(Oil Price)– Demand for electricity from data centers handling AI technology drove the price of the largest electricity auction in the United States to a new record, exceeding last year’s all-time high by 22%.
Organized by PJM Interconnection, the capacity auction covers 20% of American consumers and aims to ensure that there is enough generation to respond to spikes in demand, averting blackouts. At this year’s edition of the auction, the price was $329.17 per megawatt-day.
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.”
Spikes in demand are becoming the norm with the proliferation of data centers, with the highest concentration of these facilities in states that are part of the territory served by PJM Interconnection, including “Data Center Alley” in Virginia, Reuters noted in a report on the news.
Data centers are being built faster than new generation capacity, which is one reason for the rise in electricity prices. Another, until recently, was the fast retirement of baseload capacity such as coal power plants, and their replacement with non-dispatchable capacity in the form of wind and solar.
Now, data center operators are in a rush to secure long-term electricity supply, notably from nuclear and gas-fired generators in addition to their commitments to buy wind and solar. This has prompted an equal rush to build generation capacity in response to the higher demand, but there is a time lag between the two, which is affecting prices.
Over the past 12 months, overall electricity prices in the U.S. rose by 5.6%, with consumer prices specifically rising by 2.7%.
By Irina Slav for Oilprice.com
