PJM Interconnection is the largest wholesale electricity market and grid operator in the United States, covering 13 states.[1][2] As AI data centers multiply, PJM's demand forecast has risen quickly, and its last two capacity auctions did not secure enough capacity to meet the reliability requirement. Factor This's policy podcast discussed the reform options in October.[3]

1. What a capacity market is

Besides buying the electricity used now, a grid must make sure there will be enough generating capability at peak times several years ahead. PJM holds an annual capacity auction, buying commitments about three years in advance from power plants, storage and demand-side resources to be available when needed. Customers pay the cost.

2. The 2028/2029 auction

PJM published the results for the 2028/2029 delivery year in July:[1][4]

  • The auction cleared 138,318 MW. With capacity committed by utilities outside the auction, the total was 149,182 MW.
  • This is 6,831 MW, or about 6.8 GW, below PJM's reliability requirement of one loss-of-load event in ten years. The previous auction was about 6,500 MW short, and these were the first two auctions in which the whole PJM region fell below the requirement.
  • The clearing price was $325/MW-day, the cap approved by the Federal Energy Regulatory Commission (FERC), for a total of about $16.4 billion.

PJM says a shortfall does not mean the system will be unable to serve load in the delivery year, but it will operate with thinner reserves and higher risk.[4] PJM chief operating officer Stu Bresler said forecast demand rose by about 2 GW, mainly because of data center development.[5]

US grid nodes and transmission network
US grid nodes and transmission network (AI-generated illustration)

3. PJM's response

On 31 July, PJM filed a one-time Reliability Backstop Procurement with FERC:[6]

  • The target is the 6,831 MW shortfall, reduced by signed contracts between large loads and new generation and by other showings of new supply.
  • Contracts can run up to 15 years, with a maximum weighted average price of $555/MW-day.
  • In parallel, PJM is matching large loads with new generation for direct contracts, so data centers bring their own new supply.

Reuters reported that since the price cap and floor were introduced, more than 43 GW of new generation projects have been announced in the PJM region, mostly in data center hubs in Ohio and West Virginia.[7]

On the podcast, participants discussed interconnection reform, large load integration and governance changes, and noted that renewables, storage and demand-side resources can come online relatively quickly.[3]

New generation and storage supplying a data center directly
New generation and storage supplying a data center directly (AI-generated illustration)

4. Data center demand worldwide

DNV's latest Energy Transition Outlook expects global data center electricity use to grow from about 400 TWh in 2025 to 1,100 TWh in 2030, and data centers to absorb about one third of new generation in North America to 2030.[8] PJM shows this trend within a single grid.

5. Directions Taiwan can consider

  • Ask large loads to bring new supply: letting data centers contract directly with new plants or storage, and counting this in grid planning, spreads responsibility for new demand.
  • Procure capacity early: buying capacity years ahead or through long-term contracts gives investors time to build.
  • Set a price range: a cap and floor protect customers when demand changes quickly and give investors predictable revenue.
  • Include demand-side resources: virtual power plants and demand response can be deployed quickly to add peak capacity.

For Formosa Plastics' plans for an AI data center and low-carbon power in Mailiao, see ccs.tw's report. On grids and electrification, see the IEA on electrification costs and energy security.

Homes taking part in demand response at peak times
Homes taking part in demand response at peak times (AI-generated illustration)

References

  1. PJM, PJM Capacity Auction Procures 138,318 MW of Generation Resources (2026-07-14). https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/2026-releases/20260714-pjm-capacity-auction-procures-138318-mw-of-generation-resources.pdf
  2. Same release: the price collar was set in coordination with the governors of all 13 PJM states and FERC.
  3. Factor This, Policycast: PJM's energy emergency (2026-10-08).
  4. PJM, 2028/2029 Base Residual Auction Report. https://www.pjm.com/-/media/DotCom/markets-ops/rpm/rpm-auction-info/2028-2029/2028-2029-bra-results-report.pdf
  5. Utility Dive, PJM capacity prices hit price cap, reserve shortfall grows. https://www.utilitydive.com/news/pjm-capacity-auction-price-cap-reserve-shortfall/825282/
  6. PJM, Reliability Backstop Procurement fact sheet. https://www.pjm.com/-/media/DotCom/about-pjm/newsroom/fact-sheets/reliability-backstop-procurement-fact-sheet.pdf
  7. Reuters, PJM capacity market woes spur activity in bilateral power deals (2026-08-26). https://www.reuters.com/business/energy/pjm-capacity-market-woes-spur-activity-bilateral-power-deals--reeii-2026-08-26/
  8. DNV, Energy-importing countries scaling clean energy three times faster than exporters (2026-10-07). https://www.dnv.com/news/2026/energy-importing-countries-scaling-clean-energy-three-times-faster-than-exporters/