Administration pushes tech firms to underwrite $15B in PJM power capacity
Friday, January 16, 2026The administration has proposed that PJM run an auction for long-term supply contracts and expects major technology firms to underwrite roughly $15 billion of new capacity. The mechanism would secure 15‑year commitments for generation capacity to blunt shortfalls as data centers and AI compute lift demand. PJM, which coordinates power across parts of the Mid‑Atlantic and Midwest, pushed back quietly and was not present at the policy rollout. Officials point to recent wholesale price inflation—regional rates rose roughly 10 to 15 percent in 2025—and a decade of increasing peak loads as the rationale for intervention. Independent monitoring shows peak demand climbed about 10 percent over the last ten years and is forecast to rise another 6.5 percent by 2027, trends that complicate planning for grid operators. Elevated natural gas costs are a prime driver: analysts estimate about 60 percent of last year’s price surge came from fossil‑fuel markets. The plan effectively asks cloud and hyperscale operators to bear the upfront cost of capacity they may never use, introducing the prospect of stranded investments if AI growth slows. Many technology buyers have favored phased renewable-plus-storage solutions because those projects can be built quickly and scaled with demand, reducing exposure. For developers and utilities, a mandated procurement would favor large, long‑lived plants that take years to reach service and could raise fixed costs across the system. If enacted, the auction would alter contracting norms: corporate buyers will press for risk protections, regulators may be drawn into disputes, and market participants could challenge the move in administrative and legal venues. At a systems level, the procurement could reallocate capital flows across the PJM footprint, raising costs for cloud customers and slowing the shift to modular clean resources. Policymakers must weigh immediate reliability concerns against the risk of locking the region into uneconomic assets and deterred innovation in flexible generation.
Impact
NEGATIVEAnalysis
Forcing or pressuring tech companies to buy lengthy capacity contracts rewrites who pays for grid reliability and when. The immediate result would likely be accelerated investment in large, long-duration generation — frequently gas-fired — because those assets meet traditional capacity metrics, but they take years to build and can become uneconomic if demand falls. Corporate purchasers will seek contract clauses to hedge or exit obligations, raising transaction complexity and legal risk. The move could also slow deployment of incremental renewable and storage projects that scale more flexibly and match data center timelines, undermining near-term emissions and innovation goals. If PJM resists or legal challenges arise, the policy could produce months of uncertainty without delivering faster reliability improvements.Administration seeks auction of new generation procurement totaling about $15 billion.
Requested contracts would run for 15 years, shifting long-term risk onto corporate buyers.
PJM expressed reluctance and did not participate in the public announcement.
Regional wholesale rates rose about 10–15% in 2025; peak load climbed ~10% over the past decade and may rise another 6.5% by 2027.
Analysts attribute roughly 60% of recent price increases to higher fossil fuel costs, complicating fuel-reliant planning.
Tech firms favor modular renewables and storage because they align better with construction timelines and risk management.
