Data Centers Account for 40 % of PJM Capacity Auction Costs, Market Monitor Finds
- Jan 8
- 2 min read
Rapid growth in projected data center loads drove a large share of capacity costs in PJM’s latest auction, prompting calls for reform of load forecasting and interconnection processes.
A report from PJM’s independent market monitor reveals that data centers, especially forecasted future demand, made up roughly 40 % ($6.5 billion) of the $16.4 billion in costs cleared in the December PJM capacity auction. Across PJM’s last three base capacity auctions, forecasted future data center load has accounted for 45 % ($21.3 billion) of total capacity payments, significantly influencing price formation. The findings have intensified concerns among regulators, utilities, and load-serving entities about how large loads are forecasted and included in PJM’s capacity market.
40 % of capacity cost attributed to data centers: Forecasted future data center loads accounted for $6.5 billion of the $16.4 billion cost in the latest PJM capacity auction.
Historic trend: In the last three auctions combined, forecasted large data center demand represented nearly half (45 %) of total capacity auction expenditures.
Forecast uncertainty: Much of the cost relates to data centers not yet built, reflecting potential over-forecasting of load growth.
Capacity shortfall lag: PJM fell roughly 6,516 MW short of meeting its reliability target in this auction, partly due to how demand was forecasted.
Reform pressure: PJM plans updated load forecasts and stakeholder processes to better vet large load projections such as data centers.
“The extreme uncertainty in the load forecasts based on uncertainty about the addition of large data center loads … raises questions about the meaning of clearing a capacity auction based on those forecasts.” — PJM market monitor.
CONCLUSION
Although this story isn’t directly about an HVDC line, it illuminates a major regulatory challenge in U.S. grid markets influencing transmission planning, capacity valuation, and reliability. Capacity market distortions driven by large forecasted loads like data centers can skew planning priorities, delay resource adequacy responses, and increase overall grid costs. Understanding these market dynamics is crucial because accurate load forecasting and transparent interconnection rules affect how long-distance HVDC corridors are justified, permitted, and ultimately financed. Engagement with FERC and RTO/ISO reforms now, especially around how new loads are modeled and cleared, can materially improve the regulatory environment for future HVDC investments.
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