PJM electricity prices hit record due to AI
Yesterday was a big day for the biggest U.S. power auction, held by the grid operator PJM Interconnection. Prices to supply electricity between June 2026 and May 2027 exceeded last year’s all-time high by 22 percent thanks to demand from artificial intelligence.
A recent surge in U.S. power consumption driven by Big Tech’s data center demand has butted up against roughly a decade of shrinking power supplies in PJM, North America’s largest power grid operator, leading to a supply shortfall that has driven up prices in the capacity auction.
PJM’s capacity auction determines what power plant owners in the grid network, which covers one in five Americans, will be paid to guarantee that they pump out electricity during times of extreme demand to help avoid blackouts…
The payments are a sign of the energy supply and demand balance in PJM, with higher prices typically acting as an incentive for developers to build more power plants.
PJM’s territory covers 13 states and the District of Columbia, as well as the biggest concentration of data centers in the world, including Virginia’s “Data Center Alley.”
The types of power-generating capacity cleared through the auction included 45% natural gas, 21% nuclear, 22% coal, 4% hydro, 3% wind and 1% solar.
Last year’s auction prices in PJM rose by more than 800 percent from the previous year due to data center demand, which began to be reflected in bills last month. Yesterday’s auction prices will start to impact bills in June 2026, though PJM says that power bills for homes and businesses will rise between 1.5 percent and 5 percent year-over-year.
Oil and gas writer Irina Slav wrote for OilPrice.com about the PJM auction:
In total, PJM Interconnection will be paying $16.1 billion to power generators in the period between June 2026 and May 2027— the 12 months covered by the latest capacity auction.
“It’s unpleasant for ratepayers,” Timothy Fox, managing director at ClearView Energy Partners, told the Financial Times. “Higher auction prices will result in higher bills for customers.”
That’s the truth. MISO’s current trajectory of retiring dispatchable plants, rising demand due to artificial intelligence, and dependence on weather-dependent resources puts it on the road to wholesale price spikes like seen in PJM.