Data Center Power Demand Drives $6.3 Billion in New Costs After PJM Auction

A recent power auction by PJM Interconnection, the grid operator serving 67 million people across 13 U.S. states and Washington, D.C., has revealed that surging data center electricity demand is set to add billions of dollars to regional power costs. The auction, which procured capacity for the period from June 2028 through May 2029, resulted in $16.4 billion in total capacity market charges, with approximately $6.3 billion attributed directly to data center-driven demand, according to Monitoring Analytics, PJM’s independent market monitor.

This latest auction marks the fourth consecutive cycle where data center demand has significantly inflated costs. Over the last four PJM capacity auctions, the cumulative impact of data center load has reached $29.4 billion in added electricity expenses. The findings underscore a growing tension between the rapid expansion of AI and cloud computing infrastructure and the ability of the existing power grid to keep pace.

Joseph Bowring, president of Monitoring Analytics, argued that the current market structure is failing to distribute costs fairly. “Data center load should be removed from the capacity market and procured through a dedicated auction,” Bowring said in an email. He added that such a mechanism would permit data centers to access capacity through a market mechanism while ensuring they pay for their own capacity and do not impose costs on other customers.

Consumer advocates echoed these concerns. Clara Summers, campaign manager at Consumers for a Better Grid, noted that the market was not prepared for the “obscene, really fast growing demand from data centers.” Because auction prices remain elevated at similar levels to recent cycles, Summers warned that consumers can expect their bills to stay high for the foreseeable future. Julia Kortrey, director of strategic initiatives at Evergreen Action, described current prices as “pretty baked in,” adding that relief is unlikely before the 2030s, regardless of any near-term actions PJM might take.

PJM also reported that it failed to procure enough power to meet its reliability target for the second consecutive auction. The grid operator is now seeking federal regulatory approval to hold a special “Backstop Procurement” to address the shortfall. PJM President and CEO David Mills stated that the auction results clearly show demand for electricity continues to grow faster than supply. He acknowledged the impact of this imbalance on both system reliability and consumer costs, and emphasized that PJM is working with government and industry leaders to restore balance by accelerating new generation and managing load growth. While Mills’ statement did not explicitly name data centers, PJM has previously identified them as the fastest driver of power demand growth across its footprint, which includes Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, and West Virginia.