The next great artificial intelligence (AI) bottleneck may not fit inside a computer at all. It could be stretching across thousands of kilometres of poles, wires, substations, and power plants.
Electricity demand is accelerating after years of relatively sleepy growth. The International Energy Agency (IEA) expects global electricity consumption to increase an average of 3.6% annually through 2030, with industry, electric vehicles, air conditioning, and data centres all piling on. Data centres alone could roughly double their electricity consumption between 2025 and 2030.
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Utilities get paid
That creates an interesting problem. Building another data centre can take a few years. Building the generation and transmission infrastructure needed to keep it humming can take considerably longer. For investors, that turns the decidedly boring electrical grid into something worth watching.
Regulated utilities spend billions building generation, transmission, and distribution infrastructure. Regulators then generally allow them to recover approved investments from customers while earning a return.
That creates relatively predictable revenue, although utilities still face regulatory decisions, construction costs, and enormous financing requirements. It also means rising electricity demand can create a much larger investment runway. One Canadian utility is already preparing for it, yet its shares have been heading in the opposite direction.
AQN
Algonquin Power & Utilities (TSX: AQN) shares recently closed at $7.37, roughly 24% below their 52-week high of $9.69. This isn’t the old Algonquin investors may remember.
The company sold most of its unregulated renewable-energy business in early 2025 and transformed itself into a much simpler regulated utility. Through Liberty, it now provides electricity, natural gas, water, and wastewater services to more than 1.2 million customer connections. That boring transformation may be arriving at precisely the right time.
Algonquin plans to invest approximately US$3.2 billion in regulated infrastructure between 2026 and 2028. Management expects its rate base to climb from roughly US$8.2 billion at the end of 2025 to about US$9.7 billion in 2028. That’s the pool of assets on which regulated utilities can generally earn approved returns.
An AI runway
Algonquin’s Empire Electric business was awarded approximately US$770 million of transmission projects in Missouri, with construction expected through 2031.
There’s more behind that number. Management specifically identifies large-load and data centre development as a longer-term opportunity. Its plans also include a 250-megawatt (MW) gas-generation project intended to support reliability as electricity demand rises.
Recent regulatory decisions are helping. Missouri approved a US$97 million revenue adjustment for Empire Electric beginning in August, while Kansas approved another US$8.8 million annual adjustment. For a utility, those aren’t exciting headlines. They’re considerably more useful: approved revenue.
Considerations
At roughly $7.37, Algonquin trades around 15 times forward earnings. That’s not bargain-bin territory, but it’s considerably easier to swallow after a 24% decline. The stock also offers income.
Its latest quarterly dividend was $0.0912 when declared. The annualized dividend would be about $0.365 per share for a yield close to 5%. That could make AQN interesting among diversified Canadian dividend stocks, particularly for investors willing to give the turnaround time.
Second-quarter adjusted earnings were only US$0.04 per share, unchanged from the previous year, while regulated-services earnings fell partly because of a wildfire-related write-off and higher interest costs. Algonquin has also cut its dividend before. Investors buying inside a Tax-Free Savings Account (TFSA) shouldn’t treat today’s roughly 5% yield as untouchable.
Bottom line
Still, the company investors own today is simpler than the one that created much of the trouble. With regulated investment climbing, electricity demand accelerating, and the shares nearly one-quarter below their high, I’d rather investigate Algonquin after this dip than chase it after the grid boom becomes obvious to everyone else.
