The grid can't keep up: how data centres became the power sector's defining problem

For the second year running, PJM Interconnection's Base Residual Auction has cleared at the federally mandated price ceiling - and the gap between what the market procured and what the grid actually needs got wider, not smaller. The price signal has hit its ceiling. It has nothing left to say.

The 30-second version

• July 14, 2026: PJM Interconnection announced that its 2028/2029 Base Residual Auction (BRA) cleared at the FERC-approved cap of $325/MW-day (UCAP) across the entire RTO footprint - a 2.5% decrease from the 2027/2028 cap of $333.44/MW-day, but still the second consecutive auction to hit the ceiling.
• 6,831 MW shortfall: The auction procured 138,318 MW of unforced capacity (UCAP), leaving the system 6,831 MW below PJM's reliability requirement - larger than the 6,500 MW shortfall recorded in the 2027/2028 BRA, which was itself the first such miss in PJM's auction history.
• New supply nearly absent: The auction cleared only 525 MW of new generation and generation uprates, down from 774 MW in the prior auction, despite prices at the cap for two consecutive years.
• Administrative response: On July 27, 2026, the PJM Board of Managers proposed a Reliability Backstop Procurement auction (target start: September 30, 2026), a mandatory Large Load Registry, and an Interim Resource Adequacy Service that would subject new data centers without their own generation to curtailment beginning June 1, 2027.

What the auction result actually shows

PJM Interconnection on July 14, 2026, announced the results of its 2028/2029 Base Residual Auction, which secured 138,318 MW of unforced capacity generation (UCAP) and demand response to meet projected electricity needs for more than 67 million people across 13 states and the District of Columbia. The clearing price of $325/MW-day is the FERC-approved cap - not a market-discovered price.

That distinction matters. A capacity market is supposed to send a price signal that attracts new supply when scarcity is real. When the price hits an administrative ceiling, the signal is truncated: generators cannot bid above the cap, so the market cannot reveal how much scarcity actually exists or what it would cost to resolve it. PJM itself acknowledged in a June 2026 pre-auction briefing that "in practical terms, prices are unlikely to change significantly from year to year under the current structure" and that "the price cap and floor may reduce volatility, but they do not solve the underlying supply-demand imbalance."

The supply response confirms the diagnosis. Supply offered into the 2028/2029 BRA increased by only 3,447 MW (UCAP) from the prior auction, and the auction cleared just 525 MW of new generation and uprates. Two consecutive years of cap-clearing prices - the highest in PJM's history - have not produced a meaningful wave of new capacity. The reasons are structural: interconnection queues, permitting timelines, and the three-year-forward auction cycle mean that supply responding to today's price signal cannot arrive in time to clear in the next auction.

The shortfall is also directionally wrong. The 2028/2029 auction left PJM roughly 6.8 GW below its 20% installed reserve margin target - an increase from the 6.5 GW shortfall in the 2027/2028 BRA, which was the first such miss in PJM's auction history. A market that clears at the price ceiling while the reliability gap widens is not functioning as designed.

The administrative toolkit PJM is deploying instead

Because the price signal is capped, PJM is managing scarcity through a set of administrative mechanisms that have no precedent in the RTO's history.

Reliability Backstop Procurement. On July 27, 2026, the PJM Board of Managers proposed holding a one-time backstop capacity auction starting September 30 to address the 6.8 GW shortfall from the 2028/2029 BRA. PJM plans to cap the total cost of accepted supply offers at $555/MW-day - up from the $325/MW-day cap in the base auction - and eligible resources must be online by June 1, 2032. Commitments of up to 15 years would be finalized before PJM holds its December 2026 base capacity auction for the 2029/2030 delivery year. The cost allocation question - who pays - remains unresolved and contested.

Interim Resource Adequacy Service (formerly "Connect and Manage"). The PJM Board's July 27, 2026 proposal includes a mandatory Large Load Registry tracking the location and megawatt quantity of large loads by site and whether they bring their own supply. New large loads that do not bring their own generation by June 1, 2027, and have not otherwise secured supply, will be subject to curtailment prior to deployment of Pre-Emergency Load Management during capacity shortage periods. The framework was previously known as "Connect and Manage" in PJM's stakeholder process; the Members Committee rejected all curtailment proposals in June 2026, but the Board proceeded with its own version.

