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.
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