Data Centers Added $9.4 Billion in Costs on Biggest US Grid

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The rapid development of data centers connected to the largest US electric grid raised costs by $9.4 billion, an expense that consumers from Illinois to Washington, D.C., will see reflected in their utility bills starting this month.

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Overall costs rose by 180%, with the growing energy needs of data centers being the primary cause of tight supply-and-demand conditions, as well as high prices, in the PJM Interconnection capacity market, which serves customers from Illinois to Washington D.C., according to a report Tuesday by Monitoring Analytics, the grid’s independent market monitor.

The analysis from PJM’s watchdog asserts that households and businesses are subsidizing the data center boom being carried out by some of the richest tech companies in the world.

“The current conditions are not the result of organic load growth,” Monitoring Analytics said in the report. “The current conditions in the capacity market are almost entirely the result of large load additions from data centers, both actual historical and forecast.”

The cost for procuring supplies on the eastern US grid jumped to a record $14.7 billion, and would have otherwise been closer to $5 billion when accounting for existing and forecast data center demand, according to the watchdog’s analysis. The biggest increases were in Virginia and Maryland. These supplies were procured in an auction and costs go into effect for one year staring this month.

“We are in the process of reviewing, but this affirms what PJM has been saying, which is that supply/demand conditions drove higher prices” in the last auction, Jeffrey Shields, spokesman for the grid, said in an emailed statement.

The data center boom is driving power demand on the grid toward levels not seen in 20 years. PJM said summer peak power consumption may climb by 70 gigawatts to 220 gigawatts over the next 15 years. That would be 32% higher than the all-time high of about 165.6 gigawatts reached in summer of 2006 and exceeds current generating capacity of 183 gigawatts, according to the grid operator.

The market monitor’s report will likely add scrutiny at a technical conference held by the Federal Energy Regulatory Commission starting Wednesday debating whether power markets formed through deregulation more than two decades ago are capable of spurring such rapid investments, adopt renewables and still keep power affordable and reliable for all consumers.

At PJM’s annual meeting last month in Northern Virginia, the data center capital of the world, one big data center developer acknowledged that consumers are bearing higher costs.

“We have largely taken advantage of an overbuilt system,” Brian George, who leads global energy market development and policy at Google, said on a panel. “We are now imposing a significant cost on the system.”

(Updates with comment from PJM in the sixth paragraph.)