Key Takeaways:
PJM Interconnection's capacity auction cleared at $325 per megawatt-day, the price cap, with a 6,831-megawatt supply shortfall — the third consecutive miss for the largest US power grid.
"Data center load growth is degrading grid reliability and raising prices to the cap," Robert Routh, Pennsylvania state lead for climate and energy policy at the Natural Resources Defense Council, said.
The auction procured 138,318 megawatts of capacity for the 2028/2029 delivery year, falling 6,831 megawatts short of PJM's reliability target. The gap is equivalent to about seven large nuclear reactors. Without the price cap, the clearing price would have reached $554.72 per megawatt-day, roughly 70% higher, PJM said. Data center demand has pushed PJM power costs up more than 60%, with data-center-related costs in this auction alone reaching $6.3 billion, according to Monitoring Analytics President Joseph Bowring.
The shortfall means PJM will operate with thinner reserve margins through the 2028/2029 planning year, which runs from June 2028 through May 2029. Total capacity costs for the period are expected to exceed $16 billion, costs that flow to residential and business customers across the 13-state grid serving 67 million people. Former Pennsylvania consumer advocate Patrick Cicero said the higher costs have added $220 to $320 per year to the average residential customer's bill in the state.
PJM President and Chief Executive Officer David Mills said the results show that "demand for electricity continues to grow faster than electricity supply." The grid operator plans to launch a backstop procurement process in September to shift the cost of new generation to hyperscale technology companies rather than consumers. PJM must submit related filings to the Federal Energy Regulatory Commission by the end of July.
The results signal that AI-driven electricity demand is structurally reshaping US power markets, with elevated capacity costs likely to persist until new generation comes online. FERC will hold a special meeting July 23 to discuss grid governance, a session that could determine whether auction rules are revised.
This article is for informational purposes only and does not constitute investment advice.
