Data center developers plan to reduce their reliance on utility grids by investing in onsite power for rapidly scaling facilities. The shift creates opportunities for electrification infrastructure providers as energy independence takes on new urgency.
The ALPS Electrification Infrastructure ETF (ELFY) offers exposure to companies building out domestic power systems at a time when demand surges and geopolitical shocks test grid capacity. The fund tracks utilities, construction firms, and equipment makers positioned to benefit as U.S. electricity demand faces its steepest growth in decades.
Roughly one-third of data centers will use 100% onsite power by 2030, according to a January report from Bloom Energy. The report surveyed 152 decision-makers across hyperscalers, colocation developers, utilities, and GPU service providers. That figure marks a 22% increase from a survey the firm conducted six months earlier.
The shift reflects mounting pressure on grids already straining to meet demand. More than half of new data center campuses will exceed 500 megawatts by 2035, with nearly one-third exceeding 1 gigawatt, according to the Bloom Energy report. Each gigawatt campus consumes roughly as much electricity as the entirety of San Francisco.
As a result, developers move into power-advantaged regions where they can secure capacity faster and increasingly design campuses to operate independently of the grid, according to the report.
Texas will capture nearly 30% of U.S. data center market share by 2028, according to the report. At the same time, Georgia’s market share will grow 75% from 4% of the total data center market to 7% as developers expand deeper into the Southeast. In contrast, California, Oregon, Iowa, and Nebraska’s respective relative market shares will drop by more than 50%.
Oil Spike Renews Focus on Energy Independence
The case for energy independence gained fresh attention this week, as crude oil prices climbed above $90 per barrel amid the ongoing Iran conflict. Qatar’s energy minister Saad al-Kaabi told The Financial Times that Gulf exporters will shut down production within days if the war continues. He forecast crude prices could soar to $150 per barrel if tankers cannot pass through the Strait of Hormuz, through which a fifth of the world’s oil and gas passes.
GMO’s Lucas White, who manages climate and resources funds, told Morningstar that geopolitical conflicts underscore the appeal of domestic power systems. “How many times do we have to learn the same lesson?” White said. “It is precarious to be dependent on natural resources controlled by hostile regimes. How much nicer would it be to have a bunch of solar panels and wind turbines and not have to worry about natural gas and oil?”
ELFY tracks the Ladenburg Thalmann Electrification Infrastructure Index, which holds 18 different subsectors. Those range from renewable and non-renewable electricity generation to construction engineering and battery technology, according to the fund’s factsheet. The index excludes the drivers of electricity demand such as data centers and electric vehicles. It focuses instead on the infrastructure needed to deliver power.
As of December 31, the fund’s allocation tilted toward utilities at 40.37%. They’re followed by industrials at 27.57% and energy at 14.31%, according to the factsheet. Top holdings included PG&E Corp. (PCG), Hudbay Minerals Inc. (HBM), and Teck Resources Ltd. (TECK.B). Each represents about 1.1% of the portfolio.
ELFY has attracted $110 million in assets under management. The fund is up 14% year-to-date, according to ETF Database, outperforming the S&P 500, which is down nearly 2% year-to-date. The ETF charges a 0.50% expense ratio.
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VettaFi LLC (“VettaFi”) is the index administrator and calculation agent for ELFY, for which it receives a fee. However, ELFY is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of ELFY.
