Global Electricity Demand Is Booming: What It Means for Energy Stocks
The world economy is undergoing a major transformation as our energy system evolves. What used to be a fossil fuel-based power grid relying on coal, oil, and gas is switching to renewable energy sources.
At the same time, demand for electricity is exploding as transportation (EVs), heating (heat pumps), and industries (electrolysis, green steel) are moving away from fossil fuels as well.
This creates a solid demand for companies able to provide more energy generation. And as the grid relies increasingly on solar power, new challenges arise. One of them is the declining stability of the electric grid frequency, as the old large rotating generators are replaced by solar panels, a problem that was at the core of the 2025 massive crash of the Iberian power grid.
This likely means that in the next 5 years, we will see a renaissance of nuclear power in parallel to renewables, as well as hydropower maintaining an important role in the grid, as these are the largest sources of power that also generate frequency inertia.
Gas-powered stations with carbon capture are likely to benefit as well for a while as they replace coal-powered stations in many developing countries.
One company is uniquely positioned to benefit from growing electricity demand that incorporates solar power’s current limitation regarding grid stability: GE Vernova, a company that was already there at the very beginning of electricity.
GE Vernova Inc. (GEV +1.41%)
“We are united by a single, urgent purpose to electrify and decarbonize the planet, and together, we have the energy to change the world.”
Scott Strazik, – CEO of GE Vernova
GE Vernova’s Legacy: From Edison’s Grid to Today’s Energy Leader
GE Vernova is the result of the split of the giant conglomerate GE in 2024 into GE Aerospace, GE HealthCare, and GE Vernova, with Vernova in the energy segment.
In that respect, this makes GE Vernova the direct heir of the 130-year-old original core of the General Electric company, moving away from the diversification that had turned the Edison General Electric Company into a diverse and finance-focused industrial conglomerate.
It started with Edison Electric Illuminating Company constructing the first central power station in New York City in 1882. GE was also a pioneer in hydropower in 1918, with Niagara Falls’s 3 GE 12,000 volt 32,500 kva generators. In 1939, GE provided the generators for the Grand Coulee dam in Washington, which had a larger production than the Hoover Dam.
Source: GE Vernova
The company shipped the first gas turbine for electricity production to Oklahoma Gas & Electric in 1949. And started operations of the world’s first licensed nuclear power plant in Pleasanton, California, in 1957.
GE was also a pioneer in high-voltage direct current (HVDC) in 1972, which is still an important technology for power grids today.
Source: GE Vernova
From its experience in energy generation and manufacturing, GE became the first supplier of wind blades for the world’s first offshore wind farm in Vindeby, Denmark, in 1991.
The Rise and Fall of GE: How Vernova Is Leading the Comeback
Since its foundation as an energy company, GE lost its way in the 1990s. During this period and in the 2000s, GE started to make multiple acquisitions and diversification moves to turn it into a giant industrial conglomerate, with activities spreading into aerospace, healthcare, telecommunication, computing, entertainment, etc.
This turn started in 1981 under the direction of the company’s CEO, Jack Welch, who focused on the company’s financial performance first and engineering prowess second.
Source: Reuters
He was also renowned for his ruthless approach to management. He notably pioneered the practice of annually firing the 10% of the employees with the lowest ratings on internal reviews, earning him a comparison to a neutron bomb leaving only the empty building after him (“Neutron Jack”).
Another trend of this period was the financialization of the company, with the rise of GE Capital, the banking arm of the company. At one point, GE Capital was a $500B company, making 2/3rd of GE’s profits.
Its hands were in everything from credit cards, to insurance, to mortgages. At the time, this was all seen as a smart, low-cost way to boost profits. “And you don’t have to build a factory,” Welch supposedly enthused.
At the time acclaimed as a revolution in management, Welch’s methods would ultimately prove to be almost fatal to the company.
