Trends Report 2026

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Economic and Market Trends That Will Shape 2026

CFC Vice President, Economic Research, John Suter highlights the economic and market trends that CFC believes will shape 2026 for electric cooperatives.

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John Suter: Hello, and welcome to CFC’s 2026 Trends Report. I’m John Suter, CFC’s vice president of Economic Research, and I’m excited to share with you our perspective on the major economic and market trends we believe will shape the electric utility industry in the coming year. As we look to 2026, the U.S. and global economies appear set to slow as higher tariffs take full effect. However, growth could exceed expectations if the AI investment boom broadens. The impact of the AI-driven investment should not be underestimated. It’s worth noting that U.S. GDP growth in the first half of 2025 was driven almost entirely by investment in data centers and information processing technology, according to an analysis by Harvard economist Jason Furman. Excluding these technology-related categories, Furman estimated that GDP growth would have been just 0.1 percent on an annualized basis. This underscores how dependent the U.S. economy is on high-tech infrastructure investment. Most economists expect the U.S. to avoid a recession in 2026, with forecasts generally placing the probability around 30–40%. Despite some significant headwinds, the U.S. economy managed to survive 2025 without a recession due to four key factors: Number one: AI-fueled investment. The U.S. GDP growth analysis for the first half of 2025 that I mentioned earlier may be less surprising when you consider that five of the largest tech companies spent an estimated $371 billion combined in 2025 on the massive data centers necessary to train and run complex AI models. This is more than seven times the cost to build the Interstate Highway System, over 15 times the cost of the Apollo space program and more than 150 times the cost of the Manhattan Project, all adjusted for inflation. While this investment is remarkable, there are concerns: Will AI generate enough revenue to justify the expense? In addition, the GPU’s, or graphics processing units, the essential computer chips for AI, depreciate quickly, with an estimated shelf life of just a few years before being reassigned to more basic AI tasks. Furthermore, data centers typically take two to three years to build and connecting them to the energy sources can take up to eight years, according to Boston Consulting Group. Number two: Affluent consumers. High earners continue to sustain consumer spending, which accounts for about 70% of GDP. The top 10% of earners—those making $250,000 or more annually—accounted for 49.2% of spending. Working-class Americans are especially vulnerable to increases in grocery prices and tariff-driven hikes on household staples, apparel and furniture. Meanwhile, middle- and upper-income households are more strategic in their purchases, buying in bulk and shopping at discount retailers. The affordability issue has political traction and recently helped Democrats score major wins in Virginia and New Jersey. Number three: Asset price gains. AI is also driving up asset prices, especially in the stock market. The S&P 500 Index gained about $8 trillion in value in 2025, overcoming a spring slump caused by increased tariffs. The so-called “Magnificent Seven” tech giants are leading the charge. For example, NVIDIA Corp, the chipmaker at the heart of the AI boom, recently became the world’s first $5 trillion company. This surge in equity wealth has boosted consumer spending, which makes up about two-thirds of economic demand, though it has mainly benefited the wealthy. Economists describe this divide as the “K-shaped” economy: If you’re in the upper part of the “K,” things are great; but in the lower part, many are feeling stressed and at risk. Number four: Lower tariff rates than anticipated. The Organization for Economic Cooperation and Development now estimates the average tariff rate at 14%, a sharp increase from 2.5% at the start of 2025, but lower than the 19.5% initially projected. There is ongoing debate about who ultimately pays for these tariffs and over what the timeframe is and the effects that will be felt. Higher tariffs will ensure inflation remains above the Federal Reserve’s target in 2026, averaging 3%. That’s all for today. As always, thank you for watching. Be on the lookout for more economic and market trends content. We’ll talk with you soon!

Economic and Market Trends That Will Shape 2026

CFC Vice President, Economic Research, John Suter highlights the economic and market trends that CFC believes will shape 2026 for electric cooperatives.

Transcript

download the transcript

View transcript

Video

Industry Trends and Developments That Will Define 2026

CFC Vice President, Utility Research & Policy, Jan Ahlen, explores the technology trends and industry developments that CFC expects will play a significant role for electric cooperatives this year.

