Wood Mackenzie warns AI data center power race threatens grid projects and raises consumer costs

Wood Mackenzie's latest report warns that the rush to power AI data centers is outpacing grid development, creating serious risks for projects and consumers. In deregulated markets like PJM, 78 gigawatts of committed data center load face only 36 gigawatts of accredited generation capacity. The report highlights that collocated generation, often seen as a quick fix, faces major technical and regulatory hurdles that make it unscalable for most developers. Key challenges include the damage that rapid AI power demand changes can cause to gas turbines, the rapid degradation of backup batteries, and unresolved grid stability issues like power harmonics. PJM is already bifurcating its capacity market to attract new generation, which could raise electricity prices for all customers and trigger political backlash. In Texas, current market prices fall well below the level needed to incentivize new gas plants. The report warns that regulatory intervention driven by affordability pressures is likely, and that investors should prepare for market rule changes. For those tracking grid decarbonization and energy transition finance, this is a concrete example of how demand growth is colliding with infrastructure reality.