With $90 billion investments in data centers, energy and power infrastructure, Pennsylvania is faced with an extra-ordinary opportunity and can become an AI Super Star. Pennsylvania is the No. 1 exporter of electricity, the second largest natural gas producer and the third largest energy producer in the nation.
However, Pennsylvania must act with speed to keep up with the rapid pace of change brought on by the artificial intelligence (AI) revolution.
With thoughtful leadership and a clear strategy, Pennsylvania can capitalize on the state’s energy resources and the surging demand for data centers brought on by AI.
Imagine all of the components on a teeter-totter. The goal is to sustain a balance among data centers, AI, the PJM power grid and utilities to maintain affordable electricity for the average utility customer.
The key is to implement smart policies from the start.
- Add to PJM’s grid capacity by investing in reliable base load generation to manage the increased load of data centers and all that is electrified. Utilize an “all of the above” energy strategy. Abundant natural gas can provide energy to generate electricity, followed by coal, nuclear and hydro. Wind and solar can be added when they are supported by mature battery and storage technology.
- Modernize the PJM energy grid so that it is dependable.
- Encourage large users to “Bring Your Own Generation.”
- Modernize energy infrastructure systems for generating, transmitting, storage and distribution to accommodate new industrial loads.
- Encourage responsible growth by large energy users. They must pay their fair share to ensure fair pricing and avoid cost shifting.
- Modernize permitting so that it is efficient and predictable, to reduce expensive delays.
- Maintain a tax and regulatory structure that supports growth.
AI is the ability of machines to perform tasks that typically require human intelligence, such as problem-solving, learning and decision-making, by processing large datasets and using algorithms to identify patterns and make predictions. AI is the fastest-growing tech sector and is used in numerous industries.
The massive electricity demand from data centers used to fuel AI is unprecedented and is driven by extraordinary demand for data processing, storage and real-time computing.
Data centers’ access to stable and reliable energy is critical. Many data centers are directly connected to the PJM electricity grid for power. They place a significant demand on the grid and compete with other users.
The PJM power grid is a regional electric transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and Washington, D.C. PJM is the largest power grid operator in the nation.
PJM’s supply of power is not adequate to meet the current and future demand from large data center loads.
Supplies are decreasing because of the retirement of many coal-fired power plants. New power plant construction isn’t coming online fast enough to meet surging demand.
One of the ways PJM manages its system is by capacity auctions. Power plant owners compete to see who will offer the lowest prices to be available to the grid at all times. This ensures the grid has sufficient power plant capacity.
The result is a “capacity price,” which ensures there are adequate resources to meet the region’s energy needs on days with highest demand. The price sets the level of payments to participating power plants, an important income source for them.
Recently PJM’s auctions have resulted in record-setting prices passed on to utilities and rate payers. The results are tied to rising electricity demand for data centers and a bottleneck in approving grid connections for new projects.
In 2024, PJM’s auction produced such an unusual result that capacity auctions and PJM became household news. The new price, effective June 1, 2025, was $269.92 per megawatt-day, an increase from $28.92 per megawatt-day in the previous year.
The June 2025 auction yielded an even higher price, $329.17 per megawatt-day which will take effect June 1, 2026.
This is where we are now.
Onward … Pennsylvania can win the AI revolution!
Eileen Anderson is the director of Government Relations at The MBA. Contact her at 412/805-5707 or eileenanderson@mbausa.org.
