AI-Driven Power Demand Surge Strains America's Largest Grid, Threatening Price Hikes and Blackouts

AI is eating up Pennsylvania's power, governor threatens to pull state from the grid -- new plants aren't being built fast enough to keep up with demand

Spiking demand is sending energy bills skyrocketing, while the governor threatens to pull the state from the grid. Artificial intelligence and the hardware that powers it, is at the heart of a fallout in Pennsylvania, where electricity prices have risen dramatically for wholesalers and consumers due to surging demand. The governor is now threatening to abandon the state's grid energy provider, PJM Interconnection, via Reuters. He's demanding that PJM increase energy capacity through the acceleration of new energy plant construction and approval. Following the launch of ChatGPT in 2023 and the explosion of competitor tools and chatbots in the months that followed, the regional transmission organization, PJM, saw a surge in demand for power as major tech companies scoured the country looking for spare grid capacity to run AI and build new data centers to support them. AI can demand a lot of power, so much so that Elon Musk is shipping an entire power plant to the US. This couldn't have come at a worse time, as in 2022, PJM had paused new power plant connections after it faced a huge influx of applications for new renewable projects, which required more engineering oversight before they could be connected to the grid. Although PJM claims that this hasn't led to a shortfall in supply, it has meant the grid hasn't expanded like it was expected to. Local opposition to the construction of some of the plants that have been approved has further compounded the issue. PJM's power management covers 13 states in total, including Virginia, which plays host to the so-called "Data Center Alley," a small region with the highest density of data centers in the world. It's the huge demand from that region and elsewhere in its coverage that PJM blames on its inability to supply power at affordable rates. Last year's annual capacity auction for energy capacity saw prices increase by over 800%, and with an impending auction for this year, those prices are expected to rise again. It's lead to a projected 20% rise in consumer energy prices across Pennsylvania and other PJM-covered territories this summer. Legislators aren't happy. "We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM," Pennsylvania Governor Josh Shapiro told Reuters. "I think they've taken some steps in that direction which is really encouraging to me and we're going to continue to work at it." PJM's response to the crisis has been to cap energy prices at $325 per megawatt-day, and it has fast-tracked connections of more than 50 power projects that should help augment its existing capacity, but many of those won't come online until the early 2030s. Despite these aims, PJM estimates that the demand issue may only worsen. By 2030, it expects to require an additional 32 gigawatts of power capacity to meet growing demand, with over 30 of these allocated to new data center projects. In the near term, with concerns about blackouts, the Trump administration has also ordered two oil and gas plants that were planned to close in May, to remain open through the summer.

Shocked by Your Electric Bill? AI-Fueled Shortage to Hike Prices 20% in These 13 States

Electricity prices are rising nationwide as tech companies scramble to bring more data centers online to fuel their AI ambitions. The nation's largest grid company, PJM Interconnection, plans to increase prices by more than 20% this summer, citing low supply as electricity demand from data centers spikes, Reuters reports. The cost of electricity has risen sharply nationwide since 2020, and continues to outpace inflation, according to the US Energy Information Administration. PJM operates in 13 states in the Northeastern US, including parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia, according to its website. The situation is so bad in Pennsylvania, where businesses are seeing a 29% increase, that its governor is threatening to abandon the service if it cannot bring prices down. PJM CEO Manu Asthana announced in April that he will step down at the end of 2025. When ChatGPT's popularity exploded in 2023, tech giants began placing enormous bids in annual power grid auctions to secure capacity for their data centers. In PJM's 2024 auction, the going rate for power plants jumped 800%, from $269.92 per megawatt-day, compared to $28.92 the year before. The "proliferation of new data centers, [is creating] major pockets of significant load growth," PJM wrote in its 2024 annual report. "Prices will remain high as long as demand growth is outstripping supply-this is a basic economic policy," PJM spokesman Jeffrey Shields tells Reuters. "Right now, we need every megawatt we can get." PJM says external factors are hampering its ability to meet demand. It blames the abrupt closure of fossil-fuel powered plants and says it's unable to quickly process some 2,000 applications from renewable power projects to make up for it. Overloaded, PJM paused new applications in 2022, exacerbating the shortage. "We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM," Pennsylvania Governor Josh Shapiro tells Reuters. "I think they've taken some steps in that direction which is really encouraging to me and we're going to continue to work at it." Chatbots consume roughly 10 times the amount of energy as a typical Google search. Even little things like saying "please" and "thank you" to ChatGPT are costing OpenAI "tens of millions of dollars" in electricity bills, CEO Sam Altman says. ChatGPT's daily consumption in 2024 matched that of 180,000 households. Forbes reports. Its user base has continued growing rapidly since then. It's not just OpenAI -- all Big Tech firms are scrambling to secure more grid power to fuel their AI ambitions. Google saw a 27% annual increase in electricity in its 2025 environmental review, along with a 51% increase in carbon emissions since 2019, The Guardian reports. It also used enough water to irrigate 54 golf courses, primarily to cool data center. This was already reaching unstainable levels before ChatGPT. "We're now at a stage where AI and data centers that power it are competing directly with humans for land and water and energy," a Harvard School of Public Health data scientist said at the DC Climate Week conference in May, according to ESG Dive. Nuclear power has emerged as a potential solution, but as we're seeing with PJM, the transition will take time and energy bills could start to look a little frightening in the interim. Microsoft is reviving Pennsylvania's Three Mile Island to power its AI products, such as Copilot. Amazon and Google have also signed agreements for nuclear projects, Fox Business reports.

