Electricity Is Now Holding Back Growth Across the Global Economy

Grid constraints that were once a hallmark of developing economies are now plaguing the world's richest nations, and new research from Bloomberg Economics finds that rising electricity system stress is directly hurting investment. The analysis examined all G20 countries and found that a one-standard-deviation increase in grid stress relative to a country's historical average lowers the investment share of GDP by around 0.33 percentage points -- a 1.5% to 2% hit to capital outlays.

The Netherlands is a case in point: 12,000 businesses are waiting for grid connections, congestion issues are expected to persist for a decade despite $9.4 billion in annual investments, and the country is already consuming as much electricity as was projected for 2030. ASML, the chip equipment maker whose fortunes can sway the Dutch economy, has no guarantee it will secure power for a new campus planned to employ 20,000 people.

Data centers are particularly affected. Google canceled plans near Berlin, a Frankfurt facility cannot expand until 2033, Microsoft has shifted investments from Ireland and the UK to the Nordics, and a Digital Realty Trust data center in Santa Clara that was applied for in 2019 may sit empty for years.

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