Published February 12, 2026
By NZero
California is adding clean electricity resources at a historic pace. Solar, battery storage, and other renewable technologies have grown rapidly across the state over the past decade. At the same time, electricity demand is beginning to rise again after years of relative stability. Electrification of transportation and buildings, growth in advanced manufacturing, and the rapid expansion of AI driven data centers are reshaping load forecasts. In this new phase of the energy transition, the central challenge is shifting. The question is no longer limited to whether enough power plants can be built. Increasingly, the constraint lies in whether the transmission system can move electricity reliably and affordably to where it is needed. Grid expansion has become directly linked to California’s long term economic growth and competitiveness.
For much of the 2010s, electricity demand in California remained relatively flat due to energy efficiency gains and distributed generation. That trend is now reversing. The California Independent System Operator has reported that peak load forecasts are increasing as electrification policies accelerate and new large customers connect to the grid. Electric vehicle adoption continues to grow, supported by state targets that aim for millions of zero emission vehicles on the road over the next decade. Building codes are encouraging heat pump installations and other electric technologies that increase year round electricity use.
One of the most significant new drivers is data center expansion. AI workloads require high density computing infrastructure, and hyperscale facilities can demand hundreds of megawatts of power at a single location. These loads are often geographically concentrated, creating localized stress on transmission networks. Industrial activity is also evolving. Advanced manufacturing, semiconductor production, and logistics electrification contribute additional demand growth. Collectively, these trends are pushing planners to revisit long term assumptions about how much electricity California will need and where it will be consumed.
California has made substantial progress in expanding renewable generation capacity. Solar installations have scaled to tens of gigawatts statewide, and battery storage capacity has increased sharply in recent years to help manage peak demand and variability. However, adding generation does not automatically ensure reliability. Electricity must travel across high voltage transmission lines to reach population centers and industrial hubs.
According to CAISO’s 2026 Assembly Bill 825 Report to the Governor and Legislature, transmission congestion and deliverability constraints are emerging as measurable risks in several planning areas. The report outlines how increasing load forecasts, generator interconnection requests, and resource retirements are shaping the 2025 to 2035 transmission outlook. It notes that without timely approval and construction of planned upgrades, certain regions could face reduced operational flexibility during peak demand conditions. Congestion occurs when transmission lines reach their capacity limits, preventing lower cost or cleaner electricity from flowing freely across the system. When this happens, grid operators may need to dispatch more expensive local resources, increasing overall system costs. In some cases, renewable generation may be curtailed because there is insufficient transmission capacity to deliver the energy to load centers.
Another factor is the interconnection queue. Many renewable and storage projects are awaiting approval to connect to the grid. Without sufficient transmission infrastructure, even technically viable projects cannot proceed at scale. The result is a mismatch between available generation potential and the physical infrastructure required to integrate it. Transmission planning therefore becomes a prerequisite for continued clean energy growth.
Transmission development is not only a reliability issue. It is increasingly an economic development issue. Companies evaluating where to build large facilities consider access to reliable and affordable electricity as a core criterion. If transmission constraints delay interconnections or increase congestion related costs, investment decisions may shift.
For data center operators, predictable timelines for grid access are essential. A delay of several years in securing transmission upgrades can significantly affect capital deployment strategies. Manufacturers expanding production lines or electrifying processes face similar considerations. Grid capacity influences site selection, operating costs, and long term risk assessments.
At the policy level, transmission projects often require coordination among multiple agencies and stakeholders. Planning studies, environmental review processes, land use considerations, and cost allocation debates can extend timelines. Major transmission projects can take seven to ten years from initial planning to completion. Because of these long lead times, proactive planning is critical. Waiting until reliability challenges become acute can result in reactive and more costly solutions.
Legislative engagement also plays a role. Lawmakers may consider policies that streamline permitting, clarify cost recovery mechanisms, or support regional coordination. These decisions can influence how quickly infrastructure keeps pace with load growth. Maintaining neutrality in policy discussions, the central point remains that grid expansion requires deliberate planning and sustained investment.
As California enters a period of sustained load growth, strategic planning becomes essential for both public and private stakeholders. Utilities and grid operators rely on scenario modeling to forecast demand under different electrification and economic growth pathways. These models inform transmission investment plans that must balance reliability, affordability, and environmental objectives.
For large energy users, grid conditions are becoming a strategic variable. Companies may evaluate a combination of solutions, including long term power purchase agreements, on site generation, battery storage, and demand management technologies. Understanding regional transmission constraints can improve capital allocation decisions and reduce exposure to congestion driven price volatility.
From a system perspective, expanding transmission supports several objectives simultaneously:
Transmission infrastructure underpins the broader energy transition. Without adequate capacity, gains in generation technology and electrification policy may not translate into reliable and affordable electricity delivery.
California’s energy system is evolving from a period defined primarily by renewable generation expansion to one increasingly shaped by infrastructure constraints. Rising electricity demand from electrification, AI data centers, and industrial activity is shifting attention toward the transmission network. Reliability, cost stability, and economic competitiveness now depend on the timely development of high voltage infrastructure. Grid expansion is becoming an enabling condition for growth rather than a background technical issue. Ensuring that transmission planning keeps pace with demand forecasts will be central to maintaining system reliability and supporting California’s long term economic trajectory.
