Electricity prices are up 76% on America’s largest grid, and an observer is pointing fingers

The largest electric utility in the US, PJM Interconnection, saw rates nearly double last year, according to the report published yesterday by Monitoring Analytics, an independent project that serves as a watchdog for the PJM community. Guilty? Data centers.

Electricity prices for one megawatt hour rose to $136.53, up from $77.78 at the same time last year. Crain’s Chicago Business was first report on the spike. Monitoring Analytics pointed the finger at the data center and PJM’s inability to meet their growing demands.

The market manager pulled no punches. “The cost impact on customers has been very high and will not change,” Monitoring Analytics wrote. “Cost damages will be significant in the near future unless the data volume issues are addressed in a timely manner.”

PJM is the target of such criticism. In 2022, when the construction of data has increased, the operator of the grid has suspended the application of new sources of production, citing a delay of many years. They have just started accepting new applications. Meanwhile, the demand for electricity from data centers has increased dramatically. The PJM group includes Northern Virginia, the part of the state that has data centers.

The rising prices are a reminder of a deeper problem: The US electricity sector is not designed to meet the demand for electricity in an AI-driven economy, and the gap between what the sector can provide and what companies need is widening.

Monitoring Analytics was specific that without the increase in demand for data centers, “the carrier market would not have seen the same demand, the same high prices.”

It added that “current capacity in PJM is not sufficient to meet the demand from big data sources and will not be sufficient in the future.”

Monitoring Analytics criticized PJM’s lack of transparency in decision-making and delays in implementing needed programs. “These upgrades have been delayed for several years and do not have an expected launch date,” the report said.

The report comes after a white paper released by PJM Interconnection, which assessed the group’s future it works. The white paper offered three options, but none of them appealed to one of the region’s largest groups, AEP, which has threatened to drop the PJM group altogether.

Monitoring Analytics was also not impressed with the PJM white paper. The group said PJM is using the crisis “as a scam” to undermine the way the electricity market works. “PJM’s fundamentals of market development remain strong,” it said, suggesting the group’s operator has made some adjustments as needed. The solution to this problem, it said, “begins with the recognition that the source of the current problems is the volume of data.” In other words, it’s a data center, stupid.