Data centres have become one of the primary sources of new electricity demand across the United States and in PJM, the largest power market in the world covering 65 million customers in the Mid-Atlantic region. The PJM market operator expects 11 GW of new data centres by 2030 in northern Virginia alone, representing more than 40% of the state’s current peak demand. According to a new report from Aurora Energy Research, a leading global provider of power market analytics, a high-growth case could drive additions of up to 15 GW (nameplate) of natural gas capacity in PJM by 2030, compared to a conservative scenario.

Since 2014, northern Virginia has seen a boom in data centres, with capacity growing 30% annually to reach more than 4 GW—ten times a decade ago and the largest concentration worldwide. A 25-square-mile area in Loudoun County known as “Data Centre Alley”, 20 miles west of Washington D.C., now contains nearly 200 data centres, with 100 more in the vicinity. 

These data centres, serving global internet traffic, demand significant amounts of electricity, and that demand is rising fast. While regional electricity demand has decreased over the last 15 years, PJM predicts data centres alone to increase peak power demand in Dominion—the utility serving most of Virginia—by 50% over the next 6 years, with data centre capacity growing by 11 GW through 2030 and another 10 GW through 2040. That equates to adding more than the entire state of New Jersey’s power demand to Virginia within a 15-year timespan. 

This fast, concentrated load growth will present a major challenge to ensure sufficient generation and transmission capacity. “Adding the 10-15 GW of firm generation capacity needed to supply these data centres and keep the lights on in Virginia will not be easy. It can take 3-4 years for the transmission organisation just to greenlight a new generator, and market prices are currently too low for developers to build the kind of capacity required,” said Zachary Edelen, PJM Research Lead at Aurora Energy Research. “Plus, this comes on top of multiple other strains on the electricity system, including conventional generator retirements, increasing reliance on weather-dependent resources, an aging transmission grid, and expected load growth from other sources, such as EVs.” 

Future growth is unlikely to be supplied by carbon-free generation alone, barring significant changes in incentives and regulations to decarbonise the grid. Although renewable capacity stimulated by state incentives grows by more than 40 GW in all of Aurora’s scenarios, transmission organisations like PJM typically limit the extent to which intermittent resources are credited for system reliability. This—and data centres’ consistently high daily demand profile—will require dispatchable generation such as natural gas or battery storage. “As a result, our analyses consistently show that data centres bolster the business case for natural gas generators, meaning state and federal governments will need to do more if they want to decarbonise,” said Edelen.  

Data centres’ load growth and the associated need for new generation capacity could strongly impact power prices, according to Aurora’s report. Aurora’s modeling shows that large demand additions can lead to a step-change in wholesale power prices, demonstrated by a 30% increase in Dominion’s 2035 power prices if the region adds 50% more demand than expected. This dynamic suggests an effective “upper bound” to regional data centre additions before consumers are severely affected by rising energy costs.  

As for capacity prices, utilities and consumers across the Mid-Atlantic could see their fixed costs for reliability rise over 400% by the late 2020s if this demand in Virginia materialises. “But a more likely outcome is for new data centres to start locating elsewhere, following where electricity is cheaper,” said Edelen.  

Despite PJM’s predictions, data centre additions to northern Virginia could slow as other regions become relatively more attractive. Artificial Intelligence training may not require the low latency that Virginia has historically provided. Other states, including Texas, Arizona, and North Carolina, are competing with Virginia’s tax breaks with incentives of their own. And local opposition, increasing power prices, and potential power deliverability issues could make Virginia go out of favor or incentivise data centres to provide their own behind-the-meter generation.  

Slower data centre growth could reduce the need for new generators in the Mid-Atlantic. However, even in a conservative case PJM will need to replace its retiring coal generators, and Aurora’s study indicates that natural gas will likely fill a significant portion of that gap. Although electricity from natural gas is 2-3 times less carbon-intensive than coal, this would still mean another 30+ year lock- in of fossil fuel generation.

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