The world has crossed a historic threshold, officially entering the “Age of Electricity,” as mentioned in the Global Energy Review 2026 report, published last month by the International Energy Agency (IEA). According to the report, global electricity demand grew about 2.3 times faster than total energy demand in 2025, exceeding the long-term average.
Global electricity generation grew more than 850 terawatt-hour (TWh) last year.
This twin surge — rapidly growing demand matched by accelerating supply — creates a powerful tailwind for utility companies. As the backbone of this new electricity-driven global economy, utilities are poised to see sustained revenue growth, making exchange-traded funds (ETFs) that hold a diversified basket of these companies a compelling investment right now.
Before diving into the specifics of these ETFs, investors may want to examine the catalysts driving this electric revolution, along with the data-driven outlook for the utility industry, to better understand why utility ETFs appear poised for multi-year outperformance and could be a compelling addition to a modern portfolio. The following sections provide a closer analysis of these factors.
Growth Drivers: AI, Data Centers & Beyond
The fastest-growing source of new electricity load and the most visible symbol of the new energy era is undoubtedly the rapid rise of AI infrastructure and its power-hungry data centers. Electricity consumption from data centers globally increased nearly 17% in 2025.
Beyond AI, the widespread adoption of electric vehicles (EVs), heat pumps for home heating and industrial decarbonization initiatives has made electricity the preferred energy source for transportation, buildings and heavy industry.
The buildings sector remained the largest single contributor to electricity consumption, accounting for nearly 45% of the total annual increase in 2025, supported by continued appliance adoption and the growing use of air conditioners and heat pumps.
The global push for "green" manufacturing means heavy industries are trading coal and gas for high-voltage electrical systems.
This structural shift, unlike past cyclical booms, guarantees years of compounding demand growth — a perfect environment for utility ETFs to absorb rising volumes without major price suppression.
Outlook for Utilities
The IEA projects global electricity demand to increase at a brisk average annual rate of 3.6% over the 2026-2030 period, supported by rising consumption from industry, EVs, air conditioning and data centres. In particular, electricity use in the United States is set to add more than 420 TWh in total over the next five years.
Meeting this massive demand will require a Herculean infrastructure effort, leading the IEA to predict that annual grid investment should increase approximately 50% by 2030.
For investors, this creates a compelling fundamental case. This acceleration in demand and the subsequent need for massive grid construction translates directly into rising rate bases (the value of property on which a utility is permitted to earn a specified rate of return).
For regulated utilities, a larger rate base typically leads to meaningful profit generation and the potential for steady dividend increases.
Utility ETFs to Buy
Considering the aforementioned discussion, one may invest directly in individual utility giants like NextEra Energy NEE or Duke Energy DUK. However, if you want to capture the systemic nature of the "Age of Electricity," a diversified approach is a more prudent choice.
Utility ETFs mitigate the regulatory and localized risks inherent in individual companies while capturing the broad upward trend of the entire sector. Thus, by holding a basket of these power providers, investors can gain a safer, more balanced entry point into the structural growth of the global grid.
Given this backdrop, one may consider buying the following four utility ETFs, each of which holds a Zacks ETF Rank #2 (Buy) right now:
State Street Utilities Select Sector SPDR ETF XLU
This fund, with assets under management worth $22.85 billion, offers exposure 31 companies from the electric utilities; water utilities; multi-utilities, independent power and renewable electricity producers; and gas utility industries. Its top three holdings are: NEE (holding 13.89% of the fund), Southern Company SO (7.27%) and DUK (6.94%).
XLU has rallied 12.1% over the past year. The fund charges 8 basis points (bps) as fees.
iShares U.S. Utilities ETF IDU
This fund, with net assets worth $1.40 billion, offers exposure to 43 U.S. companies that supply electricity, gas, and water. Its top three holdings are: NEE (12.18%), SO (6.34%), and DUK (6.06%).
IDU has risen 10.3% over the past year. The fund charges 38 bps as fees.
Fidelity MSCI Utilities Index ETF FUTY
This fund, with net assets worth $2.46 billion, offers exposure to 66 companies trading in the utilities sector in the U.S. equity market. Its top three holdings are: NEE (12.34%), SO (6.55%), and DUK (6.26%).
FUTY has soared 12.5% over the past year. The fund charges 8 bps as fees.
Vanguard Utilities Index Fund ETF Shares VPU
This fund, with net assets worth $9 billion, offers exposure to 67 electric, gas, and water utility companies as well as companies that operate as independent producers and/or distributors of power. Its top three holdings are: NEE (12.15%), SO (6.75%), and DUK (6.47%).
VPU has soared 12.5% over the past year. The fund charges 9 bps as fees.
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Southern Company (The) (SO) : Free Stock Analysis Report
Duke Energy Corporation (DUK) : Free Stock Analysis Report
State Street Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
Vanguard Utilities Index Fund ETF Shares (VPU): ETF Research Reports
Fidelity MSCI Utilities Index ETF (FUTY): ETF Research Reports
iShares U.S. Utilities ETF (IDU): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
