Key facts
- PJM Interconnection, the largest U.S. power grid, failed to secure enough future power supply commitments in its latest auction.
- The auction for the 2028/2029 delivery year fell 6.8 gigawatts short of the reliability requirement.
- This shortfall is attributed to the significant and growing demand from data centers.
- The result raises concerns about grid reliability and is expected to increase electricity costs for consumers and businesses in 13 states and Washington, D.C.
- PJM plans to seek approval for an emergency procurement mechanism to address the supply gap.
PJM Interconnection, the largest U.S. power grid operator serving 13 states and Washington, D.C., announced that its auction to secure future power supply commitments for the year starting June 2028 fell short by 6.8 gigawatts. This shortfall, equivalent to nearly seven nuclear reactors, highlights the immense pressure on the grid due to a historic boom in data center demand, particularly in regions like Virginia's Data Center Alley.
The auction's result means PJM has failed for the third consecutive year to secure enough capacity to guarantee system reliability during peak demand periods. This situation is exacerbated by the rapid proliferation of electricity-intensive data centers. The shortfall is expected to lead to increased electricity costs for consumers and businesses across PJM's service territory.
While the clearing price in the auction was set at the Federal Energy Regulatory Commission (FERC)-approved ceiling of $325 per megawatt-day, a 2.5% decrease from the previous year's cap, PJM officials and market monitors have warned that without regulatory intervention, prices could have been significantly higher. The current price cap, while protecting consumers from extreme volatility, may also disincentivize the construction of new power generation.
PJM CEO David Mills acknowledged that electricity demand is growing faster than supply, impacting system reliability and costs. The grid operator is collaborating with government and industry leaders to address this imbalance by accelerating new generation and managing new load growth. The grid has already shown signs of strain, with recent heatwaves pushing demand close to historical limits.
Attention now turns to an emergency procurement mechanism, tentatively scheduled for September, aimed at filling the supply gap and ensuring that hyperscalers, which operate the data centers, bear a greater share of the burden for ramping up power generation. This measure follows pressure from the White House and state governors. A conference hosted by FERC on July 23 will further discuss grid governance.