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The biggest US power grid is under strain from AI — and no one is happy Tim De Chant 6:00 AM PDT · May 8, 2026 Pity the grid operator PJM Interconnection. For decades it worked quietly and in the background, matching electricity demand with supply. Meanwhile, customers enjoyed some of the lowest electricity prices in the United States.
No longer. Politicians, businesses, households, and power companies think it needs an overhaul. Even PJM is in agreement.
PJM released a white paper this week that said the region “has years, not decades” to make fundamental changes to the way it operates. “The current situation is not tenable,” PJM CEO David Mills wrote in a forward to the report.
Normally, this sort of wonky report would land on the desks of a few legislators and regulators. But PJM’s territory includes a large number of data centers, including the compute-dense region of Northern Virginia. What happens to PJM will send ripples throughout the tech world.
The 70-page report is an exercise in navel gazing. But despite the deep introspection, not everyone is convinced the organization is up to the task of overhauling itself. One utility, American Electric Power (AEP), is considering pulling out of PJM altogether.
“The current state of PJM’s performance and stakeholder approval process does not give me great confidence that these issues will be resolved anytime soon,” Bill Fehrman, AEP’s CEO, said in an earnings call Tuesday. “In fact, if something is not done now, I expect we could still be having these same conversations in 10 years. The PJM market worked very well when supply exceeded demand; we are now in a very different time.”
Cloud computing and AI have begun to strain PJM’s existing generating capacity. Against the backdrop of surging demand, PJM paused applications in 2022 for new generating sources to connect to its grid, citing a years-long backlog. Just as the need for electricity was beginning to grow for the first time in decades, the grid operator prevented new sources from even applying to get hooked up.
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Demand in the region remains so large that, since PJM recently reopened the queue, power companies and project developers have filed more than 800 interconnection requests for 220 gigawatts worth of new power. PJM might have been able to pause new requests, but it did nothing to tamp down demand for new interconnections.
In its white paper, PJM has proposed three options. One would require utilities and power generators to essentially make bigger, longer-term commitments. (PJM currently requires them to commit to supplying a certain amount of electricity for three years.) The second option would change reliability guarantees for customers — those who pay less might get their power cut first. The last choice would try to move PJM closer to a real-time market, where supply and demand dictate prices, without entirely eliminating stability from long-term contracts.
It’s hard to see how PJM emerges looking good in any of these scenarios.
First, the way PJM operates its market has somewhat locked it into a three-year mindset. That seemed to work when natural gas power plants were replacing coal-fired generators, but today solar and batteries can be installed at least two to three times faster. What’s more, the shortage of natural gas turbines means that power plants planned today won’t be able to install the equipment until the early 2030s. Plus, prices of turbines have skyrocketed on the back of demand for hyperscalers. Given those realities, it’s hard to see suppliers wanting to commit to an even longer timeline.
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