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Jan Ahlen: Hello and welcome to CFC’s 2026 Trends Report. I’m Jan Ahlen, Vice President of Utility Research and Policy, and I’m looking forward to sharing our insights and perspectives on the industry trends and policy developments that will define 2026 for electric cooperatives. This year, the electric cooperative network will face several transformative forces, ranging from demand growth and supply constraints to opportunities such as artificial intelligence and virtual power plants. As always, public policy will create opportunities and challenges for electric cooperatives. In this report, we will explore how these forces are shaping co-op strategies. First, we expect data center power demand to continue growing rapidly. What was once an industry concentrated in a few suburban areas is beginning to expand across more regions of the country. Power capacity and transmission constraints will continue to limit development, and data center companies will seek out areas with reliable, affordable power and transmission. This will provide new opportunities for electric cooperatives. Even as data centers move into more rural areas, companies will increasingly build more on-site generation to reduce power and transmission constraints. Cooperatives will need to have financial safeguards in place to ensure the rest of the membership is not adversely affected. Second, natural disasters are an annual reality for electric cooperatives. Wildfires in particular pose risks to a significant portion of the United States, not just the West. These events can result in loss of life and significant damage to cooperative assets, which leads to legal and financial risks. The consequences can include higher costs to cooperative members, credit rating downgrades, increased insurance premiums and legal liabilities. The good news is that cooperatives are taking steps to mitigate these risks. For example, many cooperatives now have wildfire mitigation plans that outline procedures, strategies and programs to reduce the potential risks of wildfires. Cooperatives are also adopting grid hardening strategies like undergrounding power lines and replacing poles and they are investing in analytical and operational tools that can help them plan for, monitor and reduce risks from wildfires. Some cooperatives are even using artificial intelligence (AI) to spot wildfires and enhance vegetation management programs. And speaking of AI, we see no slowdown in its adoption among electric cooperatives. AI powers smarter call centers and chatbots that answer routine questions 24/7, explain outages and inform members about their energy consumption. AI can also flag accounts that may be at risk, allowing employees to intervene with solutions. Cooperatives recognize their responsibility to ensure these technologies are handled properly. That’s why many cooperatives are adopting clear AI use policies to govern deployment, protect data and validate results. By embedding AI responsibly—with clear policies and robust data governance—cooperatives are strengthening resilience, improving service and controlling costs for members. We also anticipate continued growth in Virtual Power Plants—or VPPs—both through the expansion of existing programs and the start of new ones. While VPPs are getting a lot of attention as the latest cooperative innovation, at their core they are simply an extension of something cooperatives have always done well: coordinating local resources to maintain reliable, affordable power. For decades, cooperatives have been trusted, local energy experts, helping members manage load with water heater switches, thermostat programs and energy efficiency initiatives. A VPP takes this idea and scales it up, coordinating many small resources: smart thermostats, water heaters, batteries, electric vehicles and flexible loads across the system. It’s worth noting that VPPs are still evolving. As cooperatives learn more about what their members’ preferences are for these programs, such as a willingness to shift EV charging to overnight, VPPs will continue to be refined. And finally, on the political front, we expect 2026 to be dominated by the upcoming mid-term elections. Passing policy in Congress will be challenging. However, key reforms important to electric cooperatives, such as permitting reform and FEMA reform, will be discussed. The White House is also likely to champion various electric cooperative priorities, including efforts to reform FEMA. As we delve further into these areas in future videos, my colleagues will provide deeper insights into the specific trends driving changes in policy, technology and industry growth. That’s all for today. Thank you for watching this edition of CFC’s 2026 Trends Report. Be on the lookout for more Trends report videos in the coming weeks on the CFC Solutions website. As always, CFC members can learn more about the latest industry and technology trends by visiting the Solutions website under the Energy & Tech page.

Industry Trends and Policy Developments That Will Define 2026

The electric co-op network is navigating a landscape where policy shifts, technological advancements and evolving industry dynamics intersect to create both challenges and opportunities.

Transcript

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2026

Trends Report

The electric cooperative network will face several transformative forces this year, ranging from surging demand growth and supply constraints to opportunities such as artificial intelligence and virtual power plants, all while operating in an uncertain economic environment. Against this backdrop, public policy will create opportunities and challenges for electric cooperatives. In the coming weeks and months, CFC’s utility, policy and economic research teams will take a closer look at the forces that will shape electric cooperatives’ operating environment in 2026.

Industry Trends

Economic Trends

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large-scale fires

Last year proved to be a tumultuous one for FEMA. The agency has seen high staff turnover, which has left leadership vacuums at every level. Disasters that would ordinarily have quickly received a presidential declaration have either not been declared or been significantly delayed. Congress has started the process of implementing meaningful reforms, and the administration has formulated its recommendations to remake the agency. Both look to move money out the door to recipients faster, which is the top priority for electric cooperatives. CFC will be watching how this reform process moves forward and the ramifications—both good and bad—for electric cooperatives.

Electric cooperatives face unknown ramifications from in a year dominated by mid-term elections.

