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PJM tests bilateral contracts as legacy interconnection queue failures mount
A 77% withdrawal rate in PJM's formal queue is driving developers and data centers toward direct bilateral agreements, with 130 GW already signaling interest.
A Canary Media analysis published on Friday (2026-07-17) identified bilateral contracts between data centers and power developers as a likely alternative channel for new US generation capacity to reach construction — a route that is emerging because PJM's formal interconnection process has struggled to convert applications into operating megawatts. PJM's Western Hub spot power traded at $72.38/MWh on Friday (2026-07-17), a price that captures how tightly balanced the grid has become as demand from AI infrastructure accelerates.6
The historical record in PJM's legacy queue makes a strong case that something different is needed. Of all the generation capacity that filed interconnection requests from 2000 to 2019, only 13% had reached commercial operations by the end of 2024. The other 77% had been withdrawn.2
Data centers are driving the demand that is exposing this structural gap. They now account for roughly half of all incremental electricity demand growth in the US, according to the IEA's global energy assessment.2 Global electricity consumption from data centers rose 17% in 2025, with AI-focused facility consumption up 50% over the same year, IEA figures show. That load is landing on a grid whose new-build pipeline has a three-in-four failure rate.2
The scale of what needs to be built makes the timeline pressure vivid. Grid Strategies projects US data center capacity additions of between 65 GW and 90 GW by 2029.3 Data centers already consume 5% of American electricity, up from 2% a decade ago, and the IEA projects that share to approach 10% by 2030.4
PJM's bilateral experiment has drawn an unexpectedly large response. When the grid operator asked developers whether they would contract directly with large loads, over 130 GW came forward, according to the Electric Power Supply Association, an industry group representing suppliers with more than 225,000 MW of US generating capacity. The figure exceeded the 55 GW that has already cleared the formal interconnection queue and stands ready to build. A further 220 GW entered PJM's latest interconnection review cycle.5
Not everyone reads the queue data as evidence of system failure. Todd Snitchler, EPSA's president, argued on July 7 (2026-07-07) in Utility Dive that PJM's capacity market is functioning and that critics have overstated the dysfunction. The 55 GW of cleared generation, on that reading, represents real forward momentum, and the 130 GW bilateral response is evidence of developer confidence rather than evidence that the formal process has broken down.5
The bilateral route carries its own complications. How direct contracts between data centers and power developers interact with PJM's existing market design has not been settled. State-level regulatory frameworks differ across PJM's thirteen-state footprint, and hyperscalers have generally preferred shorter-duration supply commitments than power developers are willing to accept without revenue certainty over a longer horizon.6
Adjacent markets point to the underlying demand intensity. In MISO, the coal generation dark spread averaged $23/MWh in 2025, up from $11/MWh in 2024 — a 111% increase — as average MISO electricity prices rose 44% while coal prices moved up just 3%, according to EIA data.1 The natural gas spark spread in MISO gained only 18% over the same period, held back by a 63% rise in gas prices, ending at $14/MWh versus $12/MWh in 2024.1 That spread divergence favored coal over gas in the central grid, complicating assumptions about how new data center load will ultimately be served as it shifts east toward PJM.
For PJM, the test is whether bilateral interest converts to signed contracts and eventually to energized megawatts — a path the formal queue has managed only 13% of the time over a quarter-century. How state regulators treat direct data-center power agreements in the coming months will be the first clear signal that the bilateral channel can deliver what the legacy process could not.6,5