Data center energy demand drives up PJM grid auction costs by $6.3 billion

The latest capacity auction conducted by PJM Interconnection, the largest electrical grid operator in the United States, has revealed that surging energy demand from data centers will add billions of dollars to electricity bills across 13 states in the coming years.

PJM released the results of its recent auction, which secures electricity capacity for a 13-state region for the period spanning June 2028 through May 2029.

Monitoring Analytics, the independent market monitor for PJM, determined that of the $16.4 billion in total capacity market costs resulting from the auction, approximately $6.3 billion is directly driven by the demand generated by data centers.

According to data from the market monitor, the demand from data centers has added a cumulative $29.4 billion to electricity costs across the last four PJM capacity auctions.

Joseph Bowring, the president of Monitoring Analytics, stated that the market watchdog’s position is that “data center load should be removed from the capacity market and procured through a special auction.”

“This method would allow data centers to access capacity through a market mechanism while ensuring they pay their own capacity costs, thereby preventing these costs from being shifted to other consumers,” Bowring said.

Consumer advocacy groups also expressed deep concern over the impact of data centers on electricity pricing following the release of the auction results.

“Right now, we are facing a wave of extreme and very rapidly growing demand driven by data centers, and the market was not prepared for this,” said Clara Summers, campaign manager for Consumers for a Better Grid.

Summers noted that while prices in this auction remained at levels similar to other recent auctions, consumers can expect their utility bills to remain comparably high for the foreseeable future.

Julia Kortrey, director of strategic initiatives for the state program at Evergreen Action, stated that the high prices have now become “largely locked in.”

“We are unlikely to see any relief until the 2030s from any moves PJM could make to improve the situation,” Kortrey said.

PJM operates the power grid serving 67 million people across the eastern and midwestern United States, covering Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia.

The grid operator announced that, as was the case in the previous auction for the 2027–2028 delivery year, it was unable to procure a sufficient amount of electricity capacity to meet its reliability targets.

To address this shortfall, PJM is requesting authorization from federal regulators to conduct a special “Backstop Procurement Auction.”

“These auction results demonstrate that electricity demand continues to grow faster than electricity supply,” David Mills, president and chief executive officer of PJM, said in a written statement.

“PJM is aware of the impact this supply and demand imbalance has on system reliability and consumer costs. We are working on multiple fronts with government and industry leaders to restore this balance by bringing new generation online as quickly as possible and managing the growth of new load on the grid,” Mills added.

While the statement did not reference data centers directly, PJM has recently reported that electricity demand from data centers represents the fastest-growing sector of load growth on its system.