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How AI Data Center Demand Raises Ohio Power Prices

Ohio market insight · Data centers

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The short answer

Data centers raise Ohio commercial electricity prices mainly through one channel: PJM's load forecast, which sets how much generating capacity the region must buy. Forecast growth, together with plant retirements, took the region-wide capacity price from $28.92/MW-day in 2024/25 to the $325–$333 cap for 2026/27 through 2028/29. Every Ohio customer pays that through a capacity tag. Transmission build-out and higher wholesale energy prices are real but secondary channels.

How large the demand growth is

The national numbers set the context. Lawrence Berkeley National Laboratory estimates U.S. data centers used about 176 TWh in 2023, or 4.4% of U.S. electricity, and projects 325–580 TWh by 2028. The wide range reflects uncertainty about how quickly AI hardware is deployed and how efficiently it runs.

PJM, the grid operator for Ohio and 12 other states plus D.C., translates that into peak demand. Its January 2026 load forecast projects summer peak growing by about 66 GW over ten years, to roughly 222 GW in 2036, or about 3.6% a year. As recently as its 2021 forecast, PJM expected about 0.3% annual growth. AEP, ATSI (the FirstEnergy zone) and many other utilities submitted large-load adjustments for data centers into the new forecast.

The near term was trimmed. PJM lowered its 2027 summer peak by about 2.3% versus the prior forecast, citing stricter vetting of data center and large-load requests and updated economic inputs. Zone by zone, the changes went in different directions: the AEP zone's 2031 forecast fell about 10.4% (3.7 GW), while the Dayton (AES Ohio) zone's rose about 27% (1 GW).

Locally, AEP Ohio reports about 17,861 MW of data center load under contract through 2035, against a system peak of roughly 8,000–10,500 MW.

Why data center load is hard on the grid

Two features make data center load costly to serve:

  • It runs around the clock. A large data center draws close to its full load in every hour, including the summer peak hours that set capacity needs. Most commercial loads fall off at night and on weekends.
  • Cooling adds to the IT load. Uptime Institute's 2025 survey puts average power usage effectiveness (PUE) at 1.54. In other words, a typical facility draws about 0.54 kW for cooling and other overhead for every 1 kW of computing.

Because the load is steady and present at peak, nearly every megawatt of it counts toward PJM's reliability requirement.

The price mechanism, step by step

  1. Forecast. PJM's load forecast sets the reliability requirement: how many megawatts of accredited capacity the region must secure for a delivery year.
  2. Auction. In the Base Residual Auction, generators, storage and demand response offer capacity against a demand curve built from that requirement. If demand rises faster than supply, the clearing price rises.
  3. Allocation. Each customer's share is its capacity tag (peak load contribution, or PLC), set from its load during PJM's summer peak hours. Tags reset every June 1.
  4. Billing. Utilities build capacity costs into the default (SSO) price through their supply auctions. Suppliers either include capacity in a fixed price or pass it through as a separate line.

The last five auctions show the effect:

Delivery year (June–May) RTO capacity price ($/MW-day) Approx. $ per kW-year of tag Illustrative cost for a 100 kW tag
2024/25 $28.92 (Duke zone $96.24) $10.56 $1,056
2025/26 $269.92 $98.52 $9,852
2026/27 $329.17 (cap) $120.15 $12,015
2027/28 $333.44 (cap; 6,623 MW short of target) $121.71 $12,171
2028/29 $325.00 (cap; 6,831 MW short of target) $118.63 $11,863

Illustrative: price × 365 days ÷ 1,000, times a 100 kW tag. Actual charges also include PJM scaling factors, losses and supplier margin.

The two most recent auctions cleared at the cap while still falling short of PJM's reliability target, so the cap, not supply and demand, is what held the price. Without it, prices would likely have cleared higher.

Secondary channels: transmission and energy

Transmission. New substations and high-voltage lines built for large loads go into utilities' FERC-approved transmission revenue requirements. Ohio customers then pay through retail riders: the Basic Transmission Cost Rider at AEP Ohio and Rider NMB at the FirstEnergy utilities, for example. AEP Ohio's data center tariff requires minimum payments so that data centers carry their share, but how costs are divided among customer classes still moves from year to year.

Energy. More round-the-clock load means more hours when natural gas plants set the wholesale price. EIA's Short-Term Energy Outlook expects PJM to account for nearly 45% of U.S. generation growth in its forecast.

Retail result. EIA data put Ohio's average commercial price at about 13.78¢/kWh for January–June 2026, against 11.07¢ a year earlier. The U.S. average was about 13.86¢. That change combines capacity, energy and delivery; EIA does not assign it to any one cause.

Tight operations. In May 2026, the Department of Energy issued a three-day emergency order letting PJM curtail large loads that have backup generation, as a last step before rolling blackouts during unseasonable heat.

What could ease the pressure

  • Price collar. FERC approved the collar ($175 floor, about $325 cap) for the 2028/29 and 2029/30 auctions. The 2029/30 auction runs December 9–15, 2026.
  • New supply. New generation, uprates and delayed retirements add capacity. Supply that clears in future auctions is the main path to lower prices.
  • Better forecasting. Tighter vetting, such as financial commitments under tariffs like AEP Ohio's, keeps speculative projects out of the forecast.
  • Demand response. Large loads that agree to curtail at peak reduce the capacity the region needs to buy.

None of these changes prices already set through May 2029.

What this means for a commercial buyer

Capacity prices through May 2029 are known, so a contract signed today prices in known inputs rather than guesses. The open questions are energy prices, the 2029/30 auction, and your own tag. Measure your tag, decide whether capacity is fixed or passed through in your contract, and treat summer peak hours as the most expensive of the year.

For how AEP Ohio's large-load rules work, see the AEP Ohio data center tariff. For specific ways to limit your exposure, see how businesses can respond to data center growth. For the projects in New Albany and Licking County, see Intel, AWS and central Ohio data centers. Every auction result is explained in the PJM capacity pillar.

FAQ

Are data centers the only reason Ohio capacity prices rose?

No. Capacity prices reflect demand (the load forecast, where data centers are the largest source of growth) and supply (retirements and slow new entry). Both moved the wrong way at the same time.

How much of my bill is capacity?

Multiply your capacity tag in kW by about $120 per kW-year at 2026/27 prices, then divide by your annual kWh. For a site with a 100 kW tag using 400,000 kWh a year, that is about 3¢/kWh before scaling factors and margin.

Did PJM's lower near-term forecast reduce my costs?

Not for delivery years already auctioned. A lower forecast can lower demand in future auctions, starting with 2029/30, but the collar still limits how far prices can fall or rise.

Do data centers pay their share of grid costs?

They pay for capacity through their own tags like any customer. In AEP Ohio's territory, the data center tariff adds minimum bills, exit fees and collateral so other customers are less exposed if a project underuses the grid built for it.

Sources

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