The AI boom leads to record-breaking costs for US grids, and seeks new plants

Businesses and households provided by the largest U.S. power grid will spend a record $16.1 billion to secure electricity supply. This is the result of prompting immediate calls from utilities and energy groups to build more generations amid the AI frenzy.

Payments to generators and other suppliers surpassed last year’s record $14.7 billion, according to PJM Interconnection LLC. This will increase the capacity price per megawatt from $269.92 to $329.17 daily.

The AI boom has driven the biggest surge in electricity demand in decades, leading to rising utility bills and disagreements about which power resources are best suited to meet those needs. The electricity industry is coalescing around new plants as a way to mitigate potential shortages and make money, but there is also the risk of adding consumer costs when politicians are sensitive to energy inflation.

“We’re literally telling us we’re not beyond generations,” said Sean Kelly, a former power trader and CEO of power forecasting company Amperon Holdings Inc.

Shares of independent electricity producers Constellation Energy Corp., Talen Energy Corp., NRG Energy Inc. and Vistra Corp. were acquired in late trading in New York on Tuesday.

According to Vice President Stu Bresler, the results of the PJM auction have added 1.5% to 5% to consumer electricity bills, as they have been supplying electricity for a year since June 2026.

“Customers are unhappy with the high energy costs and I share their frustration,” Calvin Butler, CEO of utility owner Exelon Corp., said in an emailed statement.

Capacity auctions affect customers compound interest as reduced demand, reduced supply and aging infrastructure increases costs, Butler said. To address the shortage, Exelon proposes building power plants and pass those costs directly to the rate payer, rather than buying supply only from others at capacity auctions.

Data Center Impact

David Rapp, a lawyer for the Marylanders, pointed to the data center as the cause of another record auction.

In a statement Tuesday, Rapp said many Maryland residents expect a slight increase in bills, but some may see a slight decline.

PJM did not specify how much of the expected increase in demand is tied to AI, but Bresler said in a media briefing Tuesday that “the majority of the increase in demand you saw is a big load and data center addition.”

After the auction, PJM’s contracted power mix will include 45% natural gas, 21% nuclear, 22% coal, 4% hydropower, 3% wind and 1% solar. The grid operator has also approved a new power source of about 46 gigawatts for grid connections (mainly renewable energy and batteries), but has not been built due to funding, permits and delays in supply chains.

The auction results came amid a discussion about old fossil fuel plants that were expected to retire. The Trump administration has already floated plants, claiming it is necessary for grid reliability, and is moving to eliminate tax credits on renewable energy.

But with these subsidies expired at record auction prices, Kelly said solar and wind developers will try to build everything they can over the next two years. “We’re going to see a lot of renewable generations by the end of 2027,” he said.

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