America's largest power grid is struggling to meet demand from AI

HARRISBURG, Pennsylvania July 9 (Reuters) - America's largest power grid is under strain as data centers and AI chatbots consume power faster than new plants can be built. Electricity bills are projected to surge by more than 20% this summer in some parts of PJM Interconnection's territory, which covers 13 states - from Illinois to Tennessee, Virginia to New Jersey - serving 67 million customers in a region with the most data centers in the world. The governor of Pennsylvania is threatening to abandon the grid, the CEO has announced his departure and the chair of PJM's board of managers and another board member were voted out. The upheaval at PJM started a year ago with a more than 800% jump in prices at its annual capacity auction. Rising prices out of the auction trickle down to everyday people's power bills. Now PJM is barreling towards its next capacity auction on Wednesday, when prices may rise even further. The auction aims to avoid blackouts by establishing a rate at which generators agree to pump out electricity during the most extreme periods of stress on the grid, usually the hottest and coldest days of the year. High prices out of the auction should spur new power plant construction, but that hasn't happened quickly enough in PJM's region as aging power plants continue to retire and data center demand explodes. PJM has made the situation worse by delaying auctions and pausing the application process for new plants, according to more than a dozen power developers, regulators, energy attorneys and other experts interviewed by Reuters. "We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM," Pennsylvania Governor Josh Shapiro told Reuters in an interview. "I think they've taken some steps in that direction which is really encouraging to me and we're going to continue to work at it." PJM says the supply and demand crunch has been caused largely by factors outside of its control, including state energy policies that closed fossil-fuel fired power plants prematurely and data center growth in "Data Center Alley" in Northern Virginia and other burgeoning hubs in the Mid-Atlantic. "Prices will remain high as long as demand growth is outstripping supply - this is a basic economic policy," said PJM spokesman Jeffrey Shields. "Right now, we need every megawatt we can get." New projects totaling about 46 gigawatts - enough capacity to power 40 million homes - have been cleared in recent years, "but are not getting built because of local opposition, supply chain backups or financing issues that have nothing to do with PJM," Shields said. PJM has lost more than 5.6 net gigawatts in the last decade as power plants shut faster than new ones enter service, according to a PJM presentation filed with regulators this year. PJM added about 5 gigawatts of power-generating capacity in 2024, fewer than smaller grids in California and Texas. Meanwhile, data center demand is surging. By 2030, PJM expects 32 gigawatts of increased demand on its system, with all but two of those gigawatts coming from data centers. POWER HUNGRY CHATBOTS Over the past few years, a confluence of events have resulted in skyrocketing power capacity rates at PJM. Among those, auctions were repeatedly delayed as regulators mulled multiple rule changes at PJM, giving developers less time to plan for power plant construction. In 2022, PJM stopped processing new applications for power plant connections after it was overloaded with more than 2,000 requests from renewable power projects, each of which required engineering studies before they could connect to the grid. PJM says its interconnection queue has not led to the supply shortfall. Then, in 2023, ChatGPT became a household name and demand exploded. Tech giants started scouring the U.S. power grid for capacity, contributing to the spike in auction prices in 2024. Consumer advocates from Maryland, New Jersey and other states filed complaints with federal regulators, asking for a re-do of the auction. Shapiro has made repeated threats to remove Pennsylvania, the biggest electricity exporting state and the "P" in PJM, from the grid if it didn't bring costs down. Asked in June if leaving PJM is still on the table, the governor told Reuters: "It is." During the fallout, PJM's CEO Manu Asthana announced in April that he would leave his post at the end of the year, citing a family move to Texas. Asthana did not respond to requests for comment. Citing fears of blackouts, the Trump administration in May ordered two oil and natural gas power plants in Pennsylvania, both scheduled to retire in May, to continue operating through the summer. CONNECTION DELAYS In response to the backlash, PJM has made multiple reforms, including capping prices at $325 per megawatt-day and holding auctions every six months instead of annually, Shields said. PJM also moved to fast-track connections of 51 power projects to its system, but many of those are still expected to take until 2030 or 2031 to come online. Among them is Constellation Energy's Three Mile Island nuclear plant, rechristened Crane Clean Energy Center, which is being restarted under contract from Microsoft. Even under PJM's expedited plan, the plant isn't expected to start up until at least 2027. Despite the reforms, PJM isn't processing new applications fast enough, said Joshua Macey, an energy expert and associate professor at Yale Law School. "It's pointless if they haven't fixed the interconnection queue," he said. Reporting by Laila Kearney. Editing by Liz Hampton and Michael Learmonth Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial IntelligenceBoardsRegulatory OversightGovernanceGrid & Infrastructure

