Approaching the limit! The largest power grid in the US failed to meet its supply targets, and AI has already caused electricity costs to soar by 60%.

AI data centers’ appetite for electricity is pushing America’s largest power grid to the brink. On July 15, Eastern Time, PJM—the largest power grid in the US—announced the results of its Base Residual Auction (BRA) for the 2028/2029 period. This grid covers 13 states and Washington, DC, serving over 67 million users. According to Bloomberg, this auction marks the third consecutive time PJM failed to meet its reliability target, with a supply gap of 6.8 gigawatts. Behind the gap is the continual surge in data center demand. Joseph Bowring, president of Monitoring Analytics—PJM’s independent market monitor—said data centers have pushed PJM’s power supply costs up by more than 60%, with data center-related costs alone amounting to $6.3 billion in this auction. Combining the last three auction data, the burden of data centers on PJM users is close to $30 billion. How big is the gap: Equivalent to 7 nuclear power plants This auction procured a total of 138,318 megawatts of capacity, plus 10,864 MW from Fixed Resource Requirement (FRR) areas, totaling about 149,182 MW. This still falls short of PJM’s reliability requirement by 6,831 MW. What does 6.8 GW mean? It’s about the installed capacity of seven traditional nuclear power plants. More importantly, this is the third consecutive time in PJM’s history that the entire region has failed to meet reliability standards. Last year (2027/2028) saw a shortage of about 6,500 MW, and the gap is widening year by year. PJM stated: “A supply shortage does not necessarily mean the system cannot reliably supply power, but it does mean PJM will have to operate with thinner reserve margins and higher risk levels.” Prices approaching the cap, consumers are paying the bill This auction’s clearing price hit the FERC-approved cap—$325 per megawatt-day, a cost directly reflected in users’ monthly electricity bills. The price cap is already a “discounted” bad news. PJM disclosed that, without the cap, this auction’s clearing price would have reached $554.72 per megawatt-day, and exceeded $776 in Chicago. In other words, without regulations, electricity prices would be about 70% higher than current levels. The total payouts to generators in this auction reached $16.4 billion, matching the historic record set at the end of 2025. However, the price cap is a double-edged sword. PJM pointed out that while it protects consumers, it also dampens price signals for new generation facilities—generators don’t see a high enough return to accelerate construction of new plants. AI demand: Supply simply can’t keep up The PJM grid covers Virginia's “Data Center Alley,” the area with the highest data center density in the US. According to Monitoring Analytics’ report, PJM’s electricity prices surged by 76% year-on-year in Q1 2024, directly due to explosive growth in data center demand. Claire Lang-Ree, Climate and Energy Advocate at the Natural Resources Defense Council, stated, “This year’s auction results confirm an unacceptable trend: data center load growth is outstripping new power supply, reliability is declining, and prices are consistently hitting the cap. New electricity supply is simply not keeping pace with data center load growth, and everyone is paying the price.” PJM CEO David Mills also admitted the situation is “unsustainable,” saying, “These auction results show electricity demand continues to outpace supply. PJM is working with government and industry leaders at multiple levels to quickly bring in new generation resources and manage the growth of new grid load.” Emergency mechanism: Making hyperscale tech companies pay Facing the ever-expanding supply-demand gap, PJM plans to launch a special “Backstop Procurement” process in September to fill the near-term electricity shortage. The core logic of this mechanism is to shift the cost burden of new generation to hyperscale technology companies, rather than ordinary consumers. Bloomberg reports PJM has not submitted a concrete plan yet, but under pressure from the White House and state governors, the process will roll out in September, and PJM must submit documents to FERC by the end of this month. Joseph Bowring further called for the grid to hold separate auctions for data centers, “so consumers won’t have to pay for extra costs.” Drew Maloney, president of the Edison Electric Institute, stated, “PJM users face high capacity costs and the risk of insufficient supply. US power companies work daily to reduce costs and keep electricity prices affordable, but we need to move fast with reforms and ongoing special measures to build more power infrastructure across the region.” On July 23, FERC will convene a special meeting to discuss grid governance, and pressure on PJM will culminate. 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