Is the "AI butterfly effect" about to send electricity prices through the roof? In this video, we break down the critical PJM Base Residual Auction taking place between December 4th and December 10th, 2025. While grid auctions usually sound arcane and boring, this one is deciding the capacity and cost of power for June 2027—and the stakes have never been higher.

Here is what we cover in this episode:
• The AI Boom & Power Demand: How the launch of ChatGPT and the manufacturing of energy-hungry Nvidia chips kicked off a massive spike in data center load, specifically in states like Ohio and Virginia.

• The Supply Crunch: Why the grid’s supply side hasn't kept up. We discuss the fallout from Winter Storm Elliot in 2022, where nearly 40 gigawatts of gas generation failed to show up, forcing PJM to derate its assets and tighten the supply curve.

• Skyrocketing Prices: We look at the numbers. Capacity prices soared from a three-year average of roughly $37 to over $269 in previous auctions.

• The Price Cap Strategy: How Pennsylvania Governor Josh Shapiro negotiated a temporary price cap (a "collar" between ~175and 325) to protect consumers."

• The Coming "Gloves Off" Moment: This current auction is the last one protected by the price cap. Future auctions scheduled for 2026 will have no floor or ceiling, potentially leading to even more volatile pricing.

• Political Fallout: With data center loads costing the market over $16.6 billion in the last two auctions alone, state governors and the Department of Energy are now fighting over how to fix the interconnection queue and manage the grid’s future.

The results of this auction will be released on December 17th, and they could signal a boiling point for the US electrical grid

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