Source: Amazon
Creative accounting and over-reliance on the banking branch came to a crash in 2008. The company had to divest at bargain prices many branches like NBC-Universal, GE Plastics, GE Water, and GE Appliances.
This created an almost 2-decade-long crisis, with a decline in aviation sales due to the pandemic only made worse. Ultimately, this led to the split of the company into 3, with each sub-segment more concentrated on a unique technological advantage and able to go its own way.
An Energy Generation Giant
Even after all these crises, GE Vernova inherited all energy-related activities from GE and displayed impressive numbers.
For example, 55,000 wind turbines and 7,000 gas turbines are currently operating, and based on the company’s technology base, these, along with many hydro and nuclear power plants, generate approximately 25% of the world’s electricity.
GE Vernova is present at all levels of electricity production and distribution, especially in turbine-related segments like wind, hydro, and nuclear, as well as in the power grid.
Source: GE Vernova
A lot of the company’s $110B+ backlog is for services on the existing park of machines (maintenance, parts, repairs, etc.), creating a stable and predictable stream of revenues.
Source: GE Vernova
By far the largest segment of the backlog is in heavy-duty gas turbines (HDGT), with most of the park having signed service agreements for 10 years or more. In addition, these devices are extremely robust and are likely to sign new service agreements in the future rather than being retired (especially as growing grid stability concerns might delay much of the plans for gas turbine retirement).
Source: GE Vernova
GE is a close partner to many of the world’s largest utility companies and ultimately the backbone of their respective country or region’s electricity systems, including French Engie, American Duke Energy (DUK +0.21%), Southern Company (SO -0.44%), German RWE, Spanish Iberdrola, Taiwan Power Company, etc.
Source: GE Vernova
Even before the split from the rest of GE, GE Vernova has managed a complete turnaround of its activity since 2019, when all its main activities (gas power, grid, onshore wind) experienced negative free cash flow.
Leaner business practices, less overhead, and ultimately more efficient business operations have now turned all three back to profitability.
Source: GE Vernova
GE Vernova’s Role in Meeting the World’s Growing Power Needs
GE Vernova sees the demand for electricity growing 2-fold by 2040. In the USA, industrial electrification could double electricity demand (not including extra demand from data centers).
Meanwhile, 4 trillion dollars in investment are needed to replace coal power plants worldwide, representing a massive opportunity for electric equipment manufacturers.
Source: GE Vernova
In addition to these statistics, still, 750 million people don’t have access to electricity globally, and many more would increase their consumption if they could afford it, giving the sector very rosy long-term growth prospect.
Overall, this would increase the market for the sector GE Vernova is serving from $265B to $435B.
Future Energy Technologies: GE Vernova’s Investment in Innovation
Gas-powered stations and hydropower are just the past and current business for the company, with the future being built for other technologies.
Regarding grid solution and electrification, GE Vernova provides battery energy storage systems, synchronous condensers, pumped storage power plants (PSPP), furnace electrification, thermal storage, solar inverters, hydrogen compressors, etc.
Source: GE Vernova
GE Vernova is also a powerhouse in energy-related R&D ($1B in annual R&D spending), notably with carbon sequestration, HVDC cables, hydrogen gas turbines, etc.
Source: GE Vernova
For its own operations, GE Vernova aims to be carbon neutral by 2030 and progressively see its power generation to be carbon-free over time.
While decarbonizing the industry through coal-to-gas switch, carbon capture, and hydrogen might be important in the future, GE Vernova is massively betting on nuclear as well, especially on its small modular reactor (SMR) design developed in partnership with Hitachi.
Nuclear GE Reboot
The company pioneered nuclear energy and is today a key global supplier of steam turbines that convert nuclear energy from heat to electricity.
However, by entering the SMR market, GE Vernova is now directly involved in building the power plant itself instead of just its turbines. The company BWRX-300 is the first North American commercial contract for an SMR, signed with Ontario Power, with a framework agreement for three more SMR units later.
