PPL Corp. and Blackstone Infrastructure have locked in 5 gigawatts of gas-turbine capacity to serve data-center loads in Pennsylvania, a move that bypasses PJM Interconnection’s capacity market and establishes bilateral contracting as the primary mechanism for adding generation in the Mid-Atlantic. The agreement, large enough to power roughly 3.75 million homes at peak output, signals that hyperscale computing demand is now driving resource procurement faster than regional grid operators can redesign their markets.
Why bilateral deals are overtaking PJM’s capacity auction
PJM’s Reliability Pricing Model has long been the default pathway for new generation to earn capacity payments, but its multi-year forward auctions have struggled to keep pace with the near-term, high-certainty load growth coming from data-center campuses. Vincent Sorgi, PPL’s chief executive, stated explicitly that he expects bilateral contracting – not the backstop reliability auction PJM plans for late September – to be the main route for adding generation in the region. That assessment reflects a structural mismatch: data-center developers need firm power on 12- to 24-month timelines, while PJM’s auction cycle clears capacity three years ahead and has recently produced clearing prices that some thermal developers consider insufficient to justify new builds.
The 5 GW commitment dwarfs the typical incremental additions seen in recent PJM auctions. For context, the 2025/26 Base Residual Auction cleared roughly 140 GW of total capacity, meaning this single portfolio represents about 3.5 percent of the entire RTO’s installed capacity base. Securing that volume through a private agreement removes the price and timing uncertainty of the capacity market for both the generator and the load, while also sidestepping the regulatory lag that has delayed PJM’s capacity-market reforms.
Gas turbines as the bridge technology for AI-era load growth
The choice of simple-cycle and combined-cycle gas turbines is deliberate: they can be permitted and commissioned in 18-30 months, far faster than nuclear, offshore wind, or new transmission, and they provide the firm, dispatchable output that data-center operators require for 99.999 percent uptime guarantees. That points to a de facto standardization of gas-fired generation as the “bridge” resource for the current AI infrastructure build-out, even as corporate buyers maintain long-term net-zero pledges. If this trend holds, the next five years could see 20-30 GW of new gas capacity added across PJM solely to serve data-center load – roughly double the gas additions of the previous decade – creating a tension between near-term reliability needs and state-level decarbonization mandates in Pennsylvania, New Jersey, and Maryland.
By comparison, the levelized cost of energy from new combined-cycle gas plants in the Mid-Atlantic is on the order of $45-$55 per megawatt-hour, while four-hour lithium-ion storage paired with solar currently runs $70-$90 per megawatt-hour on a levelized basis. That cost gap explains why storage has not yet displaced gas for baseload-equivalent data-center contracts, though hybrid configurations (gas plus batteries for frequency response) are beginning to appear in term sheets.
Who this affects
- Utility resource planners: Must now model bilateral data-center contracts as firm capacity additions outside the PJM auction, adjusting reserve-margin calculations and integrated resource plan assumptions to reflect loads that are contracted but not visible in the capacity market.
- Independent power producers: Face a bifurcated market where bilateral deals with creditworthy hyperscalers offer faster revenue certainty than capacity-auction participation, potentially shifting development pipelines toward contracted gas and hybrid projects.
- PJM market designers: Confront accelerating erosion of the capacity auction’s relevance for new entry; the September backstop auction will be a key test of whether revised parameters can attract any meaningful new thermal capacity.
- State climate policymakers: Need to reconcile clean-energy standards with the reality that the largest new loads in their territories are being served by fossil generation under long-term contracts that extend past 2035 target dates.
What to watch next
- PJM’s late-September backstop reliability auction results: Clearing prices and MWs procured will indicate whether the reformed auction can still attract new gas entry or if bilateral deals have permanently captured that segment.
- Permitting timelines for the first 1-2 GW of the PPL-Blackstone portfolio: Pennsylvania DEP air-permit decisions in the next 6-9 months will reveal whether state agencies can process gas-plant applications at the pace data-center demand requires.
- Emergence of “greenium” clauses in bilateral PPAs: Watch for contracts that pair gas turbines with binding commitments to retrofit carbon capture or blend hydrogen, which would signal a pathway to align these assets with 2030s decarbonization goals.
- Transmission interconnection queue dynamics in PJM’s AECO, PECO, and PPL zones: A surge in new gas interconnection requests would confirm that this deal is the leading edge of a broader wave rather than a one-off arrangement.
Bottom line: The PPL-Blackstone agreement marks the moment data-center load growth formally outpaced the PJM capacity market’s ability to deliver new firm generation, cementing bilateral gas-turbine contracts as the default infrastructure response for the AI era.
Read the full report at Utility Dive
Note: facts and figures attributed above to Utility Dive reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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