The PJM Interconnection market, home to the largest concentration of data centers in the world, is bracing for a massive expansion after Google committed to invest billions of dollars in the power-hungry facilities across the system. This major outlay, the latest in a long spending spree among U.S. tech titans, threatens to worsen an already precarious power supply-demand imbalance in the market, further pressuring PPA valuations toward a 12-month high.

Alphabet’s Google on July 15 announced that it will invest $25 billion in data center and AI infrastructure over the next two years in states within the PJM wholesale market. This commitment aligns with Google’s $75-billion AI and cloud spending target for this year – up from about $52.5 billion last year – and builds upon Google’s significant presence in the region. In Virginia alone, where Google has three data center campuses, its investments have already topped $4 billion. PJM’s market footprint extends across the Mid-Atlantic and Midwest, spanning 13 states and the District of Columbia.

As part of its announcement, Google said it will also invest in “increasing America’s energy abundance,” including by investing more than $3 billion to modernize two hydropower facilities in Pennsylvania. But it’s unclear what additional investments will be made to help meet the surging power demand from its expanding facilities.

The “unique and unprecedented” load growth from existing and planned data centers are the primary factor behind PJM’s record-high demand forecasts and the resulting tight supply-demand conditions, Monitoring Analytics, the market’s independent watchdog, found in a June 3 report. The watchdog found that data centers will account for over 90% of the large load power demand on the system next year, far exceeding other industrial users.  

This surge has also been the main driver of record-high prices in PJM’s capacity auction, which is used to ensure future system reliability. For the 2025/2026 delivery year alone, data center load more than doubled auction revenues, adding over $9 billion to the market, the watchdog’s analysis found.

The sustained expansion of data centers from the likes of Google, as well as Amazon, Microsoft, and others, is adding more pressure to an already overheated market. To meet the accelerating electricity use, PJM has taken extraordinary measures to expedite capacity additions including by revamping the interconnection queue process and by accelerating shovel-ready projects. But those efforts appear to be proving insufficient in the short term to keep pace with the rapid speed and large scale of the load growth. PJM has warned of a supply deficit as soon as 2026.

For generators in PJM, the announcement is the latest in a series of bullish developments in the market that promise to keep energy and capacity prices elevated for the foreseeable future. In the capacity market, a significant source of revenue for renewable generators in the region, an auction price cap and floor set by PJM has paved the way for sky high revenues through the auction for the 2026/2027 Delivery Year.

The fair market value for a 10-year, as-generated, solar PPA, starting in 2027, for delivery in PJM’s benchmark Western Hub, reached $87.96/MWh on July 16 – nearing a 12-month high, according to Pexapark’s PPA data. This valuation, which incorporates PJM’s base case load forecast, was the highest price since July 31, 2024, when prices hit $88.22/MWh.  

Even before Google's pledge, PJM was grappling with escalating load forecasts. Its 2025 load forecast projects that power demand will hit nearly 159,000 MW in 2026, marking a 4.4% increase from PJM's projection for that year made in 2022. For comparison, PJM's highest summer peak load since 2013, excluding exports, was just 148,890 MW, while the average annual forecasted growth rates have generally been below 1% in prior load forecast reports.