Data Center Load Drives Up PJM's Capacity Prices, Prompting New Rules
Data center load is significantly impacting PJM's capacity auctions, with recent and forecast loads from the center driving up revenue and causing double-digit electric bill increases for some utility customers. The surge in capacity prices has raised concerns and prompted proposals for new rules.
In PJM's last two July capacity auctions, existing and forecast data center load resulted in $16.6 billion in capacity auction revenue, nearly half of the total revenue. This growth in center load is the primary reason behind recent and expected capacity market conditions, including high prices.
Monitoring Analytics has highlighted the issue, attributing recent capacity market results to large load additions from the center. The company recommended in June that new centers should supply their own generation instead of relying on existing power supplies. NRG Energy has also proposed to PJM to improve load forecasting for centers and other large loads, as far back as 2024.
PJM is addressing these concerns. It proposes to bolster its load forecasting for centers and other large loads, and to require large load customers to post financial security for the capacity they plan to buy in an auction. The 'extreme uncertainty' in center load forecasts has raised questions about the validity of clearing a capacity auction based on those forecasts. PJM is currently in a fast-track stakeholder process to develop new rules for adding large centers to its system, aiming to file a proposal before the end of the year at FERC.
PJM's capacity auctions, designed to ensure adequate power supplies for future needs, are now significantly influenced by center load. With the next auction scheduled for early December 2026, PJM is working to address the challenges posed by center load growth and improve the reliability and fairness of its capacity market.
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