FEMA reforms

Artificial intelligence (AI) will play an increasingly pivotal role for many electric cooperatives in 2026. AI tools are increasingly present in different aspects of electric cooperative operations. For example, AI is emerging as a practical solution for electric cooperatives to improve safety, efficiency and member service. As the functionality of AI continues to expand and evolve in 2026, CFC will be watching how it is used in vegetation management. AI-powered drones and image recognition can identify encroaching trees and prioritize trimming, reducing outage risks and maintenance costs. Similarly, AI-driven wildfire detection systems can analyze satellite images and sensor data to spot early warning signs, enabling faster response and minimizing damage. For workforce development, AI-based training platforms can create interactive simulations that help staff learn complex procedures in a safe, controlled environment. On the member engagement side, AI chatbots and virtual assistants can provide personalized support, answer billing questions and guide members through energy-saving programs. AI adoption in these practical areas offers the potential for electric cooperatives to enhance safety, optimize resources and deliver superior service in an increasingly digital energy environment.

is emerging as a practical solution for electric cooperatives.

Focused AI

Data center-driven power demand, in particular, is expected to play a significant role for many electric cooperatives this year, and for electric utilities overall. According to consulting firm Grid Strategies, utility planning areas in the U.S. are forecasting 90 GW of peak load growth from data centers through 2030. However, these projections can often be overstated due to market constraints and timing issues, which are becoming more prevalent today as a multitude of new data centers compete for key resources on the grid. As these constraints worsen, how will it impact electric cooperatives?

A multitude of are competing for key resources on the grid.

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Combined piece about the 2026 economy, the sharp split into two

coexisting economic realities.

On the economic front, the U.S. and global economies appear set to slow this year as higher tariffs take full effect. However, growth could exceed expectations if the AI investment boom broadens. The impact of AI-driven investment should not be underestimated. It’s worth noting that U.S. gross domestic product growth in the first half of 2025 was driven almost entirely by investment in data centers and information processing technology. This underscores how dependent the U.S. economy is on high-tech infrastructure investment. Most economists expect the U.S. to avoid a recession in 2026, with forecasts generally placing the probability around 30%–40%. Despite some significant headwinds, the U.S. economy managed to survive 2025 without a recession due to four key factors: AI-fueled investment, affluent consumers, asset price gains and lower tariff rates than anticipated.

The impact of on economic growth should not be underestimated.

AI-driven investment

LOGO

Overview

Wildfire mitigation is another pressing issue that will likely define 2026 for electric cooperatives. Wildfires pose multiple risks to electric cooperatives, from the loss of life and damaged physical assets to legal and financial risks. The impact of severe fire events in cooperative territory can potentially lead to higher costs for member consumers, credit rating downgrades, increased cost of commercial utility insurance and lower availability of insurance coverage. As fire outbreaks become more dangerous, especially when they occur near populated areas, state and local governments, financial and insurance institutions will be looking to electric cooperatives to minimize the impact of large-scale fires.

large-scale wildfires.

As 2026 continues to unfold, look for economic conditions to split sharply, reinforcing a world of two coexisting realities across markets, sectors and households. On one side, growth will remain concentrated in technology and AI-enabled industries—which are well-positioned for expansion—while manufacturing and traditional retail sectors face slower demand and tighter margins. This divide extends to consumers. Higher-income households with greater asset exposure and job security are likely to sustain spending, while lower- and middle-income households confront rising employment risk and weaker real income growth. This divergence also applies to the labor market, where workers in AI-complementary roles will see productivity gains and wage resilience, while those with jobs vulnerable to automation face displacement, reduced bargaining power and slower wage growth. In short, the macro outlook for 2026 is less about a uniform slowdown or acceleration and more about who participates in growth—and who does not.

Look for economic conditions to split sharply, reinforcing a world of two across markets, sectors and households.

coexisting realities

Prepare for a year defined by technology-driven significant power and economic

uncertainty.

new data centers

Expect government, financial and insurance institutions to look to electric cooperatives to minimize the risk of

CFC Vice President, Utility Research & Policy, Jan Ahlen, explores the technology trends and industry developments that CFC expects will play a significant role for electric cooperatives this year.

demand

transformation,

transformation, demand uncertainty.

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Video

Electric Industry To Evolve as Policies Shift, Tech Advances

The electric co-op network is navigating a landscape where policy shifts, technological advancements and evolving industry dynamics intersect to create both challenges and opportunities.

download transcript

Video

Industry Trends and Policy Developments That Will Define 2026

CFC Vice President, Utility Research & Policy, Jan Ahlen, explores the technology trends and industry developments that CFC expects will play a significant role for electric cooperatives this year.