State of the State 2025: Leaders highlight ways to meet growing energy needs

The energy sector has welcomed the emergence of the lithium industry in Arkansas while it grapples with rising electricity demand and declining generation as coal-fired plants are retired. Leaders look to a mix of solutions to meet demand, avoid an “energy crisis” and “restore American energy dominance.”

Lauren Waldrip, executive director of the Arkansas Advanced Energy Association (AAEA), highlighted one of the state’s most notable developments over the past year: the expansion of the lithium industry in southwest Arkansas.

“That is a new component of our membership,” Waldrip said. “We are seeing participation from folks like Exxon, Standard Lithium, as well as community and municipality organizations from that side of the state.”

Waldrip said AAEA is interested in the industry because of the economic opportunities it will bring to the state, and battery storage will be essential to fill existing gaps in the grid. Lithium is a significant component of batteries.

Gifford Briggs, Gulf Coast region director for the American Petroleum Institute (API), said this is the beginning of an industry ancillary to the oil and gas sector as companies look at Arkansas for lithium extraction.

“While some companies and Standard Lithium have maybe been doing this on a smaller scale for a long time, the public interests of Exxon, Equinor, Occidental, Chevron, and other companies (are) bringing a new level of attention and new opportunities for the state of Arkansas,” Briggs said. “It’s not traditional oil and gas activity, but it is extraction … Many of the same companies that have been investing in our industry for generations (are) going to be looking to deploy new technologies and new approaches to provide a nice little economic boost for Arkansas.”

Waldrip said another notable development in 2024 was the deadline for legacy status net-metering for solar arrays. Leading to the Sept. 30 deadline, Waldrip cited an influx of new arrays added to the grid to receive the 1-to-1 net metering credit. While fourth-quarter numbers for new arrays have yet to become available, she expects a decline in new arrays.

She also noted a rise in partnerships with municipalities “to mobilize economic development and workforce efforts in rural parts of the state, whether that is with renewable projects, energy efficiency opportunities, or different grant funding programs.”

Regarding workforce development, she said new energy jobs are projected to rise 9% over the next five years, reflecting the sector’s health. Waldrip added that AAEA has grown to seven staff members, including the recent addition of Ebony Mitchell as director of external affairs.

In 2024, utilities in Arkansas completed resource planning, which they do every three years.

Waldrip said the three that completed the planning process last year identified the gaps in the grid, including energy shortfalls expected as early as 2026. Meanwhile, energy demand is projected to rise while energy infrastructure is aging.

“We are looking at an energy crisis right in the face, so it’s really important that we have policies that enable generation rather than hindering that opportunity,” said Waldrip, citing existing regulatory hurdles she hopes will be addressed soon. “Immediate planning is crucial in order to prevent that crisis.”

Speaking as a ratepayer, Waldrip said a lack of planning leads to “last-minute solutions that are two to three times more expensive.” The result would be “materially higher costs for Arkansans.”

Waldrip said the AAEA represents members across multiple sectors and that they can contribute to the solution. She said as coal-fired plants are retired, they’ll need to be replaced with new electricity generation.

“It’s not going to be one simple solution,” she said. “It’s going to be a host of different technologies and programs, whether it’s energy efficiency, demand response or different types of energy sources. It’s an all-of-the-above approach, and we cannot continue to kick the can down the road anymore.”

AI, POLITICAL IMPACTS
Briggs highlighted artificial intelligence’s growth and how this contributes to a rise in data centers and energy demand. Briggs said natural gas-fired power plants provide a large part of U.S. electricity generation, and he expects natural gas demand to surge to meet the increase in electricity demand because of the centers.

“That’s a real positive,” Briggs said. “On the other side of the equation, last year we didn’t have a single lease sale for the first time since … the 1960s in the Gulf of Mexico.”

He said it’s a concerning statistic, particularly for the Gulf Coast. Another challenge was former President Joe Biden’s “last-minute moves to take more federal land out of commerce for exploration and development. Access continues to be a major challenge.” Briggs said stability is one of the industry’s biggest challenges amid changes in presidential administrations. He said the industry can adapt to a predictable environment.

“What we’ve seen here recently is large swings in the past two administrations … with hugely different approaches to how we look at energy policy for our country,” he said. “That creates challenges as companies decide … The kind of investments you’re looking at in the Gulf of Mexico are not two-year investments. These are eight-, nine- and 10-year commitments and billions of dollars in capital. When you are looking at deploying resources for exploration and production or building pipelines, these are multiyear commitments … The seesaw nature of politics and the regulatory landscape make it very difficult to make these decisions with a lot of confidence.”

He said the industry is optimistic about President Donald Trump and his views on the industry, including looking to reduce regulations, offer lease sales again and “restore American energy dominance.” But it’s measured because the industry would like to see “responsible change that can endure multiple administrations that we can make investments and feel confident that those investments are going to play out and not be … Keystone Pipelined — all go one day and shut down the next.”

Briggs also follows the global production and consumption of energy, which continue to rise globally.

“That’s a good thing,” said Briggs, adding that “energy prices, while not very high, have remained fairly stable as well.”

He said the forecasts from the U.S. Energy Information Administration (EIA) and others show rising demand for oil and natural gas “every year through 2050, despite some of the introductions of new technologies. Many of those predictions didn’t really even begin to take into consideration the growth of AI and how it continues to grow faster than people are even predicting. So, those numbers are only going to go up.”

EIA PROJECTIONS
In its January Short-Term Energy Outlook, the EIA projected crude oil production to rise in 2025 and 2026, both globally and in the United States. U.S. production is expected to rise to an average of 13.5 million barrels per day in 2025 and 13.6 million barrels per day in 2026. Both averages would be production records. In 2024, production averaged a record 13.2 million barrels per day.

The increase in global production is expected to outpace demand for petroleum products, contributing to a decline in oil prices through 2026. EIA projects the international benchmark Brent crude oil price will fall by 8% to an average of $74 per barrel in 2025 from 2024 and decline to an average of $66 per barrel in 2026.

According to the EIA, U.S. retail gasoline prices are expected to fall by 10 cents to an average of $3.20 per gallon in 2025 from 2024 and decrease to an average of $3 per gallon in 2026.

U.S. electricity demand is projected to rise by 2% in 2025 and 2026 after rising by the same rate in 2024. This would mark the first time the demand has risen for three consecutive years since 2005 to 2007. Demand is projected to rise the fastest in the industrial sector — by 2% in 2025 and 3% in 2026 — as new semiconductor and battery manufacturing factories start operating. In the commercial sector, demand will increase by 2% in 2025 and 2026 as data-center power consumption increases.

For the first time, renewable energy sources will provide one-quarter of U.S. electricity generation in 2025, the EIA outlook shows. Renewables are expected to contribute 27% of electricity generation in 2026.

The Henry Hub natural gas spot price is expected to average $3.10 per million British thermal units in 2025 and $4 per million British thermal units in 2026, up from a record low average of $2.19 per million British thermal units in 2024. The prices are expected to rise as demand — driven by liquified natural gas exports — exceeds production growth and keeps inventories at or below the 2020 to 2024 average for most of the next two years.

Energy-related carbon dioxide emissions in the United States will rise slightly in 2025 and decrease slightly in 2026, according to the EIA. Emissions from coal and petroleum-product consumption will drive the 2025 increase. In 2026, less electricity generation from natural gas and improvements in vehicle fuel economy are key contributors to the 2026 emissions decrease.

Editor’s note: The State of the State series provides reports twice a year on Arkansas’ key economic sectors. The series publishes stories to begin a year and around mid-year to provide an update on the state’s economy. Link here for the State of the State page and previous stories.