U.S. electricity demand is climbing at a pace not seen since the post-World War II electrification era. However, according to one index architect — investors may be eyeing the wrong corner of the trade.
Key Takeaways:
- U.S. electricity demand has climbed to about 5% annually, up from fractions of 1% for most of the past 25 years.
- Beyond AI data centers, demand is rising from onshoring, electric vehicles, bitcoin miners, and commercial robots.
- ELFY’s index targets utilities and power infrastructure companies rather than the tech firms consuming electricity.
Mark McLean built the index underlying the ALPS Electrification Infrastructure ETF (ELFY). McLean, managing director and head of power and energy at Ladenburg Thalmann, made his case on the SS&C ALPS Advisors “Crossing the Themes” podcast. The real opportunity, he argued, isn’t with the companies consuming power, but with those supplying it.
See more: AI’s Exponential Power Demands Could Make This ETF a Winner
According to McLean, U.S. electricity demand now grows at roughly 5% annually, up from fractions of 1% over the past 25 years. In regional hot spots like Texas, Louisiana, and Iowa, demand is pushing closer to 10%.
Artificial intelligence (AI) data centers dominate the financial headlines, he noted, but the demand picture is far broader. The Inflation Reduction Act requires domestic manufacturing to qualify for federal tax credits, triggering a wave of industrial onshoring. Electric vehicles, bitcoin miners, commercial robots, and state mandates replacing gas appliances with electric alternatives are all adding to the load.
McLean pointed to a historical parallel. The last time that U.S. electricity demand outpaced GDP growth was between 1953 and 1972, when returning troops drove urbanization across the country. The mass adoption of refrigeration and air conditioning during that period turned electricity from a luxury into a household staple. He said the country is in that same environment today.
Electrification’s Picks and Shovels
The strategy behind ELFY follows the gold rush principle, McLean explained on the podcast. The real money wasn’t made by those digging for gold, but by those selling the picks, axes, and shovels. The index targets companies solving the electricity demand, not creating it.
Regulated utilities account for roughly 40% of the index, McLean said. That allocation reflects the capital spending underway as states close coal plants and scale renewable capacity.
McLean said that the rest of the index spans natural gas pipelines, copper miners, uranium producers, and turbine manufacturers, among others. He cited GE Vernova Inc. (GEV) as one example.
He also provided one illustration of where the electrification demand may be heading. At a recent meeting, some financial advisors told him about their experience at a casino where the blackjack dealer was a robot, plugged into an electrical socket.
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VettaFi LLC (“VettaFi”) is the index administrator and calculation agent for ELFY, for which it receives a fee. However, ELFY is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ELFY.
