AI demand drives up electricity supply costs in largest US market to record high
Blow for Trump’s vow of lower prices as grid operator PJM forced to pay 10% more to meet soaring energy needs
 The auction results are a blow to US President Donald Trump’s pledge to slash energy prices by 50 per cent © AFP or licensors
current progress 79%
Martha Muir in New York
Published15 minutes ago
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The cost of providing electricity in America’s largest power market will hit a record high due to soaring demand from artificial intelligence data centres and delays in building new power plants, raising energy prices for consumers.
Grid operator PJM, which covers 13 states and Washington DC, said on Tuesday it procured energy supplies for $329.17 per megawatt day, a 22 per cent increase compared with the previous year. The organisation will pay power producers $16.1bn to meet its energy needs from June 2026 to May 2027, a 10 per cent increase compared with the previous year.
The operator said it expects a 1-5 per cent rise for customers in their energy bills, depending on how utilities and states passed on costs.
“It’s unpleasant for ratepayers,” said Timothy Fox, a managing director at ClearView Energy Partners. “Higher auction prices will result in higher bills for customers.”
PJM sets prices at an annual capacity auction where power suppliers bid to provide the region’s projected demand.
Earlier this year PJM and some state governments took steps to try to keep power prices lower after last year’s capacity auction delivered a $269.92 per MW-day price — a more than 800 per cent increase from 2023.
In January, under pressure from a complaint that Pennsylvania governor Josh Shapiro filed with the Federal Energy Regulatory Commission, PJM agreed to a “price collar” — a floor and ceiling on prices set at $175 per MW-day and $325 per MW-day for the next two years.
However, the latest auction results are a blow to US President Donald Trump’s pledge to slash energy prices by 50 per cent. Data published this month by the Labor department showed that electricity prices rose 5.6 per cent over the past year. More broadly, consumer prices increased by 2.7 per cent.
PJM is a regional transmission organisation, which manages the wholesale electricity market and the reliability of the grid. It includes “data centre alley”, a region in Virginia which hosts the world’s largest concentration of data centres, making it a test case for how the growth of the sector will affect power prices.
Grid operators and politicians face an escalating dilemma of how to meet booming power demand from the data centres that train and deploy AI, while keeping utility bills from spiralling.
Utilities are spending record sums on building out their generating and transmission infrastructure, some of which is covered directly by big tech companies including Amazon, Microsoft and Meta.
As well as booming demand from data centres, the energy crunch is being fuelled by long interconnection queues and the retiring of ageing power plants. Last year, PJM said 12-30 per cent of its installed capacity could be retired by 2030. |
