&A heats up with developers looking to acquire ready-to-build assets to satisfy hyperscaler demand.
Grid constraints and the “invisible” pipeline
The tension between data center demand and grid capacity is becoming more pronounced. Large load capacity with signed construction or supply agreements has reached 183 GW, equivalent to 22% of 2025 U.S. peak load. Utilities in ERCOT and PJM account for 72% of these large load commitments.
To bypass interconnection delays that can stretch beyond five years, developers are increasingly looking inside the massive private power grids being deployed in Texas and the Southwest. These “islanded” or behind-the-meter configurations allow for rapid deployment by avoiding the traditional utility queue.
Furthermore, on-site batteries accelerate grid access by allowing facilities to manage their own peak demand and provide frequency regulation, making them more “grid-friendly” to skeptical utilities.
Policy and operational risks
New policy proposals are shifting the success criteria for developers, favoring those with strong balance sheets and power expertise. The White House and PJM governors are reportedly aligned on market reforms, though details on a potential “backstop auction” remain unclear.
Interconnection rules proposed in SPP and ERCOT, including voltage ride-through requirements and curtailment exposure, pose further operational risks. NERC is currently working toward a national standard for ride-through compliance.
“New data centers must contract with new generation or face non-firm transmission service,” said Hertz-Shargel. “This creates diesel supply and generator runtime risk that could cause hesitation on data center development in these regions.”
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