Editor's note: Widespread power outages can turn an ordinary day into chaos. And as Joe Austin of our corporate affiliate Chaikin Analytics explains, the U.S. electrical grid is unprepared for today's increasing demand. In this piece, originally published in the May 7 issue of the free Chaikin PowerFeed e-letter, Joe shares his recent experience of a catastrophic blackout – and why the need for reliable electricity will be an important trend for investors...

A 'Boots on the Ground' Lesson From Spain's Big Blackout

By Joe Austin, senior analyst, Chaikin Analytics

Mondays are usually calm in Barcelona. But during a recent trip, I experienced something I'll never forget...

Shortly after 1 p.m., I was working from my hotel room. I had my windows open, with a gentle breeze blowing in.

Then, out of the blue, my computer beeped. It was almost out of power. That seemed odd, since I knew I had plugged it in.

What I didn't know was that, about an hour earlier, most of the Iberian Peninsula had lost power.

The Iberian Peninsula is more than just Spain. It also includes Portugal and a small part of southern France. It's bigger than California and home to nearly 60 million people.

And while I sat comfortably in my room... Spain and Portugal were in chaos.

Throughout the peninsula, millions of people had lost power. Airports were shuttered, leaving about 80,000 passengers stranded. Worse, trains in Spain are mostly electric... so the outage was hugely disruptive.

When I went for a walk outside, traffic seemed normal. But businesses were selling what fresh food they had and starting to close.

Near my hotel, a crowd had gathered outside a bar. The owners had a battery-operated FM radio – which meant people could hear the news. Mobile networks hadn't been prepared for the power outage... And the phone system had failed as well.

I continued on my walk, hoping to find a restaurant that was still open.

I finally found one... but I couldn't eat unless I had cash. The banking system, including credit-card payments and cash machines, was also down.

I spent my last 26 euros on a good meal. But the server and I carefully watched what I ordered to make sure I had enough cash to pay for it.

The power didn't come back on until shortly after midnight.

The company that operates the national electricity grid in Spain ruled out a cyberattack. The main cause was likely a surge in voltage, which set off a series of power-plant shutdowns.

Meanwhile, the whole experience got me thinking about the power grid back here in the U.S...

Amid increasing strain on our nation's electrical grid and with a new administration in the White House, reliable electricity will be a big, long-term investment trend...

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America Needs Reliable Electricity More Than Ever

At its core, an electrical grid is the infrastructure that facilitates the generation and distribution of electricity to end users.

Put simply, the grid keeps life as we know it going.

However, here in the U.S., a majority of the system was built as early as the 1960s.

Sure, the system has seen improvements over the years. But it's old. And it's struggling to meet the growing electricity demands.

About 70% of transmission lines are more than 25 years old. They're approaching the end of their life.

It's tempting to think that a blackout on the scale of Spain and Portugal could never happen here. But the U.S. grid is more fragile than you might think...

Since 1970, our population has grown by nearly 150 million people. That's a more than 70% increase in about 55 years. Over the same span, electricity consumption has grown by more than 40%.

And we're starting to see the strain on our grid create real problems.

You might remember the "Great Texas Freeze" in February 2021. Amid severe winter storms and freezing temperatures, about a third of the state's roughly 30 million residents lost power.

Just east of Texas, Hurricane Idalia hit Florida's Big Bend region on August 30, 2023. Counties like Taylor and Madison saw total power loss.

Weather disasters account for about 80% of all outages. But our power demand keeps growing, too...

Artificial intelligence ("AI") and electric vehicles ("EVs") are two big drivers. Power-hungry data centers and the EV charging infrastructure have placed further strain on an already overworked system.

For example, according to the U.S. Department of Energy, data centers alone could consume up to 12% of our country's electricity by 2028.

Meanwhile, the Electric Reliability Council of Texas says that one company's flagship data center will consume as much energy as 240,000 houses each day.

And over the 10-year period from 2013 to 2023, the number of EV charging ports increased 845%.

Unfortunately, upgrading our grid will be expensive.

Even back in 2017, a researcher at the University of Texas at Austin Energy Institute estimated that modernizing the entire U.S. grid would cost about $5 trillion.

That figure would add about 13% to our current national debt if the government got involved.

President Donald Trump signed an executive order to ensure grid reliability, but he didn't put any money behind it. At this point, he has mostly canceled clean-energy programs that were pet projects of the previous administration.

Spain's recent blackout shows how serious it can be when a grid fails. America's aging grid could experience a similar failure without warning. And that would be catastrophic.

So keep an eye on the electrical utility industry's long-term performance. Demand for electricity just keeps increasing. And all that power will have to come from somewhere.

Meanwhile, when you travel, it's probably a good idea to keep a little extra cash in your pocket. It's not fun when the power goes out... no matter where you are.

Good investing,

Joe Austin

Editor's note: AI is only getting better, with the underlying technology doubling in power every six months... And that's creating huge investment opportunities. Right now, Chaikin Analytics founder Marc Chaikin is unveiling a powerful breakthrough that can spot which AI stocks could double or triple your money this year.

It's a secret that takes all his previous work to the next level – and it could reshape your approach to investing, no matter where the market goes next.