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The mid-Atlantic region’s grid operator is struggling to secure enough electricity to meet the demand projected from data centers in the coming years, as costs for consumers continue to rise.
PJM Interconnection, which runs the grid in Pennsylvania, Delaware, New Jersey and part or all of 10 other states, released results of its latest capacity auction Wednesday. Auction prices reached a record high for the third auction in a row, but remained close to the last auction’s prices, thanks to a price cap of around $333 per megawatt-day negotiated by Pennsylvania Gov. Josh Shapiro to mitigate skyrocketing costs for consumers.
For the first time across the entire grid region, PJM was unable to secure enough promised power to reach its goal, risking blackouts should electricity use outpace supply.
“It’s a little bit scary,” said Abe Silverman, an energy consultant and research scholar at Johns Hopkins University.
“It is a long-term structural deficit where the amount of power — generation supplies, power plants — is way less than the amount of electricity we’re trying to provide to customers, and that is particularly driven by the data centers,” he added.
The organization uses capacity auctions to secure commitments from power producers and large power users to generate or conserve enough electricity to meet demand on the hottest and coldest days in the future, when people use more electricity. This month’s auction determines capacity for the year starting in June 2027.
Although PJM sought a 20% buffer, power commitments totaling just 14.8% over projected peak demand cleared the auction.
PJM’s projection of peak electricity demand for the year starting June 2027 was 5,250 megawatts higher than its projection for the prior year. Nearly all of this increase is attributable to data centers, PJM said.
“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,” said Stu Bresler, PJM’s executive vice president for market services and strategy, in a statement.
An independent PJM market watchdog, Monitoring Analytics, said rising power demand due to data centers was the “primary reason” capacity prices spiked during last year’s auction, too.
A worsening risk of blackouts in the mid-Atlantic region
PJM’s shortfall in guaranteed electricity generation for the year starting June 2027 is roughly equivalent to the electricity used by a city the size of Philadelphia, Silverman said.
“It’s a significant miss,” he said.
Silverman said PJM aims to secure enough power so that this sort of partial grid failure happens no more than once every ten years. With PJM unable to reach this reliability threshold during the most recent capacity auction, the region will be at an “elevated risk” for blackouts starting June 2027, he said.
“It’s an immediate reliability concern, but it’s not in a reliability crisis,” Silverman said.
The projected demand from data centers, however, may not pan out, said Seth Blumsack, a professor of energy policy and economics at Penn State University.
“They could run into delays, they could get canceled — all sorts of stuff could happen,” Blumsack said.
PJM could also request that energy users voluntarily curtail their use or mandate usage reductions, said Hannah Wiseman, a professor of energy law at Penn State University.
“A failure to meet the reserve margin doesn’t mean there will definitely be a blackout,” Wiseman said.