Expedited Interconnection Track. In June 2026, FERC approved PJM's tariff revisions establishing an Expedited Interconnection Track (EIT), a temporary, stand-alone process under which PJM may evaluate up to 10 interconnection requests per calendar year for new or uprated capacity resources of at least 250 MW that can achieve commercial operation within three years. The EIT runs outside the normal interconnection cycle process and is aimed at state-sponsored, shovel-ready projects.

Bilateral contracting. On June 9, 2026, PJM began facilitating new long-term bilateral agreements between large load customers and generation providers, with contracts often spanning 10 years or more. These are outside the capacity market entirely.

Taken together, the toolkit represents a shift from market-clearing to administrative allocation: who gets power, at what price, and who bears the cost are increasingly determined by PJM board decisions and FERC filings rather than by auction outcomes.

The demand side: why the ceiling keeps getting hit

The price cap was introduced in coordination with the governors of all 13 PJM states to limit consumer bill shock after PJM capacity prices surged from $28.92/MW-day in the 2024/2025 delivery year to $269.92/MW-day in the 2025/2026 delivery year - an increase of approximately 833% - and then continued rising to the cap in subsequent auctions. The cap is a political response to a real affordability problem. But it does not address the demand side.

PJM's 2025 Long-Term Load Forecast predicts a peak load growth of 32 GW from 2024 to 2030, with approximately 30 GW of that coming from data centers. PJM's Board Decisional Letter of July 27, 2026, states that new large load demand is forecasted to increase by approximately 70 GW by 2038, which will place increased pressure on the region's resource adequacy position, especially when coupled with the retirement of roughly 15 GW of generation since 2022.

PJM's Independent Market Monitor estimated that data centers were responsible for 63% of the price increase in the 2025/2026 auction, translating to $9.3 billion in capacity costs. Northern Virginia's "Data Center Alley" - the largest data center hub in the world - sits inside the PJM Dominion zone, and the Dominion zone's load forecast has been revised dramatically upward: the 2022 forecast showed an increase in load of about 5,700 MW by 2037 in PJM's Dominion Zone, while the 2025 forecast showed more than 20,000 MW of growth from data centers alone in the same zone by 2037.

The demand growth is not hypothetical and it is not slowing. The 2028/2029 auction shortfall grew despite a 2.5% decrease in the cap price, because a roughly 2 GW increase in forecast demand, driven largely by data center development, contributed to the outcome.

What to watch

• September 30, 2026: PJM's proposed Reliability Backstop Procurement auction is scheduled to open, targeting new resources to cover the 6,831 MW shortfall from the 2028/2029 BRA. FERC must approve the filing before the auction can proceed; the Board stated it would file before the end of July 2026.
• End of September 2026: FERC Chair Laura Swett stated on July 23, 2026, that PJM has until the end of September to agree to governance and stakeholder reforms, or FERC will impose them. FERC will convene a dispute resolution forum in September with PJM stakeholders.
• December 9, 2026: PJM's base capacity auction for the 2029/2030 delivery year is scheduled. The price collar - extended by FERC in April 2026 - applies to this auction as well, meaning a fourth consecutive cap-clearing outcome is structurally possible.
• June 1, 2027: The proposed deadline by which new large loads must demonstrate they have secured their own generation supply or face curtailment under PJM's proposed Interim Resource Adequacy Service.
• Cost allocation ruling: The question of whether data centers or existing ratepayers bear the cost of the Reliability Backstop Procurement remains unresolved. A bipartisan coalition of all 13 PJM state governors and the White House National Energy Dominance Council issued a joint Statement of Principles in January 2026 demanding that data centers bear the infrastructure costs of their own load growth. How FERC rules on cost allocation will determine whether the backstop procurement is a precedent-setting shift or a one-time patch.

Common questions

Machine-drafted · Editor-reviewed. Primary sources: PJM Interconnection news release, July 14, 2026; PJM Board Decisional Letter, July 27, 2026; PJM Inside Lines, June 25, 2026; Utility Dive, July 15 and July 27, 2026; Orrick LLP client alert, July 2026; American Action Forum, April 2026; IEEFA, 2025; PJM 2027/2028 BRA Report, December 17, 2025.