PJM Just Put AI Data Centers First in Line for Blackouts — and Nobody Knows What It Costs

PJM Just Put AI Data Centers First in Line for Blackouts — and Nobody Knows What It Costs

I've been running hosting infrastructure for over a decade, and I've watched the AI buildout from the cheap seats the whole way. I've written about the chips, the cooling, the water, the debt, the copper. But this week I read something that genuinely stopped me: America's biggest grid operator is about to make new AI data centers the FIRST customers cut when the power runs short — ahead of households, ahead of factories, ahead of every demand-response customer the grid currently pays to shut down. And here's the part that should scare every operator, every investor, and every bank underwriting this buildout: nobody has put a price on it yet.

Let me tell you what PJM actually filed, what the grid math looks like, and what this means for anyone who runs real infrastructure for a living. Because this isn't a niche regulatory story. This is the first time the grid has formally told the AI buildout "you're last in line" — and the fine print is where the real story lives.

The News — What PJM Actually Filed

On July 31, PJM Interconnection — the grid operator covering 13 states and Washington, D.C., serving 67 million people — asked the Federal Energy Regulatory Commission for permission to reorder the emergency queue. Docket ER26-3380-000. Two things at once.

First, a one-time backstop capacity auction capped at $555/MW-day to close a 6.8-gigawatt shortfall in the 2028/2029 delivery year — the second straight auction that failed to secure enough power to meet PJM's reliability requirement, falling 6,831 megawatts short. Second, something called the Interim Resource Adequacy Service: any new load of 50 megawatts or more — measured at a single interconnection point or across points inside a one-mile radius — that shows up after June 1, 2027 without its own supply gets cut ahead of every other customer when the system gets tight.

Read that again. Not after. AHEAD of. The demand-response customers who volunteered to be interrupted and get paid for it? They stay on. The households? They stay on. The new 50-megawatt data center that didn't bring its own power? It goes dark first. The 50-MW COL4 data center in Columbus, Ohio is the poster child — a real site sitting exactly on the line PJM drew.

The Grid Math — Why This Filing Exists

The numbers explain the filing better than any press release. PJM projects roughly 70 gigawatts of new large-load demand by 2038. Since 2022, about 15 gigawatts of generation has retired. Of the 32 gigawatts of forecasted demand growth between 2024 and 2030, 30 gigawatts is data centers. That gap is not a rounding error — it's a chasm.

Capacity prices tell the same story. The market cleared at about $28.92/MW-day for the 2024/25 delivery year. By the 2026/27 delivery year, that number hit about $329.17/MW-day. Eleven times in two years. PJM's independent market monitor, Joseph Bowring, puts the capacity-cost increase attributable to data center load at $29.4 billion across the last four auctions. That's the number ratepayers are already eating.

And here's the twist that tells you how weird this moment is: the Natural Resources Defense Council came out in SUPPORT of the plan — calling the requirement that future data centers secure their own power the single best thing PJM could have done. The market monitor and the environmental group rarely agree on a capacity question. When they do, pay attention.

The Two Readings — Protection or First Crack

There are two ways to read this filing, and both are true.

Reading one: the grid is finally doing its job. PJM is a reliability operator. When you can't secure enough capacity, you protect the people who can't protect themselves. The IRAS framework basically says: if you want to plug a gigawatt into the machine, bring the machine's fuel. The White House's Ratepayer Protection Pledge — introduced in March, expanded in July — says the same thing: new large loads must "build, bring, or buy" the generation they need. NRDC loves it. Households get protected. That's the wholesome reading.

Reading two: the first crack in the buildout's operating assumption. And this is the one that keeps me up. PJM's own stakeholders VOTED on this package in June. They endorsed the backstop auction. They REJECTED the large-load curtailment piece. The board filed it anyway. That's a board overruling its own stakeholders to reorder who gets cut — and the filing does not settle what the compensation rate for a directed reduction actually is. PJM proposes to pay for curtailments at a FERC-approved rate administered by distributors, but the number is blank. Until it's filled in, an operator cannot price the risk of being curtailed — and neither can the bank lending against the building.

