On-prem

BYO power for AI bit barns may be the best way to ease the problem, says energy watchdog

Prices in the United States' largest wholesale power market have nearly doubled in the past year thanks to demand from datacenters. And an independent watchdog predicts things will only get worse without some serious changes.

The PJM Interconnection serves all or parts of 13 states and the District of Columbia in the eastern US, including Northern Virginia, that’s got the densest cluster of datacenters in the world. The surge in wholesale power costs across PJM was outlined on Thursday by Monitoring Analytics, a firm that serves as the official market monitor for the Interconnection, in its Q1 2026 state of the market report. 

According to the report, the total cost per megawatt-hour (MWh) of wholesale power rose from $77.78 in the first three months of 2025 to $136.53 in the same period this year, an increase of 75.5 percent year over year. Monitoring Analytics didn’t mince words in its report, identifying datacenter load growth as the main driver of recent capacity market conditions and rising prices in PJM. 

“Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices,” the report reads. “But for data center growth, both actual and forecast, the capacity market would not have seen the same tight supply demand conditions.” 

As for what might come next, the report doesn’t ignore the likely outcome of the current situation, either. 

“The price impacts on customers have been very large and are not reversible,” the report states, but the bad news doesn’t stop there. “The price impacts will be even larger in the near term unless the issues associated with data center load are addressed in a timely manner.” 

Based on the rest of the report, a timely resolution to the datacenter load issue shouldn’t be expected, at least not in a way that’ll benefit locals. 

For starters, Monitoring Analytics found that - like pretty much everywhere right now - power grids aren’t ready for the datacenter boom. PJM has taken steps to upgrade its power commitment and dispatch software to better operate its grid, but planned upgrades have been delayed multiple times with no planned implementation date on the calendar, per the report. 

“The current supply of capacity in PJM is not adequate to meet the demand from large data center loads and will not be adequate in the foreseeable future,” Monitoring Analytics asserted. 

Current plan: Shift the risk to everyone else

PJM has been planning a one-time backstop auction to procure new power generation for datacenter projects in the region at the request of the Trump administration and the governors of the states it serves, but Monitoring Analytics isn’t convinced the Interconnection is going about the process in the right way. 

The currently proposed auction structure, says the watchdog, would “generally shift significant risk to other PJM customers,” which is a temptation the group says “should be resisted.” 

“Other PJM customers, whether residential, commercial or industrial, should not be treated as a free source of insurance, or collateral, or financing for data centers,” the report continued. “Yet that is what most of the proposals related to a backstop auction actually do.” 

As for what PJM ought to be doing, you probably won’t need to rack your brain to figure that out: Monitoring Analytics says datacenters ought to be required to bring their own power. Such a rule, says the group, should include fast-track options for interconnection for BYOP datacenters, and otherwise a queue that would only connect datacenters when there is adequate capacity to serve them. 

“This broad bring-your-own new generation solution to the issues created by the addition of unprecedented amounts of large data center load does not require a continued massive wealth transfer through ongoing shortage pricing,” the analysts argue. 

When asked for its response to the problems raised by the Monitoring Analytics report, PJM told us that it was fully aware of the impact of electricity cost increases on its customers. 

“PJM is working with states and member companies to address these consumer impacts on multiple fronts, including extending market caps put in place since the 2025/2026 auction, authorizing multiple transmission expansion projects that are now in development, and reforming wholesale electricity market rules,” the Interconnection told us. Monitoring Analytics didn’t respond to questions.

Americans have become increasingly hostile to new datacenter projects driven by the AI boom, with 71 percent of respondents to a Gallup survey saying they opposed DC projects in their neighborhoods. Projects in multiple states have been abandoned recently due to pushback from locals, many of whom are concerned not only with electrical price increases, noise, and eyesores, but environmental harm as well. ®