Another Boffo Energy Forecast, Just in Time for DeepSeek

The nation’s largest electricity market expects to be delivering a lot more power through the end of the next decade — even more than it expected last year.

PJM Interconnection, which covers some or all of 13 states (and Washington, D.C.) between Maryland and Illinois, released its latest long-term forecast last week, projecting that its summer peak demand would climb by almost half, from 155,000 megawatts in 2025 to around 230,000 in 2039.

The electricity market attributed the increased demand to “the proliferation of data centers, electrification of buildings and vehicles, and manufacturing,” and noted (not for the first time) that the demand surge comes at the same time many fossil fuel power plants are scheduled to close, especially coal plants. Already, some natural gas and even some coal plants in PJM and elsewhere that were scheduled to close have seen their retirement dates pushed out in order to handle forecast electricity demand.

This is just the latest eye-popping projection of forthcoming electricity demand from PJM and others — last year, PJM forecast summer peak demand of about 180,000 megawatts in 2035, a figure that jumped to around 220,000 megawatts in this year’s forecast.

While summer is typically when grids are most taxed due to heavy demand from air conditioning, as more of daily life gets electrified — especially home heating — winter demand is forecast to rise, too. PJM forecast that its winter peak demand would go from 139,000 megawatts in 2025, or 88% of the summer peak, to 210,000 megawatts in 2039, or 95% of its summer peak demand forecast for that year.

Systems are designed to accommodate their peak, but winter poses special challenges for grids. Namely, the electric grid can freeze, with natural gas plants and pipelines posing a special risk in cold weather — not to mention that it’s typically not a great time for solar production, either.

Aftab Khan, PJM’s executive vice president for operations, planning, and security, said in a statement Thursday that much of the recent demand increase was due to data centers growing “exponentially” in PJM’s territory.

The disparity between future demand and foreseeable available supply in the short term has already led to a colossal increase in “capacity” payments within PJM, where generators are paid to guarantee they’ll be able to deliver power in a crunch. These payments tend to favor coal, natural gas, and nuclear power plants, which can produce power (hopefully) in all weather conditions whenever it’s needed, in a way that variable energy generation such as wind and solar — even when backed up by batteries — cannot as yet.

Prices at the latest capacity auction were high enough to induce Calpine, the independent power company that operates dozens of natural gas power plants and recently announced a merger with Constellation, the owner of the Three Mile Island nuclear plant, to say it would look at building new power plants in the territory.

The expected relentless increase in power demand, power capacity, and presumably, profits for power companies, was thrown into doubt, however, when the Chinese artificial intelligence company DeepSeek released a large language model that appears to require far less power than state of the art models developed by American companies such as OpenAI. While the biggest stock market victim has been the chip designer Nvidia, which has shed hundreds of billions of dollars of market capitalization this week, a number of power companies including Constellation and Vistra are down around 10%, after being some of the best stock market performers in 2024.