Infrastructure and utilities ETFs are the funds most directly tied to the power demand theme, and in 2026 they have split. The Global X U.S. Infrastructure Development ETF (PAVE) returned 36.30% over the year to June 30, 2026, and the iShares U.S. Infrastructure ETF (IFRA) returned 30.46%, while the Utilities Select Sector SPDR Fund (XLU) returned 14.09% over the same year and only 0.19% year to date through August 31, 2026 [1][2][3]. The demand side of the story is intact: the U.S. Energy Information Administration's September 9, 2026 Short-Term Energy Outlook projects U.S. electricity sales of 4,135 billion kilowatthours in 2026 and 4,211 billion in 2027, gains of almost 2% a year driven by data centers and manufacturing [4]. The market has rewarded the companies that build the grid more than the regulated utilities that own it.
Power demand growth: what the EIA data shows
The EIA expects record electricity consumption in both forecast years. Commercial sector sales, the category that includes data centers, are projected to rise 3.3% in 2026 and 2.7% in 2027, accounting for 63% and 56% of the total increase in those years [4]. The growth is regionally concentrated: the West South Central region is expected to supply nearly 20% of nationwide growth in 2026 and nearly 40% in 2027, even though Texas has paused connections of new data centers to its grid [4]. For investors the relevant point is that demand growth of about 2% a year is high by the standards of the past two decades but not explosive, and that the capital spending it requires, on generation, transmission, transformers and cooling, lands with equipment makers and contractors before it shows up in utility earnings.
Infrastructure and utilities ETFs compared
| Fund | Expense ratio | Index | 1 year to June 30, 2026 (NAV) | Other data |
|---|---|---|---|---|
| Global X U.S. Infrastructure Development ETF (PAVE) | 0.47% | Indxx U.S. Infrastructure Development Index | 36.30% | 3 year 24.16%, 5 year 18.86% annualized [1] |
| iShares U.S. Infrastructure ETF (IFRA) | 0.30% | NYSE FactSet U.S. Infrastructure Index | 30.46% | YTD 6.69% to June 30; SEC yield 1.66% (Aug 31) [2] |
| Utilities Select Sector SPDR Fund (XLU) | 0.08% | Utilities Select Sector Index | 14.09% | YTD 7.62% to June 30; YTD 0.19% and 1 year 2.85% to Aug 31 [3] |
PAVE targets companies expected to benefit from an increase in U.S. infrastructure activity, which in practice means industrial equipment, construction materials, electrical products and engineering firms; the fund launched on March 6, 2017 [1]. IFRA, launched April 3, 2018, splits its index between owners of infrastructure assets, mainly utilities, and enablers such as materials and construction companies [2]. XLU holds the roughly 30 utilities in the S&P 500 and is the purest play on regulated power [3]. Daily prices for all three are on DataPorium's ETF page.
Why utilities have lagged since April
XLU closed at a 2026 high of $47.15 on April 9, 2026, then slid to $45.34 on June 30, $42.23 on August 31 and $42.39 on September 11, a decline of 10.1% from the April peak [5]. The move erased the first half gain: the fund was up 7.62% year to date at the end of June and 0.19% at the end of August [3]. Several forces work against regulated utilities even in a demand boom. Higher interest rates raise the cost of the debt that funds new plant. Regulators decide how much of the new spending earns a return and how fast, and large industrial customers negotiate rates that limit what utilities can charge. DataPorium sector data show the average price to earnings ratio of Nasdaq listed utilities at 28.15 on September 11, 2026, close to the 28.85 recorded on December 31, 2025, so the sector has not been rerated upward by the demand story [6]. Industrials, by contrast, saw their average multiple fall from 38.11 to 17.17 over the same period as earnings caught up with prices [6].
How investors may use the power demand theme
- Builders versus owners. PAVE and IFRA hold the companies that supply grid equipment and construction; XLU holds the utilities that will own the assets and earn a regulated return on them over decades [1][2][3].
- Income versus growth. XLU is the income vehicle of the group, and IFRA's 1.66% SEC yield as of August 31, 2026 sits between XLU and PAVE's low yield growth profile [2].
- Cost. XLU charges 0.08%, IFRA 0.30% and PAVE 0.47%, so the thematic funds cost four to six times the sector fund [1][2][3].
- Cyclicality. PAVE's 36.30% one year return and 24.16% three year annualized return came in a capital spending upswing; industrial earnings are cyclical and the multiple has already compressed [1][6].
The counterpoint for utilities is that a 10% decline while demand forecasts rise may be an opportunity rather than a warning. Regulated returns are set on a growing asset base, and a sector trading near 28 times earnings with a 2% a year demand tailwind is not obviously expensive if rates ease [6]. The risk is execution: connection pauses like the one in Texas show that grid capacity, not demand, is the binding constraint, and delays defer the earnings that the spending is meant to produce [4]. Investors may consider holding both a builder fund and a utilities fund rather than choosing one, since they have moved in opposite directions in 2026.
Electricity demand is growing about 2% a year and the ETFs that build the grid have outrun the ETFs that own it by more than 20 points over the past year.
Key takeaways
- The EIA projects U.S. electricity sales of 4,135 billion kWh in 2026 and 4,211 billion kWh in 2027, with commercial demand up 3.3% and 2.7% [4].
- PAVE returned 36.30% and IFRA 30.46% over the year to June 30, 2026, against 14.09% for XLU [1][2][3].
- XLU fell 10.1% from its April 9 high of $47.15 to $42.39 on September 11, 2026, giving back its first half gain [3][5].
- Utilities trade at about 28 times earnings, little changed from year end, while industrials derated from 38 to 17 times [6].
- Fees range from 0.08% (XLU) to 0.47% (PAVE); the builders cost more and have returned more [1][2][3].
Frequently asked questions
What is the best ETF for the power demand theme?
There is no single best fund. PAVE (36.30% one year return to June 30, 2026) and IFRA (30.46%) hold grid and construction companies, while XLU (14.09%) holds the utilities that own the assets; they have moved differently in 2026 [1][2][3].
Why are utilities ETFs down in 2026 if electricity demand is rising?
XLU fell 10.1% from April 9 to September 11, 2026 as higher financing costs, regulatory limits on returns and grid connection delays weighed on regulated utilities even as the EIA raised demand forecasts [4][5].
How fast is U.S. electricity demand growing?
The EIA's September 2026 outlook projects growth of almost 2% in 2026 to 4,135 billion kWh and nearly 2% again in 2027 to 4,211 billion kWh, led by the commercial sector [4].
What does PAVE invest in?
PAVE tracks the Indxx U.S. Infrastructure Development Index of companies expected to benefit from increased U.S. infrastructure activity, such as equipment makers, materials producers and engineering firms, and charges 0.47% a year [1].
Sources & References
- [1] Global X U.S. Infrastructure Development ETF (PAVE) fund page
- [2] iShares U.S. Infrastructure ETF (IFRA) fund page
- [3] Utilities Select Sector SPDR Fund (XLU), State Street fund page
- [4] U.S. EIA Short-Term Energy Outlook, September 9, 2026: Electricity
- [5] DataPorium ETF prices (XLU daily closes)
- [6] DataPorium stock market data (sector P/E)
