A heat dome settled over the mid-Atlantic during the July 4th weekend, and PJM's electricity demand climbed to within a few thousand megawatts of the ISO's all-time record, set in 2006. While demand ultimately fell short of setting a new peak, the near-peak demand highlights how little margin remains as electricity demand continues to grow and outpace new generation.
The Numbers
Demand built through the last week of June and broke hard over the holiday. PJM's daily peak climbed from about 150,053 MW on June 30 to 162,648 MW on July 2, its highest reading in nearly two decades and within striking distance of the all-time summer peak of 165,563 MW set in August 2006.
Seen in the chart above, peak demand came within 3,000 MW of the all-time record. However, approximately 6,000 MW of demand was reduced through demand response programs, which pay large electricity consumers to reduce usage when called upon. Without that reduction, July 2 would have almost certainly set a new all-time peak.
How PJM Held the Line
Holding demand of that size without rolling blackouts took an escalating stack of precautions. PJM recalled generation from maintenance outages on June 25 as the forecast firmed, issued a Low Voltage Alert on July 1, and ran under Maximum Generation and Load Management alerts through the July 2 peak before activating emergency demand response for the July 3 evening. Federal authority was involved as well: the Department of Energy signed two orders under Section 202(c) of the Federal Power Act, which authorizes the Secretary of Energy to order emergency electricity operations during grid emergencies. One order waived pollution limits on specified fossil units; the other authorized curtailing data centers and other loads above 50 MW onto their own on-site generation, with hospitals, 911 centers, water treatment plants, air traffic control, and defense facilities carved out.
Natural gas did the heavy lifting during the heat wave, ramping to more than 70 GW at the July 2 evening peak, when it supplied over 40% of system load on its own. Nuclear and coal held flat as baseload, so the incremental power that met each evening's record demand came almost entirely from the dispatchable fossil fleet, the very units the DOE ordered to keep running.
More Than a Heat Wave
The July heat wave may have been the catalyst, but the market response reflects a longer-term shift. PJM forecasts peak demand to grow by 32 GW between 2024 and 2030, with data centers accounting for roughly 30 GW of that increase. Current load increases and supply constraints have already started pricing in that future, and the early July heat wave provided a glimpse of what those tighter supply/demand conditions look like in the real-time market.
Capacity prices, what generators are paid to guarantee they will be available, cleared at $333.44/MW-day in PJM’s Base Residual Auction for the 2027/'28 delivery year, substantially higher than the $28.92/MW-day cleared just three auctions earlier. Monitoring Analytics, PJM's independent market monitor, attributes 63% of that increase to data center demand. The heat wave then showed what scarcity looks like in real time. System-wide, real-time prices averaged $348/MWh over July 1–3, more than five times the PJM RTO year-to-date average of $64/MWh; in the data-center-heavy Dominion zone, real-time prices averaged $467/MWh against a $98 year-to-date mark. Individual hours peaked at $1,870/MWh across the RTO and above $2,120/MWh in Dominion.
What to Watch Going Forward
PJM was able to service the high level of load by drawing reserves down by half, leaning on federal emergency authority for the third time in a single year and asking data centers to self-supply during the peak. Those are tools that scale less comfortably as load keeps climbing. The next capacity auction scheduled for this month and the ongoing FERC resource-adequacy proceedings are where the market will find out whether supply can be coaxed to grow as fast as demand.
Be sure to check back in for more Energy Market Insights as FactSet Energy continues its coverage of ever-changing power markets.
This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.