Global energy and utilities companies are shifting investment priorities away from an overwhelming focus on sustainability and decarbonisation, as aging infrastructure, affordability pressures and reliability concerns force the sector to balance the energy transition with core operational needs.

New research from IFS, conducted by Censuswide among 850 C-level and senior utility executives globally, found that unprecedented electricity demand from data centres and electrification, combined with extreme weather events, is reshaping investment strategies.

The study shows utilities are increasingly prioritising grid hardening, new energy sources and storage, and stronger asset lifecycle management.

Industrial AI is emerging as a key technology supporting these efforts, helping utilities optimise performance, improve resilience and manage increasingly complex operations.

Carol Johnston, VP of Energy, Utilities & Resources at IFS, puts the findings into perspective: "The pendulum in the energy sector has swung fast. Sustainability continues to be a critical objective for utilities, but evolving operational and geopolitical realities are driving a more balanced investment agenda. Decades of under-investment, coupled with rigid regulatory rate cases and an aging grid, have created an operational environment where reliability, resilience, and affordability must be addressed simultaneously."

Grid resilience moves to the top of the agenda

Hardening existing grid infrastructure to protect against extreme weather and cyber threats has become a leading operational priority for utility executives.

The pressure is prompting companies to reassess existing assets, with 26 per cent actively re-evaluating their asset portfolios to prioritise investment in existing grid infrastructure.

At the same time, AI is becoming increasingly important to the sector's modernisation efforts.

Utilities see Industrial AI as a way to connect fragmented systems, predict equipment failures before they cause outages and automate complex operational processes.

Some 57 per cent of utility leaders say AI is critical to reducing operational costs, while 47 per cent believe it is critical for optimising asset performance and managing demand growth driven by electrification.

Asset management remains a major challenge

Despite significant technology investment, utilities continue to face foundational data and system challenges.

Nearly half, or 49 per cent, say operational data silos are restricting real-time decision-making.

Only 33 per cent of respondents describe their asset lifecycle management capabilities as advanced.

Meanwhile, 51 per cent say they have asset management systems in place but operate them in silos with limited predictive capabilities.

Carol Johnston, VP, Energy, Utilities & Resources, IFS, is clear: "Utilities cannot invest their way out of today's challenges through new infrastructure alone. Addressing growing demand and affordability pressures requires a balanced strategy that gets more from existing assets while making smart investments in new capacity, grid modernisation, and resiliency. Industrial AI provides the decision intelligence needed to optimise asset performance, maximise returns on capital, and maintain reliable service in an increasingly complex operating environment."

Preparing for a more flexible grid

Utilities are also looking beyond traditional grid management as they seek to balance investment in aging infrastructure with the need for additional capacity.

Battery Energy Storage Systems (BESS) and Distributed Energy Resource Management Systems (DERMS) are gaining attention as tools for managing demand volatility and reducing the impact of prolonged outages.

Looking further ahead, utility leaders identify advanced geothermal (22 per cent) and Small Modular Reactors (SMRs) (18 per cent) as technologies likely to have the greatest long-term impact on securing continuous clean baseload power.

Meanwhile, 46 per cent say AI is critical to accelerating the integration of renewable and distributed energy resources.

The research points to a broader shift in digital transformation priorities.

Rather than adopting technology for its own sake, utilities are increasingly focused on measurable outcomes, including grid uptime, customer experience and regulatory compliance.

By combining unified asset lifecycle management with Industrial AI, the sector is seeking to make better use of existing infrastructure while investing strategically in new capacity, resilience and future clean energy technologies. -TradeArabia News Service