NEWS: Data centers â€~primary reason’ for high PJM capacity prices
PJM’s market monitor has flagged a shift in what’s driving capacity prices, with hyperscale data centers now the dominant factor behind recent spikes in the capacity market. The trend reflects an unprecedented surge in load from large-scale computing facilities as demand for cloud and data services continues to climb.
In the latest capacity auction, data-center users added about 7.3 billion dollars in costs, pushing total capacity payments to roughly 16.1 billion—an increase of about 82% from the previous cycle.
Across the two most recent auctions, demand from large data-center operators accounted for roughly half of PJM’s overall capacity payments, underscoring how much this sector is shaping bidding and price clearing.
Capacity auctions are designed to ensure enough generation remains available to meet peak needs, but observers warn that the rapid and uncertain growth of data-center load is distorting the market. Clearing prices are increasingly being set on forecasts that could prove wildly off as new centers come online and utilization patterns evolve.
Several remedies are under discussion. One proposal would require new data centers to secure a portion of their own generation or leverage on-site resources. At the same time, PJM is drafting tighter load-forecast rules and introducing financial requirements for hyperscalers, with a formal filing expected before year’s end.
Analysts caution that while these measures could reduce volatility and align auctions more closely with actual resource needs, they may also influence the economics of large-scale computing and the strategic decisions of major data-center operators in the region.
