Key US Power Grid Cuts Demand Outlook on Overstated AI Boom
(Bloomberg) -- The biggest US grid operator dialed back its forecast for power demand growth, offering a reality check to the frenzy around the artificial intelligence boom.
PJM Interconnection LLC, which manages the 13-state eastern grid from the mid-Atlantic to the Midwest, cut its peak demand forecast for the summer of 2027 to about 160 gigawatts. That’s down from a previous outlook of about 164 gigawatts.
Massive electricity consumption from the data centers that run artificial intelligence has transformed the global energy landscape, but AI remains somewhat unproven as a profit-making business model. Uncertainty about the hundreds of billions of dollars being spent to build and power data centers has sparked concern about a speculative bubble surrounding the sector. Even some of AI’s biggest cheerleaders acknowledge the market is frothy, while still professing their belief in the technology’s long-term potential.
PJM lowered its demand forecast because some of the projects incorporated in its previous outlook — including data centers — don’t yet have firm electric service or construction commitments. The downward revision injects some skepticism into feverish projections for AI-related consumption.
Shares of the largest independent power producers, which have profited from demand increases in the PJM grid, fell Wednesday. Vistra Corp. declined as much at 3.1% in New York, while Constellation Energy dropped as much as 2.3% and NRG Energy Inc. fell as much as 2%.
For PJM, the demand revision is critical because the projection is used to procure supplies and those costs are passed on to consumers via their utility bills. PJM executives have been warning that forecasts for demand growth, which bubble up to the regional grid operator via utilities receiving requests to connect data-center campuses, have bloated to levels that are irrational.
Still, the grid operator expects strong electricity growth of 17% by 2030 from this year’s projected high, which will be driven by data centers. Peak demand in the summer of 2028 is seen surpassing the record of about 165 gigawatts set in the summer of 2006.
PJM’s forecasts are used to set payouts to generators and other power suppliers, and they’re also used to determine how quickly to expand the grid’s network of poles, wires and substations. The most immediate impact of PJM’s revised forecasts will be on its so-called capacity auctions, which are used to secure supplies.
The auction itself has become a political flashpoint after costs rose to a record for three consecutive years. The last power sale, which secured 2027-2028 supplies for $16.4 billion, would have been even more expensive if not for grid constraints that resulted in a supply shortfall of 6 gigawatts.
It marked the first time the auction has failed to meet required reserves. PJM would need to make up for this shortfall by procuring the remaining supplies in an incremental auction, tacking on even more costs. But the recent demand forecast will trim that shortfall.
Still, “this doesn’t solve the problem,” said Sean Kelly, former power trader and chief exective officer of AI-enabled demand forecaster Amperon. “We’re still short two gigawatts of supply, which means prices will still likely continue to hit the cap for the PJM capacity auctions.”
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