Load growth is dominating headlines and decision-making across the American energy industry in 2025. The artificial intelligence (AI) arms race between the world's largest and wealthiest tech companies is driving hundreds of billions of dollars into the construction of new data centers and high-performance computer equipment manufacturing facilities.. Data centers and high-tech manufacturing represent the largest segments of demand growth in most wholesale power markets (but are by no means the only driver of growth) and projected near-term load growth has increased substantially year-over-year.
Power prices and price volatility are likely to rise in the short-term in response to this developing surge in demand. Any firm looking to transact in electricity or build new generation resources will encounter heightened uncertainty and risks. Typical strategies for clean energy buyers in particular could be exposed to significantly more upside or downside than was originally anticipated. However, barring wider changes in economic conditions or geopolitics, we contend that these increases will not immediately make or break existing procurement strategies and hedges. While it may feel as though power market conditions are changing rapidly, there are reasons for skepticism and caution. This article highlights three factors that we think will modulate the impact of data center-driven power market evolution: large load interconnection rates, resource adequacy preservation, and uncertainty in data center efficiency gains.
The first market dynamic to consider is the rate of large load interconnection. Just as new generators need to apply to ISOs and RTOs to join the grid, large new loads also need to apply for interconnection. Over the last decade, generation interconnection queues across the United States have grown ten-fold to over 2,600 GW, driven primarily by new wind, solar, and storage projects. These generation resources are not being reviewed and approved for interconnection to the grid nearly as quickly as they have been added to the queue, resulting in years-long backups and delays in most regions. As new data centers apply for grid interconnection in unprecedented volumes, it is likely that queue times for these projects will also grow substantially unless market reforms are implemented and supply chains can keep pace. Some data centers may elect to develop new generation capacity on-site to help ease the interconnection burden or, in extreme circumstances, operate off-grid as has been considered by some prospective green hydrogen producers. It is also likely that some proposed data centers will not make it to market at all due to a range of grid and non-grid-related factors, a pattern that is well established in the generation queues. Data center interconnection attrition will therefore temper the growth of electricity demand and, all else being equal, power prices.
The second market dynamic to focus on is the relationship between overall power supply and demand, otherwise known as resource adequacy. Grid operators are tasked with maintaining resource adequacy and a healthy surplus of generation capacity to cover for generators that are offline for maintenance or other reasons. Existing generation resources, particularly older, 'dispatchable' coal and gas units, retire for economic or regulatory reasons every year and need to be replaced with new generation to maintain resource adequacy. Load growth and more frequent extreme weather conditions are two of the many other factors that threaten to further erode resource adequacy. In response, most U.S. power markets (with ERCOT as the primary exception) operate capacity markets, which both pay for generation capacity to remain online and send price signals to generation operators and developers when more capacity is needed in the coming years. The recent record-high capacity prices recorded in the 2025/2026 PJM Base Residual Auction results are a stark example of this signal. While there is plenty of new generation capacity that wants to connect to the grid, very little of that capacity is dispatchable.
Grid operators discount the true capacity of resources like wind, solar, and battery storage to better account for their contribution to power supplies during high demand periods. Data centers in particular reinforce this pressure due to their typically steady 24/7 demand profiles. In a rapid load growth environment, older dispatchable resources that might otherwise retire would be incentivized to stay online for an extended period to support grid reliability and capture higher power prices. While the pace of load growth is likely to outstrip generation additions and extensions of existing resources (including mothballed nuclear power plants in some extreme cases), grid operators will not sacrifice resource adequacy for the sake of accommodating every data center that wishes to interconnect. As long as resource adequacy is maintained in the coming years, wholesale power prices in a given market are unlikely to rise by leaps and bounds.
Another factor to consider in data center load growth is energy efficiency. New AI models like DeepSeek have grabbed headlines in recent weeks with their apparently substantial energy efficiency gains compared to incumbent AI models, raising questions about the relationship between AI energy efficiency gains compared to AI service demand growth. Although no one knows exactly how much new load will materialize and when, it is clear that substantial load growth is about to arrive. The crux of the matter now is whether load-serving entities, regulatory bodies, and supply chains enable load growth at rates that jeopardize resource adequacy or introduce unreasonable power price volatility.
It is clear that many factors are at play when considering the impact of load growth on wholesale power prices. As you assess changing power market conditions and examine new power price forecasts, here are a few key points to focus on:
While it is true that the power sector is living through a period of increased uncertainty and risk, not every worrisome headline should be taken at face value. By considering the above questions and market dynamics, buyers and sellers of clean power can ensure they’re making strategic decisions based on reality — not just hype.
Jennifer Newman is an atmospheric scientist currently focused on investigating new methods for estimating the risk of potential wind projects at REsurety. Dr. Newman holds Doctor of Philosophy and Master’s degrees in Meteorology from the University of Oklahoma. She also holds a Bachelor’s degree in Atmospheric Science from Cornell University.
