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Data Centres: Boom and Backlash
4AUG

PJM's backstop auction opens at $555

3 min read
10:53UTC

PJM wants a one-time reliability auction capped at $555 per MW-day to close a 6,831 MW gap for 2028/29, a cap set well above the $325 ceiling on its base auction.

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Key takeaway

PJM would pay up to $555 per MW-day to backfill a 6,831 MW capacity gap for 2028/29.

PJM Interconnection, the largest US regional transmission organisation, wants a one-time reliability backstop auction at a price cap of $555 per MW-day of unforced capacity, running from 30 September to 21 October 2026 with results between 22 October and 2 December 1. Utility Dive reported that the filing reached FERC on Friday 31 July; PJM's own newsroom lists no release for that date 2. That $555 cap sits against the $325 per MW-day ceiling on the base auction, itself 2.5 per cent below the $333.44 cap for 2027/28 3.

The auction is meant to close a 6,831 MW gap against PJM's reliability requirement, the cushion of contracted capacity every RTO must hold above its expected worst hour, for the 2028/29 delivery year. That shortfall was recorded when the year's base auction cleared on 14 July 4. A separate 6,623 MW shortfall belongs to the 2027/28 delivery year and a different auction, and the two should not be run together.

PJM attributes the gap to large-load growth, projecting 70 GW of new demand by 2038 against roughly 15 GW of generation retired since 2022 5. Utility Dive put the cost of the new capacity at up to $20bn through 2027 6. That estimate appears in no PJM document: the 27 July board decision sets out the mechanism and attaches no figure to it 7.

A capacity market is a mechanism for paying generators to exist rather than to run, and a backstop auction at a 71 per cent premium to the base cap is what happens when that mechanism is asked for volume on short notice. The bill reaches a household in Ohio or New Jersey through the wholesale price, for capacity procured to serve campuses that have not yet connected. Those are the same ratepayers in whose name county moratoria are argued, which is the awkward part: refusing a campus locally does nothing about the regional cost of the ones already approved.

Deep Analysis

In plain English

PJM runs the electricity market for 13 US states and Washington DC, including much of the mid-Atlantic. It has worked out that by 2028, it will not have enough power generation to meet demand, partly because of data centres, so it is holding a special one-off auction to buy extra capacity at a higher price than normal. Whoever wins that auction gets paid more to guarantee they can supply power when needed, and that extra cost eventually shows up on electricity bills.

Deep Analysis
Root Causes

PJM's own filings and the wider six-RTO filing round attribute the shortfall directly to data-centre demand growth, projecting 70 GW of new large-load demand by 2038 against roughly 15 GW of generation retired since 2022, a supply-demand gap that ordinary capacity-market timelines cannot close before the 2028/29 delivery year.

A second structural cause is that new generation, particularly gas and nuclear, takes years to permit and build, while data-centre load can be committed and connected far faster, so PJM's shortfall is a timing mismatch between how quickly demand can grow and how slowly supply can respond.

What could happen next?
  • Consequence

    A $555/MW-day backstop price cap, well above the $325 base, signals PJM expects to pay a premium to secure capacity on this compressed timeline.

  • Risk

    PJM's forthcoming Interim Resource Adequacy Service proposal could allow curtailment of new large loads coming online after 1 June 2027, shifting reliability risk onto future data-centre projects.

Sources:Utility Dive·PJM Interconnection·PJM Interconnection
Mentions:PJM Interconnection →New Jersey →California →FERC →Washington →Utility Dive →
First Reported In

Update #12 · Ofgem prices the grid queue by the megawatt

Utility Dive· 4 Aug 2026
Read original →
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