The White House and a coalition of governors asked PJM — the sprawling grid operator that serves roughly 65–67 million people across the Mid‑Atlantic and Midwest — to hold an unusual emergency auction: 15‑year contracts for new power generation that would be available to technology companies building power‑hungry data centers.
It’s an audacious gambit. The administration and several state leaders argue that the surge in demand from AI and hyperscale data centers is driving up wholesale electricity prices and hurting ordinary consumers, and that the quickest way to get new generation built is to have the companies creating the demand help underwrite it. PJM, however, was blindsided: it wasn’t invited to the White House event and publicly signaled skepticism about the plan.
What the proposal would do
Instead of the usual one‑year capacity auctions that utilities and generators use to hedge short‑term needs, the plan would channel roughly $15 billion in long‑term revenue guarantees toward new plants — most likely fast‑built natural gas facilities, officials say — by giving tech companies the option to bid on multidecade contracts even if they don’t immediately need the full output.
Backers frame it as a pragmatic fix: secure long‑term revenue to convince developers to invest in big baseload projects that take years and hundreds of millions of dollars to build. Governors from states including Pennsylvania, Maryland and Virginia joined the administration to argue it will stabilize rates and accelerate construction.
But the approach raises immediate questions: who actually approves such a change (the Federal Energy Regulatory Commission would have a role), whether PJM’s rules can be reshaped to accommodate a separate, long‑dated auction for a narrow class of buyers, and whether tech companies will agree to underwrite plants they may never run at full capacity.
Why PJM and some energy experts are uneasy
PJM says it’s already wrestling with the mechanics of integrating huge new loads and released a board letter outlining 12 proposals after a fast‑track stakeholder process. Those included options to speed interconnection for state‑sponsored projects, let large new loads build their own generation, and run backstop procurement to fill short‑term reliability gaps.
Behind the scenes, PJM’s officials have been candid: the existing market design — created for a time of steady demand and a handful of large generators — is strained by the influx of hundreds of smaller renewable projects and a handful of hyperscale customers demanding city‑sized amounts of electricity. The operator recently failed, for the first time, to match supply with forecast demand for a coming delivery year, underscoring the urgency.
There’s also a political and environmental tangle. The quickest route to new, dispatchable capacity is typically natural gas; building new gas plants squares with calls from some governors but worries environmental advocates and policy leaders who pushed for cleaner sources. And utilities and regulators will have to reconcile long contracts locked to fossil fuel assets with state decarbonization goals.
Who pays, and how much would it help?
Supporters say the auction would make data centers shoulder more of the system cost their growth is imposing, rather than letting those costs show up on household utility bills. Some governors want PJM to require data centers to either bring their own generation, agree to curtailment during shortages, or pay higher prices — a blunt set of choices intended to protect consumers.
Tech companies’ public responses vary. Google said it’s open to helping and “looks forward to working” with officials; Amazon stressed it pays full energy costs. Industry groups argue the price spikes are rooted in market and policy design, not solely data‑center growth.
There’s also a timing problem: building large baseload plants takes years. Even if a 15‑year contract materializes quickly, developers face permitting, financing and construction lead times that make any immediate relief to 2027–2028 shortages unlikely. That’s one reason many in the sector prefer modular renewables plus batteries — solar farms and storage can be staged and brought online faster, matching data center buildouts more neatly.
Alternatives and tradeoffs
PJM’s board proposals aim for a mix: improved forecasting, a voluntary “bring your own generation” pathway so big loads that secure their own plants aren’t subject to the same curtailment rules, an accelerated interconnection track for state projects, and a short‑term backstop procurement. Those steps try to thread the needle between speed, reliability and affordability.
Policy choices will come down to values and risk tolerance. Do regulators prefer to underwrite faster, modular clean resources that better align with data‑center timelines? Or do they prioritize dispatchable plants that shore up reliability for a broader set of hours — at the risk of locking in fossil assets and saddling ratepayers if demand shifts?
Some companies are already experimenting with unconventional ideas to manage future demand and supply — from corporate-backed nuclear commitments to speculative concepts like off‑planet server farms. Google’s exploratory work on Project Suncatcher is an example of how desperate the search for new approaches has become. And as cloud services add features that push more workload into massive data centers — think advanced search and research tools — demand projections are only getting murkier, a trend reflected in developments like Gemini Deep Research.
PJM’s choices in the coming months will matter for the cost of power in a swath of the country, for where and how future data centers get built, and for the longer‑term mix of energy resources. The White House‑governors push has put a political spotlight on the grid operator — but it hasn’t solved the practical problems of timelines, market design and competing public priorities. For now, the auction is a proposal on paper, PJM is working through stakeholder feedback, and utilities, companies and regulators are squaring up for what may be a years‑long scramble to reconcile exponential computing demand with a grid built for a different era.