Analysis-America's Largest Power Grid Is Struggling to Meet Demand From AI

HARRISBURG, Pennsylvania (Reuters) -America's largest power grid is under strain as data centers and AI chatbots consume power faster than new plants can be built. Electricity bills are projected to surge by more than 20% this summer in some parts of PJM Interconnection's territory, which covers 13 states - from Illinois to Tennessee, Virginia to New Jersey - serving 67 million customers in a region with the most data centers in the world. The governor of Pennsylvania is threatening to abandon the grid, the CEO has announced his departure and the chair of PJM's board of managers and another board member were voted out. The upheaval at PJM started a year ago with a more than 800% jump in prices at its annual capacity auction. Rising prices out of the auction trickle down to everyday people's power bills. Now PJM is barreling towards its next capacity auction on Wednesday, when prices may rise even further. The auction aims to avoid blackouts by establishing a rate at which generators agree to pump out electricity during the most extreme periods of stress on the grid, usually the hottest and coldest days of the year. High prices out of the auction should spur new power plant construction, but that hasn't happened quickly enough in PJM's region as aging power plants continue to retire and data center demand explodes. PJM has made the situation worse by delaying auctions and pausing the application process for new plants, according to more than a dozen power developers, regulators, energy attorneys and other experts interviewed by Reuters. "We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM," Pennsylvania Governor Josh Shapiro told Reuters in an interview. "I think they've taken some steps in that direction which is really encouraging to me and we're going to continue to work at it." PJM says the supply and demand crunch has been caused largely by factors outside of its control, including state energy policies that closed fossil-fuel fired power plants prematurely and data center growth in "Data Center Alley" in Northern Virginia and other burgeoning hubs in the Mid-Atlantic. "Prices will remain high as long as demand growth is outstripping supply - this is a basic economic policy," said PJM spokesman Jeffrey Shields. "Right now, we need every megawatt we can get." New projects totaling about 46 gigawatts - enough capacity to power 40 million homes - have been cleared in recent years, "but are not getting built because of local opposition, supply chain backups or financing issues that have nothing to do with PJM," Shields said. PJM has lost more than 5.6 net gigawatts in the last decade as power plants shut faster than new ones enter service, according to a PJM presentation filed with regulators this year. PJM added about 5 gigawatts of power-generating capacity in 2024, fewer than smaller grids in California and Texas. Meanwhile, data center demand is surging. By 2030, PJM expects 32 gigawatts of increased demand on its system, with all but two of those gigawatts coming from data centers. POWER HUNGRY CHATBOTS Over the past few years, a confluence of events have resulted in skyrocketing power capacity rates at PJM. Among those, auctions were repeatedly delayed as regulators mulled multiple rule changes at PJM, giving developers less time to plan for power plant construction. In 2022, PJM stopped processing new applications for power plant connections after it was overloaded with more than 2,000 requests from renewable power projects, each of which required engineering studies before they could connect to the grid. PJM says its interconnection queue has not led to the supply shortfall. Then, in 2023, ChatGPT became a household name and demand exploded. Tech giants started scouring the U.S. power grid for capacity, contributing to the spike in auction prices in 2024. Consumer advocates from Maryland, New Jersey and other states filed complaints with federal regulators, asking for a re-do of the auction. Shapiro has made repeated threats to remove Pennsylvania, the biggest electricity exporting state and the "P" in PJM, from the grid if it didn't bring costs down. Asked in June if leaving PJM is still on the table, the governor told Reuters: "It is." During the fallout, PJM's CEO Manu Asthana announced in April that he would leave his post at the end of the year, citing a family move to Texas. Asthana did not respond to requests for comment. Citing fears of blackouts, the Trump administration in May ordered two oil and natural gas power plants in Pennsylvania, both scheduled to retire in May, to continue operating through the summer. CONNECTION DELAYS In response to the backlash, PJM has made multiple reforms, including capping prices at $325 per megawatt-day and holding auctions every six months instead of annually, Shields said. PJM also moved to fast-track connections of 51 power projects to its system, but many of those are still expected to take until 2030 or 2031 to come online. Among them is Constellation Energy's Three Mile Island nuclear plant, rechristened Crane Clean Energy Center, which is being restarted under contract from Microsoft. Even under PJM's expedited plan, the plant isn't expected to start up until at least 2027. Despite the reforms, PJM isn't processing new applications fast enough, said Joshua Macey, an energy expert and associate professor at Yale Law School. "It's pointless if they haven't fixed the interconnection queue," he said. (Reporting by Laila Kearney. Editing by Liz Hampton and Michael Learmonth)

