AI datacenter boom forces US utilities to extend coal plants, undermining climate policy and net-zero pledges
At least 15 coal plant retirements delayed since January 2025 as hyperscalers' $380 billion buildout outpaces renewable energy deployment, creating $163 billion ratepayer burden and exposing tech sector sustainability claims.
AI-driven datacenter expansion is forcing US utilities to delay retirement of at least 15 coal plants and propose 10,800 MW of new fossil fuel generation, directly undermining the Inflation Reduction Act’s climate objectives and exposing a critical infrastructure velocity mismatch: Big Tech’s $380 billion annual buildout is racing ahead of renewable energy deployment, leaving fossil fuels as the default gap-filler.
The scale of the reversal is stark. More than 9,000 MW of fossil fuel generation slated for closure has been delayed or placed at risk, according to Frontier Group analysis. Dominion Energy postponed retirement of its Clover Power Station by 20 years—from 2025 to 2045—citing datacenter demand. The 15 coal plants with delayed retirements emitted nearly 65 million metric tons of greenhouse gases in 2023, more than all pollution sources in Massachusetts combined, per E&E News.
US Energy Secretary Chris Wright made the policy explicit in September 2025: Data Center Dynamics reported his statement that “the majority of that coal capacity will stay online” to meet datacenter demand. Southern Company CEO Chris Womack was equally direct, telling investors the company would “extend coal plants as long as we can because we need those resources on the grid,” according to DeSmog.
The Capacity Market Breaking Point
The PJM Interconnection—the grid operator serving 65 million people across 13 states—provides the clearest signal of energy scarcity. Capacity prices jumped 833% in the 2025/2026 auction, from $28.92 to $269.92 per megawatt-day. Datacenters accounted for 63% of that increase, translating to $9.3 billion in additional costs to ratepayers, per IEEFA analysis.
The December 2025 auction hit the price cap of $333.44/MW-day for the first time in PJM’s history while failing to meet reliability requirements by 6,625 MW. Residents across PJM states could face $163 billion in cumulative additional capacity costs through 2033, according to NRDC projections. Virginia residents saw electricity bills increase by an average $21 per month starting June 2025, with roughly $10 attributed to datacenter-driven capacity price spikes.
“Our capacity market is breaking under the weight of data center demand and a dysfunctional interconnection queue.”
— Sarah Moskowitz, Executive Director, Citizens Utility Board of Illinois
The market monitor for PJM found datacenters responsible for 40% ($6.5 billion) of costs in the December auction, reported Utility Dive. This marks the first time the grid operator has experienced a reliability shortfall in a capacity auction, raising the prospect of forced blackouts if datacenter load growth continues unchecked.
Infrastructure Velocity Mismatch
The core dynamic is speed. US datacenter power demand is projected to reach 76 GW by 2026, up from approximately 50 GW in 2024—a 52% increase in two years. Globally, datacenter electricity consumption could hit 1,050 TWh by 2030, up from 415 TWh in 2024, making the sector the world’s fifth-largest energy consumer, according to Brookings Institution analysis of IEA data.
Against this, renewable energy deployment faces 5–10 year lead times for large-scale projects, constrained by permitting, interconnection queue backlogs, and transmission buildout. The result: Big Tech’s combined $380 billion in datacenter capital expenditure for 2025—Meta alone spent $65 billion, Microsoft pledged $80 billion—is overwhelming the Inflation Reduction Act’s $370 billion in clean energy incentives.
Coal-fired generation in the US was 15% higher in H1 2025 compared to the same period in 2024, reversing years of decline. Five coal plants that received pollution compliance waivers from the Trump administration emitted nearly 190 pounds of mercury in 2023 alone. The regulatory rollback, combined with economic pressure from datacenter contracts, has created what E&E News characterises as utilities “emboldened by changes in the regulatory landscape.”
Quentin Good, policy analyst at Frontier Group, framed the causality bluntly: “These are power plants that were scheduled to close this year or next year, and they would not be polluting and burning coal if not for AI,” he told E&E News. NRG Energy withdrew the retirement notice for its Fisk oil plant after determining “there’s an economic case to keep them around,” according to senior vice president Matt Pistner.
Corporate Net-Zero Credibility Under Pressure
Hyperscalers face mounting regulatory and reputational risk as the gap between sustainability commitments and operational reality widens. A June 2025 report from NewClimate Institute and Carbon Market Watch concluded that tech companies’ greenhouse gas emissions targets “appear to have lost their meaning and relevance” due to AI growth outpacing renewable buildout, reported Trellis.
Microsoft reported matching 100% of its global electricity use with renewables in February 2026, but this relies on unbundled renewable energy certificates (RECs)—a practice under investigation by 16 Republican state attorneys general led by Montana. The AGs are probing whether Amazon, Google, Meta, and Microsoft’s renewable energy claims constitute greenwashing, given that RECs allow companies to claim renewable energy use while their datacenters draw power from grids still heavily dependent on fossil fuels.
- At least 15 coal plant retirements delayed since January 2025, with 10,800+ MW of new fossil generation planned—reversing a decade of coal fleet reductions
- PJM capacity prices jumped 833% in 2025, with datacenters responsible for 63% of the increase and 40% of December auction costs ($6.5 billion)
- Big Tech’s $380 billion annual datacenter buildout is outpacing the IRA’s $370 billion clean energy investment, creating a structural energy deficit
- Corporate net-zero pledges increasingly rely on carbon credits and REC accounting rather than actual grid decarbonisation, inviting regulatory scrutiny
The workaround strategies are proliferating. Microsoft, Google, Amazon, and Meta are ramping up carbon credit purchases, with CNBC reporting in March 2026 that the AI boom is driving demand for carbon removal as “impossible” to achieve net-zero without it, given tight clean energy supply. Hyperscalers are also negotiating nuclear power purchase agreements and exploring small modular reactor deployment—strategies that address long-term supply but offer no solution to near-term grid stress.
What to Watch
The April 2026 PJM capacity auction results will provide the next market signal on whether datacenter-driven scarcity is accelerating or stabilising. Watch for additional coal plant retirement delays in the South and Midwest, where utilities face the steepest datacenter growth. Monitor state-level pushback: Introl reported that 230+ environmental groups coordinated a December 2025 campaign demanding a moratorium on new datacenter construction—regulatory resistance is building.
Track interconnection queue reform efforts at FERC and regional grid operators. The current backlog is forcing utilities to choose between waiting years for renewable projects or extending fossil fuel plants immediately. Finally, scrutinise hyperscaler sustainability reporting through 2026: the gap between renewable energy claims (via RECs) and actual grid decarbonisation will determine whether state AG investigations expand into federal enforcement action or shareholder litigation. The infrastructure velocity mismatch is no longer a forecast—it is creating material financial and regulatory risk today.