Source: GE Vernova
By far, this is the “conventional” SMR design from a design point of view, in the sense that it mostly miniaturizes existing nuclear tech and utilizes the existing supply chain, aiming for quick certification and easy scalability when compared to more innovative designs using molten salt, thorium, etc. (You can read more about it in “Update on SMRs (Small Modular Reactor) – Still The Future of Nuclear Power”).
This new business line could generate up to $2B in revenues by the mid-2030s and make GE one of the major players in the upcoming nuclear renaissance, alongside other companies like NuScale (SMR -3.47%) or Westinghouse (part of Cameco (CCJ -1.32%) and Brookfield Energy Partners (BEP -1.66%) (follow the links for each of these companies’ own dedicated investment reports).
Source: GE Vernova
Electrification
The power grid side of Vernova is greatly benefiting from the boom in electric demand in the USA and globally, with the market expected to more than double compared to 2022’s numbers.
This is in large part driven by the need for energy storage in response to green energy generation and the growing need for stronger and smarter grids that can handle intermittent power sources.
Source: GE Vernova
Another interesting market will be micro-grid for electrolyzers (green hydrogen, e-methanol/ammonia), producing close to solar plants the liquid fuel helping decarbonized segments hard to electrify like air transport, metallurgy, chemical process, and shipping.
Source: GE Vernova
This electrification segment is also one where software is becoming increasingly important, an activity where GE Vernova had impressive use cases, for example:
- 30% reduction in maintenance cost and 14% in NOx emissions at a fossil fuel power plant.
- 18% less outage and 40% faster restoration time after an outage for a power grid company.
- 10-15% YoY energy savings increase and 35% product waste reduction at a manufacturing plant.
In total, 70% of Fortune 500 utilities use GE Vernova smart grid software GridOS, covering 40% of global transmission lines’ length and 60% of electricity trading in the USA.
Source: GE Vernova
This grid software activity is growing its revenues by 10% CAGR, already forming a $1B software business within the industrial manufacturer.
GE Vernova’s U.S. Manufacturing Strategy Amid Tariffs and Supply Chain Shifts
Supply issues and industrial equipment shortages in the US might present an opportunity for the company, thanks to a $9 billion cumulative global capex and R&D investment plan for new production facilities through 2028.
This includes $50M for next-generation nuclear fuel design, $300M for gas power and LNG exports, $600M in US factories by 2026, etc.
Overall, the company should not be suffering too much from trade wars, as it produces a lot of its US products locally, and also has other facilities over the world to avoid retaliatory tariffs.
Conclusion
Because of the breadth of GE Vernova’s activity, investors in the company’s stock do not need to be certain about which technology will win the energy transition in the next 5 or 10 years:
- If natural gas stays important, GE Vernova is already the major actor in the segment.
- If nuclear indeed undergoes a renaissance, nuclear turbines and SMR will generate a lot of revenues.
- If wind power stays on par with solar for renewable energy generation, GE Vernova will also be a major actor in this industry.
- If hydrogen, ammonia, methanol, pumped hydropower, or carbon capture & sequestration are booming, GE Vernova will be able to grab part of these markets as well, thanks to early forward-thinking R&D investments.
- If the main investment topic becomes grid stability and smart grid upgrade, GE is already the go-to partner for most of the world’s largest utility companies.
So overall, GE Vernova is a good stock to consider for investors aware of the growing electricity demand, and need for a better grid, and confident that GE will be a part of the answer, be it with hydro, wind, nuclear, or almost any other form of energy. As the company has performed a difficult turnaround since the 2010s, and is now focusing on its core markets after separation from GE Healthcare and GE Aerospace, this seems more likely.
It will also indirectly benefit from the rising percentage of solar energy in the grid as solar power becomes cheaper. The company’s giant turbines will be key in providing enough frequency inertia out of solar, and its grid improvement solutions will reduce risks.