Electric Load Growth, Scarcity Pricing, Demand Response, and You: Understanding Your Risks and Opportunities in an Era of High Energy Demand

By Brendan Boyle, Director, Market Intelligence, Transparent Energy, July 2025

For much of the past year, Transparent Energy has been informing clients about the growth of electric consumption across the country. Today’s article highlights the recent implications this transition is having on electric prices along with solutions to avoid higher costs and generate revenue for your business.

At a recent FERC conference on adequacy issues facing grid operators, Joseph Bowring, President of Monitoring Analytics, said “data centers could overwhelm the grids if they chose to.” Meta CEO Mark Zuckerburg recently posted an image on social media of the footprint of the company’s planned Richland Parish data center in Louisiana superimposed on Manhattan. Data center demand for energy is BIG!

According to data from Grid Strategies, there are six regions driving electric load growth expectations through 2029:

1. ERCOT: + 43 GW
2. PJM: + 30 GW
3. Georgia Power: + 13 GW
4. MISO: + 9 GW
5. Pacific Northwest: + 7 GW
6. SPP: + 6 GW

Total: 108 GW, or the equivalent of the combined current summer peak demand of Illinois, New York, and Virginia.

These projected increases necessitate sizable time and investment for the planning and construction of new generation, transmission, and distribution capacity.

What is Scarcity Pricing?

For a little more than 100 hours last week, the entire Northeast and Mid-Atlantic became an uncomfortable place to spend time outdoors. Power demand across the PJM region (mapped below) exceeded 160 GW, which is extreme for late June:

From Sunday to Monday, daily peak demand grew by 17 GW (+12%) and exceeded last year’s max before 2 PM. The grid weathered the heat wave in terms of overall reliability, but prices across the region rocketed up in turn:

Source: PJM.com

Parts of New York and New England also saw wholesale electric (LMP) prices selling for more than $1,000 per MWh ($1.00 per kWh!). As temperatures rise, more electricity is needed to meet cooling demand. This means older, less efficient, more expensive power plants are brought online. This all leads to the phenomenon known as scarcity pricing – a market mechanism that sends prices sharply higher when demand exceeds available supply.

Economic Response

Temperatures were even hotter on Tuesday (6/24); however, demand came in almost 2 GW lighter. Some of that had to do with changes in humidity, but a sizable portion was driven by Demand Response (DR) initiatives.

At a certain price point, electricity becomes too expensive to continue normal business operations. One option businesses have is to take advantage of programs where the grid operator will pay you to use less. In the most basic terms, there are three different DR programs:

1. Capacity / Emergency Response Programs – the most common DR program where you commit to reducing demand a few (unknown) hours per year during extreme grid circumstances.
2. Frequency / Synch Regulation – Reserved for large loads that can turn off power within seconds or minutes to stabilize irregularities.
3. Economic Response – Establishes a price point at which load can be dropped or shifted based on Locational Marginal Pricing (LMP).

While most energy users are familiar with the first, capacity/emergency response; and most can’t participate in the second, frequency/synch regulation, because of exacting time constraints; the third, economic response, provides a unique opportunity for customers that are able to actively manage energy consumption.

Transparent Energy has been collaborating with customers across the country to implement Economic Response strategies and generate revenue when electric prices soar. The concept is simple:

1. Determine how much electricity the facility can curtail given a 1-day notice.
2. Establish a strike price at which LMPs are no longer desirable.
3. Implement load shedding plan once the strike price is met.
4. Collect revenue.

Here is an example of how the program works:

During last week’s heat wave, one of our clients generated over $300,000 in Economic Response revenue, plus the added savings of kilowatt hours avoided vs. normal operations.

Achieving results like that requires organization and planning, along with cooperation from building operations. Our team at Transparent Energy is uniquely positioned to help your business explore these solutions which help stabilize the grid and positively impact your company’s bottom line. We’ll work with you to identify ways your business can avoid high-price intervals, create a competitive environment among vendors, and implement a load-reduction plan to help maximize your profitability.

The takeaway from this latest heat wave is that electricity demand is extremely sensitive to weather, and the rate at which scarcity pricing is being reached is rising fast due to overall electric demand growth. It’s time to stop viewing electricity as a liability that must be paid for every month and consider its value as an asset to your business. Now more than ever, grid operators are encouraging flexible electric consumption and paying handsomely to end-users that can provide relief as it is needed.

Don’t stand on the sideline as other businesses avoid high-priced electricity. Transparent Energy offers comprehensive solutions to help monetize your operational flexibility. This combined with our industry-leading reverse auction platform will allow your business to avoid soaring prices and implement a long-term energy management strategy that reduces risk and minimizes cost.

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Interested in exploring demand response programs as part of a comprehensive energy management strategy optimized for today’s rapidly changing energy environment? Contact us today at letstalk@transparentedge.com.