Largest U.S. Grid Operator Sees Power Costs Soar By 60% Due To Data Center Development
The price of power is set to jump more than 60% for PJM, the largest electrical grid in the country, amid insatiable demand from data centers.
“Demand for electricity continues to grow faster than electricity supply,” PJM CEO David Mills said in a statement included with the results of an annual auction that prices power two years down the line.
PJM, which serves 13 states and Washington, D.C., said Tuesday that the $16.4B closing bid for electricity starting in June 2028 tied a record set late last year. The auction also failed for the third consecutive time to secure enough future supply commitments to ensure grid reliability in the years ahead.
PJM serves the Northeast, which includes the region known as Data Center Alley, and has faced criticism from residential and commercial consumers alike as explosive demand for computing power drives up energy costs.
Data center development has increased PJM power supply costs by more than 60%, according to Monitoring Analytics, the grid’s independent market monitor. That burden means PJM will need to raise nearly $30B from ratepayers to keep the lights on, Monitoring Analytics President Joseph Bowring told Bloomberg.
Even with the added capacity, PJM is still short some 6.8 gigawatts of the power it expects to need to guarantee reliability during demand spikes, the equivalent of nearly seven nuclear reactors, according to Bloomberg.
The failure to secure enough power was “not an acceptable way to go forward” Bowring said, telling Bloomberg that PJM needed to run an auction specifically for data centers and separate those related price hikes.
The shortage doesn’t mean PJM will be unable to meet demand, but it will instead have to operate with slimmer power reserves and a greater level of risk, the utility said in a news release disclosing the auction results.
PJM's auctions since 2024 have resulted in about $29B in additional costs to all the utility’s customers. In the latest auction, data centers accounted for roughly $6.3B of the $16.4B total, Bowring told Bloomberg.
Individual ratepayers would have been on the hook for even more of the rising costs, but the total ran up against a cap first negotiated in 2024 after Pennsylvania Gov. Josh Shapiro sued the utility over rising prices.
Shapiro and other lawmakers have complained that PJM has been too slow to add power generation capacity to the grid, including renewable energy solutions that would have helped pull down costs, The New York Times reported.
The Natural Resources Defense Council, an environmental advocacy group, said the auction represented an increasingly familiar trend.
“This year’s auction confirms an unacceptable trend: data center load growth is outpacing new electricity supply,” Claire Lang-Ree, an advocate for climate and energy at NRDC, said in a statement. “Only 524 [megawatts] of new power plants joined PJM for this auction, proving that new supply simply can’t keep up with the pace of data center load growth, and everyone is paying the price.”
The utility has been shifting policy to try to meet demand, moving a power auction to September to expedite plans to connect data centers to the grid this year. It asked regulators in March to change rules to make it easier for operators to generate their own electricity.
PJM has customers in New Jersey, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, North Carolina, Tennessee, Kentucky, Ohio, Indiana, Illinois, Michigan and Washington, D.C.
