AI bumps power cost 60% as mega US grid fails to hit supply goal
The largest US electric grid, PJM Interconnection, has failed its third consecutive auction to secure sufficient future power supply, primarily due to increased demand from data centers. This has driven up supply costs by over 60% and raised concerns about grid reliability across the 13 states it serves. Government entities and industry groups are now seeking emergency measures and regulatory reforms to address the shortfall and ensure data centers bear more of the cost.
PJM Interconnection LLC, the largest electric grid in the US serving 13 states and Washington, DC, reported that its latest capacity auction failed for the third consecutive time to secure enough future power supply commitments for 2028. This shortfall, equivalent to nearly seven traditional nuclear reactors, is largely attributed to surging demand from power-hungry data centers, particularly driven by the artificial intelligence boom.
The auction results showed that data centers contributed approximately $6.3 billion to the total $16.4 billion cost for the year starting June 2028, leading to a more than 60% increase in supply costs for PJM ratepayers. Joseph Bowring, president of Monitoring Analytics, PJM's independent market monitor, stated that the cumulative data center burden on ratepayers from four recent auctions amounts to almost $30 billion. Bowring called the failure to meet reliability targets "not an acceptable way to go forward" and suggested a separate auction specifically for data centers.
The National Resources Defense Council's Claire Lang-Ree echoed concerns, noting that new power supplies are not keeping pace with data center load growth, degrading reliability and keeping prices at their cap. The situation is putting immense pressure on PJM, which is home to Virginia's "Data Center Alley," and has drawn criticism from consumer groups and politicians over spiraling power bills.
In response, attention is shifting to an emergency procurement mechanism designed to shift the burden of power generation onto hyperscalers. This proposal, backed by pressure from the White House and state governors, is expected to be filed with the Federal Energy Regulatory Commission (FERC) this month and get underway in September, aiming to address the supply gap and ensure data centers contribute more to the infrastructure costs. A July 23 FERC conference is also scheduled to discuss grid governance amidst these challenges.