The Secondary Bottleneck Nobody's Talking About — The Risk Nobody Can Price

This is the part I keep coming back to as a founder. The curtailment rule itself is manageable — build your own power, and you're off the list. The BYONC mechanism — "Bring Your Own New Capacity" — is actually the sane answer. On-site gas, fuel cells, batteries: they stop being insurance against a rare outage and become the thing that keeps you off the list in the first place.

The unpriced part is the problem. PJM wants a mandatory Large Load Registry of every 50-MW-plus customer — location, ramp schedule, capacity lined up. The grid calls it a forecast fix. Developers read it as a call list. And because the obligation attaches to the LOAD, not the company signing the lease, it follows the building. Sell the lease, refinance the site, change your name — the curtailment obligation stays with the walls.

Add the precedent: the Department of Energy had to issue an emergency order in July — the second in seven weeks — just to let PJM push 50-MW-plus data centers onto backup power during a heat wave. The emergency tool already existed. So what is IRAS buying beyond a queue position nobody has priced? That's the question every colo lease and every construction loan in PJM territory now has to answer.

What This Means for Independent Hosting Providers

First — know which side of 50 megawatts you live on. Most independent hosting operations never touch that threshold. But the ripple matters: capacity prices, interconnection timelines, and power costs are all moving because of the loads above it. If you rent space in a building that shares a feeder with a large load, you're in the same queue.

Second — make the registry your diligence tool. Once it's live, the curtailment status of any facility you colocate in becomes public record. If your provider is behind the meter with their own generation, that's now a structural advantage worth paying for. If they're grid-only in a stressed zone, your disaster recovery plan just gained a new column: "who gets cut first."

Third — treat on-site power as an operating license, not insurance. The era of "the grid will be there" is over in PJM. The filing is designed to force exactly this behavior. For independent operators, that means the economics of behind-the-meter generation just changed — it's no longer a resilience luxury, it's the difference between being on the list and off it.

Fourth — spell out curtailment in writing while the rate is unpriced. The compensation vacuum means nobody can price the risk today. That's the moment to lock contracts that define what happens in a directed reduction — who decides, who pays, what the SLA is. In five years, that clause will be boilerplate. Right now, you can still write it in your favor.

The Structural Reality — The Grid Just Started Saying No

Step back and look at the arc. PJM's queue is already choked — 47 gigawatts and counting. FERC ordered this filing after finding PJM's tariff "unjust and unreasonable" for lacking clear rules on co-located loads. The December 2025 order told every US grid to resolve the same question. The backstop auction runs September 30 through October 21, with results landing near December 2, and it could run as high as $20 billion for resources that must be online by June 1, 2032.

None of this is a blip. The 15 gigawatts retired since 2022 is not coming back on a spreadsheet. The 70 gigawatts of projected load is real demand from real leases. And now the grid has formally said: bring your own, or go to the back of the line — and if you show up without it, you're FIRST to be cut. That's not a market signal. That's a structural reordering of who bears the risk.

The Bottom Line

FERC hasn't ruled yet. June 1, 2027 is a planning assumption, not a deadline. Comments are due September 3. But the direction is unmistakable: the cheapest era of the AI buildout just ended, and the price of admission now includes a question nobody can answer — what does it cost to be first in line for a blackout?

Here's what I know from a decade of running infrastructure: when a risk can't be priced, someone eventually prices it for you. Usually in a way you don't like. The operators who figure out their power story now — on-site, behind the meter, contracted capacity — are the ones who won't be having that conversation from a dark building.

— Allan Ali, Founder

This article was produced with AI-assisted research and editorial support. Sources: PJM Interconnection FERC filing Docket ER26-3380-000, Forbes (Aug 21), Utility Dive, Data Center Knowledge, Reuters (Aug 13), T&D World, mgrid.org.