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The price of the largest US power grid auction has reached a new record due to a supply crunch

Payments to power plant in the largest U.S. market for electricity, PJM Interconnection hit a price 'cap' and set a record on Wednesday, as?demand?from data centers in 13-state area grows faster compared to?construction of new electricity supply.

The expansion of Big Tech data centers in PJM has driven so-called capacity price in PJM up by around 1,000% in the last year-and-a-half, increasing concerns about energy affordability. This grid serves one in five Americans living in the U.S. Mid-Atlantic - and Midwest.

Prices in the latest PJM?auction for capacity reached $333.44 per megawatt-day, compared with $329.17 at an auction held in August. The auction shows that the demand for electricity by data centers continues to exceed the supply.

PJM, the company that operates the grid for the most energy-intensive data centres in the world, conducts auctions to determine how much energy companies are paid to ensure they can run their power plants if needed. The last auction in July saw the capacity payments reach their highest levels due to the rapidly rising electricity consumption in PJM and the stagnant addition of new power stations.

A group of PJM governors including Pennsylvania Governor Josh Shapiro negotiated a floor and ceiling price for PJM. This 'price ceiling' was in effect at the last auction held in July and extends through the latest bidding rounds.

Shapiro, among others, is now calling for a price limit to be applied to future auctions.

The so-called PJM capacity market includes generators that are on-call to protect against blackouts and other disruptions when demand for electricity spikes. High prices are intended to encourage developers to increase their supply.

(source: Reuters)