Jeff Guo

And so the idea is that I'm a power plant operator.

And even if nobody is buying my energy, I'm still going to get this revenue stream just for being willing to supply power on those peak demand days, just to say I'm ready to, if you need it.

It's hard to stress enough how weird the capacity market is.

So PGM will try to model how much power the region is going to need three years out into the future.

And then it will hold an auction where it will determine how much power plants should be paid for promising to be available in case they are needed on that one super hot day when everyone turns on their AC.

Local power distributors basically have to pay power plant operators just for existing, whether or not those power plants ever generate any actual power to sell.

So it was relatively easy for power generators to keep up with any demand growth.

But Kathy says the moment when a kajillion data centers showed up and started wanting more and more and more power, things really broke down.

It turned out the capacity market was not great at dealing with this kind of scenario.

The amount local utilities across PJM had to shell out went up by $12 billion in one year.

Again, not to actually buy any electricity, just to guarantee that there would even be enough electricity to buy in the future.

And that $12 billion extra, it got spread out across the electric bills of all the customers in the PGM region, including Ken and Carol in Ohio.

Yeah, remember, what an energy company is selling in the capacity market is its ability to supply power whenever demand is at its peak.

And solar panels, they cannot generate power at night.

Wind turbines can't make much power on calm days.

In an email, a PJM spokesperson said, "...this narrative is old and it's no longer true, that PJM had done a good job clearing the backlog of power plants waiting to connect."

But the experts I spoke to said it was still a problem.

Kathy says it's important to keep in mind why all of this is happening.

A bunch of tech companies are in a big hurry to build data centers, which is creating a huge surge in demand for power.

For some of those projects, companies are building their own on-site power plants.