The AI boom is devouring US power and raising prices, and the market loves it
The ongoing investment boom is pulling in more resources.
The massive US investment boom in AI infrastructure will contribute to rising electricity bills next year across a giant swath of the United States.
Prices set in a key auction from the nation’s largest electricity grid — PJM Interconnection, which services roughly 67 million people in 13 states and the District of Columbia — jumped 22% to a new record of $329.17 per megawatt-day, the grid operator said Tuesday afternoon.
That may sound steep. But it’s nothing compared to the increase over the last couple years. Two years ago, the same auction — which sets the contractual price for reserve power that the grid uses during peak demand — was just $28.92 per megawatt-day. It’s now more than 1000% higher.
PJM officials noted that a key driver of the increase in prices is increased demand, explaining that “the majority of the demand increase you saw was large loads and data center additions,” Bloomberg reported.
PJM’s territory includes areas of frenetic data center activity, including Northern Virginia’s data center alley, which is a major drain on power supply.
The prices generated from the most recent auction could boost consumer bills between 1.5% and 5%, the grid said, reinforcing persistent inflation in consumer energy prices, which have increasingly outpaced the overall rise in headline inflation rates in recent months.
That trend is bad news for bill payers. But such rising prices are a granite block in the foundation of one of the most popular trades in the market at the moment: the AI power trade.
“Already big users of electricity, data centers will guzzle even more energy going forward,” Vanessa Cook of the Bank of America Institute wrote. “Such centers consume approximately 1- 2% of global electricity production and forecasts range from an 11% compounded annual growth rate through 2030 globally, to a ~20% CAGR (2023-30; range: 15-23%) for the US alone.”
Today’s strong earnings from GE Vernova, which makes gas turbines for power generation, and its more than 10% jump are a big part of that story. (GE Vernova is up nearly 300% over the last 12 months. In the S&P 500, only Palantir has done better.)
Other stocks tied to the AI power story — such as Vistra, NRG, and Constellation Energy — are also enjoying healthy gains. Talen Energy, which saw its shares surge last week after announcing purchases of power plants that feed PJM, also popped.
So even as the AI boom boosts Americans’ net worth by trillions, it’s also pinching their pocketbooks, with more pain in the electrical pipeline to come.
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