Global electricity systems will face intensifying strain in 2026 as booming data-centre demand, rising network investments and accelerating nuclear development reshape the power and renewables sector, according to BMI’s latest Power & Renewables Key Themes for 2026 report.
BMI highlights four major forces set to define the energy landscape next year: rapid data-centre expansion, higher electricity prices, accelerating deployment of small modular reactors (SMRs), and a sharp downturn in China’s solar manufacturing sector.
Data Centres Become a Major Driver of Global Power Demand
Data centres are poised to be one of the fastest-growing contributors to global electricity consumption in 2026, BMI said. The surge—driven largely by AI, cloud services and hyperscale operators—is placing unprecedented pressure on grid capacity, especially in the US and key Asian hubs.
Rapid clustering of facilities is creating localised load spikes that existing grids were never designed to handle. The US, already battling soaring power prices in major data-centre markets, is increasingly pushing investment flows towards Asia.
Malaysia, India and Indonesia are emerging as regional beneficiaries. Malaysia’s Johor state, in particular, has become a prominent hotspot, though the speed of new cluster build-outs is straining Peninsular Malaysia’s grid. Data centres accounted for around 20% of new generation in 2024 and could exceed 60% of output growth between 2025 and 2026, BMI said.
Electricity Prices Set to Rise Across Major Markets
Electricity prices are expected to climb in 2026 amid higher wholesale power costs, heavier grid investments and surging demand from data centres.
Utilities worldwide are upgrading transmission lines, deploying storage and enhancing grid flexibility to accommodate both renewables and rising electrification. These network upgrades are pushing retail tariffs higher across consumer segments.
In Europe, network charges now make up roughly a quarter of electricity bills, with countries like Germany and the Netherlands facing the steepest increases. The US also faces upward pressure as AI and data-centre load expands. US data centres consumed 183TWh in 2024 and could double consumption by 2030, potentially reaching 12% of national electricity use.
Asia shows a mixed picture. China’s spot-market liberalisation may push its tariffs lower in 2026, while Latin America faces more volatile pricing due to hydropower variability and subsidy reforms.
SMRs and Advanced Nuclear Enter Commercial Reality
SMRs—long seen as a future technology—will begin shifting into commercial deployment in 2026.
BMI notes regulatory milestones, factory-built modules and accelerated licensing as key enablers. The US and China are leading momentum:
- China’s Linglong-1 offers the first real-world demonstration of modular reactor fabrication and deployment.
- In the US, major projects at Clinch River and Palisades are moving forward with strong backing, including long-term baseload supply agreements from data-centre operators. Google has agreed to purchase 500MW from an advanced reactor project in Tennessee.
However, BMI warns of challenges including workforce shortages, interconnection delays and component bottlenecks.
China’s Solar Manufacturing Slows as Overcapacity Bites
China’s once-dominant solar manufacturing engine is now confronting a painful correction.
After years of rapid expansion, solar module capacity reached 1.8TW by end-2025—far beyond global demand. Prices for polysilicon, wafers and cells have collapsed by up to 89% from pandemic-era highs, driving margins below production cost.
BMI reports:
- USD2.8 billion in combined losses among six major manufacturers in H1 2025
- 87,000 layoffs
- More than 40 company failures through bankruptcy, delisting or forced mergers
- Sharp declines in polysilicon and wafer output
Protectionist measures in the US, EU and other markets have also splintered supply chains, accelerating a shift towards manufacturing bases in Southeast Asia, India and Türkiye.
Despite the manufacturing downturn, China remains on track to add 266GW of domestic solar capacity in 2025 and another 167GW in 2026, pushing installed capacity beyond 1TW.
Outlook: A Transformative—and Turbulent—2026
BMI concludes that power markets will undergo significant structural shifts next year. Data-centre load growth will reshape demand patterns globally, SMRs will move closer to commercial reality, and China’s solar sector will continue a painful but necessary consolidation.
For policymakers and industry, BMI says, the challenge lies in managing grid reliability, financing new capacity, and mitigating disruption as clean-energy supply chains undergo a deep geographic reconfiguration.
