Morgan Stanley Sees PG&E's 2026 Growth Fueled by Data Center Demand and Grid Modernization

Morgan Stanley Sees PG&E's 2026 Growth Fueled by Data Center Demand and Grid Modernization December 28, 2025 Utility giant PG&E Corporation is poised for a significant growth phase in 2026, with Morgan Stanley identifying surging data center power demand as a primary catalyst. This outlook underscores a critical trend in the utility sector, where investments in grid resilience and capacity are becoming increasingly vital to support the exponential energy needs of digital infrastructure. In a year-ahead note to investors, Morgan Stanley analysts highlighted that utility performance will be "heavily driven by data centers and growth upside in 2026." While the firm lowered its price target on PG&E (NYSE: PCG) to $20 from $21, maintaining an Equal Weight rating, the focus on data centers signals a transformative period for the California-based utility. This analysis places PG&E among dividend stocks noted for low payout ratios and strong upside potential. The strategic importance of this forecast is reflected in PG&E's concurrent operational advancements. In mid-December, its subsidiary, Pacific Gas and Electric Company, announced the successful launch of a technology demonstration for Dynamic Line Rating (DLR) and Asset Health Monitoring (AHM). This initiative, which has progressed to trial deployment following recent hardware installations, aims to modernize the grid by using advanced sensors and real-time analytics to enhance transmission line utilization. DLR technology represents a fundamental shift in grid management. By leveraging live weather data—such as ambient temperature and wind speed—the system dynamically calculates how much electricity a power line can safely carry, moving beyond static limits. This allows PG&E to unlock unused capacity within its existing 70,000-square-mile service territory, which provides energy to approximately 16 million people in Northern and Central California. The broader strategy integrates this innovation with substation upgrades and transmission line expansions to ease congestion and maintain reliability during extreme weather. For the industry, the implications are profound. Successfully validating these tools can enable utilities to support more renewable energy integration and rising demand from sectors like data centers without solely relying on costly new construction. "The goal is to unlock unused capacity, improve reliability, and support more renewable energy," the company stated, noting that such modernization can ultimately lower costs for customers by optimizing existing infrastructure. As data center clusters expand, utilities that effectively deploy such smart grid technologies will be better positioned to capitalize on this demand-driven growth. Source: Yahoo