The artificial intelligence boom is upending US electricity markets, and this week, more indications emerged that the US natural gas industry stands to profit.

The tech sector’s energy appetite drove the cost of generating capacity to record levels in the US’ largest power market, the PJM Interconnection, highlighting the value of dispatchable power — and particularly gas-fired generation.

And data center developer Crusoe finalized a deal this week to buy 29 natural gas turbines from GE Vernova — enough to supply 1 gigawatt of electricity — to help power its rapidly expanding AI infrastructure build-out.

“The greatest barrier we collectively face to our country’s leadership on AI today is timely access to reliable electric power,” Advantage Data Centers Executive Vice President Jeff Tench told a US Senate Energy and Natural Resources Committee hearing Wednesday. “I have seen the scale and speed of hyperscale data center development grow dramatically. Five years ago, a 30 megawatt facility was considered large. Today, 100 MW is the starting point, with campus developments commonly reaching 500 MW or more, and we have multiple customers seeking 1 GW or more for AI infrastructure, which is the equivalent of all electrical power used here in Washington, DC.”

‘Left No Choice’

That trend, along with years-long waits for links with the power grid, has data center developers building their own gas-fired power plants.

Tench said Advantage had planned to interconnect with the local utility to obtain 100 MW of power for a data center it developed in Loudon County, Virginia, but was “left no choice” after the utility said it could not connect them to the power grid for another five to seven years.

“The planning cycles for our data center developments can sometimes span multiple years. … We had already committed hundreds of millions of dollars into the development project,” Tench testified. “In this particular case, we were fortunate in the fact that our property sat on top of a high-volume, high-pressure natural gas line. And we scrambled. We designed, built and commissioned a power plant operating completely independent of the grid within 18 months, and that data center is up and running with a very important customer of ours today.”

Tench said the site “was only big enough to handle a turbine plant, and there would have been no way to bring in wind and solar in that particular case.”

Capacity Prices Skyrocket 

Utilities in PJM, which serves about 65 million customers in a territory spanning all or parts of 13 states and the District of Columbia, must buy capacity from generators and demand response resources that clear the PJM capacity auction.

In this week’s auction, the region-wide price for the 2026-27 delivery year jumped 22% to the federally approved cap of $329.17 per megawatt day (MWd). In the previous delivery year, capacity prices jumped 833% to $269.92/MWd, following three consecutive auctions that resulted in prices well below $100.

Capacity of 134,205.3 MW cleared the 2026-27 auction, including 63,377 MW of gas-fired generation. The results demonstrate “a near inability to provide supply adequate to clear the market overall — regardless of price,” analysts at Jefferies wrote in a Jul. 23 report.

The bank noted that ahead of the auction, bilateral capacity trades were in the high $200s/MWd. That activity “could trend higher above the ceiling level of $329/MWd for 2028-29, the subsequent auction after this next December. We would model flat at the cap for at least the next two auctions.”

In a July filing with the US Federal Energy Regulatory Commission, PJM’s independent market monitor, Monitoring Analytics, said the electricity market’s tightness is “almost entirely the result of large data center load additions, both actual historical and forecast.”

Talen Scores Windfall

Sustained high capacity prices benefit incumbent merchant generators, most of which operate large fleets of gas-fired power plants. Talen Energy’s stock opened almost 9% higher on Jul. 23 after the auction’s results were released.

Talen owns 9,662.7 MW of capacity in PJM, 56% of which burns gas, about 21% nuclear and about 14% coal. The Houston-based company said 6,702 MW of its capacity cleared the auction, which will bring in about $805 million in capacity revenues for the 2026-27 delivery year, which runs from Jun. 1, 2026, through May 31, 2027.