Surging demand from AI data centers and the gradual electrification of transportation are adding pressure to the US grid, but the solution might already exist.
Overview
Surging demand from AI data centers and the gradual electrification of transportation are adding pressure to the US grid, but the solution might already exist. ARK's research suggests that stationary energy storage, paired with existing underutilized generation, could unlock latent supply, manage intermittent renewable energy sources, and accelerate electricity cost declines. Elon Musk recently noted that the capacity utilization of the electricity grid in the US is only 50%, and that large-scale batteries could lift it to 100%1—more than doubling annual generation to 10,775 TWh (Terawatt hours). While 100% utilization rate may not be possible, the thought experiment highlights how much latent energy capacity is untapped in the US. In practice, only coal and natural-gas plants have significant flexibility to raise their capacity factor (CF), the percentage of actual electricity produced compared to the maximum possible output. Illustrating that difference and underscoring the fact that fossil fuel sources have the most room to scale is the following chart. Note: “Capacity factor” is the ratio of the electrical energy produced by a generating unit for the period of time considered to the electrical energy that could have been produced at continuous full power operation during the same period. Source: ARK Investment Management LLC, 2026, based on data from Tesla 2025 and EIA 2025.2 For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Natural gas plants are significantly underutilized in the US as of the most recently published data. More than half are operating below 25% of their capacity, as shown below. Source: ARK Investment Management LLC, 2026, based on data from EPA 2025.3 For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Raising the average capacity factors of coal and natural gas plants from the low-40% range to 85% could add 2,550 TWh of power per year—roughly 60% of all electricity generated in the United States in 2024, as shown below. Source: ARK Investment Management LLC, 2026, based on data from EIA 2025.4 For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Surging demand from AI-driven data centers is highlighting the imperative not only of increasing the capacity utilization of natural gas and coal plants but also investing in energy storage. While critics focus on the looming gap between projected load growth and available supply, higher capacity utilization of plants already in place, paired with energy storage, could satisfy much of the demand in the short term, giving regulators and power producers more time to address the likely longer term imbalance. Higher utilization rates also will lower the cost of generating electricity. Spread over more kilowatt-hours, fixed cost absorption should lower the levelized cost of electricity (LCOE), as shown below. Indeed, improving the utilization rate from 25% to 85% could cut the LCOE in half, from ~$.09 to ~$.04 per kilowatt hour. Source: ARK Investment Management LLC, 2026, based on data from Lazard LCOE 2025.5 For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security. Deploying the “surplus” energy associated with baseload balancing would require significant storage capacity. Based on four-hour megapack-class batteries cycling once per day, the grid would need ~1.75 Terawatts of storage to absorb the incremental energy associated with increased capacity factors—a 43-fold expansion relative to the current US energy storage base, as shown below. Including markets beyond the US, the expansion opportunity could more than double. Source: ARK Investment Management LLC, 2026, based on data from EIA 2025.6 For i