America's largest power grid is struggling to meet demand from AI

America's largest power grid is under strain as data centres and AI chatbots consume power faster than new plants can be built. Electricity bills are projected to surge by more than 20% this summer in some parts of PJM Interconnection's territory, which covers 13 states - from Illinois to Tennessee, Virginia to New Jersey - serving 67 million customers in a region with the most data centres in the world. The governor of Pennsylvania is threatening to abandon the grid, the CEO has announced his departure and the chair of PJM's board of managers and another board member were voted out. The upheaval at PJM started a year ago with a more than 800% jump in prices at its annual capacity auction. Rising prices out of the auction trickle down to everyday people's power bills. Now PJM is barreling towards its next capacity auction on Wednesday, when prices may rise even further. The auction aims to avoid blackouts by establishing a rate at which generators agree to pump out electricity during the most extreme periods of stress on the grid, usually the hottest and coldest days of the year. High prices out of the auction should spur new power plant construction, but that hasn't happened quickly enough in PJM's region as aging power plants continue to retire and data center demand explodes. PJM has made the situation worse by delaying auctions and pausing the application process for new plants, according to more than a dozen power developers, regulators, energy attorneys and other experts interviewed by Reuters. "We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM," Pennsylvania Governor Josh Shapiro told Reuters in an interview. "I think they've taken some steps in that direction which is really encouraging to me and we're going to continue to work at it." PJM says the supply and demand crunch has been caused largely by factors outside of its control, including state energy policies that closed fossil-fuel fired power plants prematurely and data center growth in "Data Center Alley" in Northern Virginia and other burgeoning hubs in the Mid-Atlantic. "Prices will remain high as long as demand growth is outstripping supply - this is a basic economic policy," said PJM spokesman Jeffrey Shields. "Right now, we need every megawatt we can get." New projects totaling about 46 gigawatts - enough capacity to power 40 million homes - have been cleared in recent years, "but are not getting built because of local opposition, supply chain backups or financing issues that have nothing to do with PJM," Shields said. PJM has lost more than 5.6 net gigawatts in the last decade as power plants shut faster than new ones enter service, according to a PJM presentation filed with regulators this year. PJM added about 5 gigawatts of power-generating capacity in 2024, fewer than smaller grids in California and Texas. Meanwhile, data center demand is surging. By 2030, PJM expects 32 gigawatts of increased demand on its system, with all but two of those gigawatts coming from data centers. Over the past few years, a confluence of events have resulted in skyrocketing power capacity rates at PJM. Among those, auctions were repeatedly delayed as regulators mulled multiple rule changes at PJM, giving developers less time to plan for power plant construction. In 2022, PJM stopped processing new applications for power plant connections after it was overloaded with more than 2,000 requests from renewable power projects, each of which required engineering studies before they could connect to the grid. PJM says its interconnection queue has not led to the supply shortfall. Then, in 2023, ChatGPT became a household name and demand exploded. Tech giants started scouring the U.S. power grid for capacity, contributing to the spike in auction prices in 2024. Consumer advocates from Maryland, New Jersey and other states filed complaints with federal regulators, asking for a re-do of the auction. Shapiro has made repeated threats to remove Pennsylvania, the biggest electricity exporting state and the "P" in PJM, from the grid if it didn't bring costs down. Asked in June if leaving PJM is still on the table, the governor told Reuters: "It is." During the fallout, PJM's CEO Manu Asthana announced in April that he would leave his post at the end of the year, citing a family move to Texas. Asthana did not respond to requests for comment. Citing fears of blackouts, the Trump administration in May ordered two oil and natural gas power plants in Pennsylvania, both scheduled to retire in May, to continue operating through the summer. In response to the backlash, PJM has made multiple reforms, including capping prices at $325 per megawatt-day and holding auctions every six months instead of annually, Shields said. PJM also moved to fast-track connections of 51 power projects to its system, but many of those are still expected to take until 2030 or 2031 to come online. Among them is Constellation Energy's Three Mile Island nuclear plant, rechristened Crane Clean Energy Center, which is being restarted under contract from Microsoft. Even under PJM's expedited plan, the plant isn't expected to start up until at least 2027. Despite the reforms, PJM isn't processing new applications fast enough, said Joshua Macey, an energy expert and associate professor at Yale Law School. "It's pointless if they haven't fixed the interconnection queue," he said.