What happens when the world’s fastest growing digital infrastructure meets one of America’s slowest moving electrical grids? The answer for Mid-atlantic residents can be found in record breaking electricity auctions and infrastructure spending in the form of billions of dollars and it’s taking a toll on their wallets.
The PJM Interconnection, which provides electricity for 65 million people in the District of Columbia and 13 states, has seen the cost of capacity increase by over 1,000 percent in only two years. The most recently completed auction settled contracts for the future production of 134,479 megawatts of electricity, falling short of what is necessary for the PJM by 6,600 megawatts, or capacity for four and a half million households. In no uncertain terms, an imminent COO for the PJM himself, Stu Bresler, highlighted, “This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply.”
The rush has as its backbone the hyperscale data center boom. The next-generation data centers, with capacities to handle loads over 100 MW, are designed to support AI computing, cloud computing, online video, and bitcoin computing. These next-generation data centers are characterized by rack density, cooling that constitutes as much as 40% of the energy consumption in the center, and feeds with redundant power. The massive data center campus can sprawl over an area of acres in the hundreds and can devour as much power as a small city. The Lawrence Berkeley National Laboratory has forecasted that in 2030, somewhere between 325 and 580 TWh of power could be consumed by the U.S. data center market, or 6.7% to 12% of the country’s total.
In fact, the problem that engineers face is so urgent that in as little as nine to twelve months, one can erect a data center, and several years later, the work of generating and transmitting within the larger-scale projects. Within just the past two years, PJM has put forward plans to spend over $11 billion, and then follows possible additional spending of $12 billion to meet future demands, which is generated largely through the development of data centers. As quoted by Maryland People’s Counsel, PJM attorney David Lapp, “The majority of those costs will be paid for by all customers even though the costs almost entirely are the result of data center development.”
Quite recently, a report released by the Union of Concerned Scientists revealed the initiation of more than 150 projects related to local transmission in the PJM states exclusively for the purpose of accommodating data centers between the years 2022 and 2024, cumulatively valuing at $4.36 billion in the year 2024. Nearly 95% of this cost was effectively externalized across all the electricity-consuming individuals and not the data center owners as a whole. This happens because of a loophole in the law, wherein high-voltage interconnections of individual consumers are categorized as “local transmission” according to the rules of the FERC.
On the contrary, the federal government is pushing for more aggressive strategies. U.S. Energy Secretary Chris Wright recently urged FERC to issue their rules by April 30, 2026, for more efficient interconnections for large loads. The vision is for a better alignment of requirements for AI and national security as a global competitor in terms of consumer affordability and reliability. Load flexibility, which would require large users to decrease their levels of consumption under peak stress conditions, has been proposed as a method for avoiding overinvestment in new capacity.
Grid bottlenecks extend far beyond electrical infrastructure issues. Currently, more than 143 GW of projects await linkage within the interconnection queue of PJM, with 95% of these projects being renewables or storage projects that have the capacity to serve 115 million households. Yet their progress has come to a grinding halt, and there appears to be no chance of them being taken up before 2026 for newly filed projects. This is an obvious point of concern for cost and climate policy, as they provide priority to projects involving fossil fuels. Maryland PIRG’s Emily Scarr highlights: “PJM needs to reform its broken interconnection process and ensure that the decisions it makes align with the interests of the public, not utility and incumbent power generator interests.”
Engineering solutions are now manifesting at the project level. In the more limited markets, say the Northern Virginia region, the focus is turning to resources that can generate power on site, battery storage options, and grid-interactive substations. Projects like the power plant that the energy company Chevron is constructing, for example, in West Texas to serve data centers illustrate the manner by which the nature and scope of the infrastructure project activities will begin to stretch upstream and begin to mitigate the overall grid load. They could, after all, help to reduce the overall grid load, though this process adds tens of millions to the project time prior to construction. Examples of policy are also evolving.
The state of Ohio, for example, now utilizes something called “demand ratchets” and credit guarantees, meaning that large consumers are to now actually pay for capacity even during reduced demand. Rate structures reflecting the POWER Act, meanwhile, now include the state’s demand above 20 megawatts, and those demands must now come with 10-year contracts, reflecting direct cost allocation with the goal towards ending the subsidies that pay for the energy use by large consumers, rather than paying residential and small businesses themselves.
Now, the mid-Atlantic’s implications, to this point, are rather simple: even with the absence, really, of the addition to the power supply, improvements to price allocation and, therefore, increased low-carbon power resources, the conflict between hyperscaling and the regional grid constraints will ensure, at the very least, that prices will keep rising. According to the petition filed before FERC by Governor Josh Shapiro, “The PJM region is facing an affordability and reliability crisis. The problem is not new, but it is growing worse.”
