Google's 1,070 MW Virtual Power Plant Turns PJM's $325 Capacity Cap Into an AI Capital Line

PJM's July 2026 Base Residual Auction cleared at $325 per MW-day — the cap set by the Federal Energy Regulatory Commission — and still came 6,831 MW short of its reliability requirement, with the reserve margin at 14.7% on 138,318 MW of unforced capacity. It was the third consecutive auction to clear at a cap, after $269.92 and $329.17 per MW-day for the two prior delivery years. When a market cannot price scarcity it rations it instead, and PJM is rationing megawatts through interconnection queues.

On October 6, 2026, Constellation Energy announced a 20-year power purchase agreement with Google for 890 MW of new nuclear capacity at 11 reactors in Illinois, Pennsylvania and New Jersey, plus a 15-year supply agreement for another 2,700 MW — 3,590 MW in all, backed by more than $4.3 billion of investment and a first uprate due in 2028. Sixteen days later, Google and Voltus expanded the PJM virtual power plant from 100 MW to 1,070 MW, running through 2040 — buying the megawatts and the right to be called on in the same market.

At the 2028/29 clearing price, 1,070 MW of accredited capacity is worth about $127 million a year gross, before any share to the aggregator and before the cost of the assets standing behind it. Google's payment is not disclosed, so the only defensible read is comparative: the same 1,070 MW of new nuclear capacity would cost on the order of $5.2 billion at the rate Constellation Energy is investing per megawatt of uprate. The demand-side portfolio buys queue position and speed, not cheap power.

The 1,070 MW does not exist yet: Voltus expects to ramp the plant over three to four years and then run it under contract with Google through 2040. The hardware behind it is a mix of home batteries, smart thermostats and industrial assets assembled by third parties rather than built by a utility. That is the structural change — the supply of flexibility now comes from fleets that can be paid to switch off, and the party that signs the contract owns the option.

Downstream, the capacity has to land somewhere. Generators sell into the capped auction, utilities build the wires and the rate base, and ratepayers eventually carry the bill for the capacity that was not built. FERC's October 2026 rejection of most of PJM's bring-your-own-power plan removed the rule that would have forced large new loads to bring equivalent generation, leaving hyperscalers to fund their own — which is exactly what Google is now doing on both sides of the meter. The effect moves the cost of data-center load off the rate base and onto corporate balance sheets.

The open question is whether a megawatt bought from a household behaves like a megawatt bought from a power plant. PJM's own materials record a 67% weighted average performance across demand response dispatches in summer 2025, and emergency programs supplied 88% of the region's $523.5 million of 2025 demand response revenue, which rose 240% from 2024 — revenue that is high and volatile precisely because it is scarce. A hyperscaler paying for flexibilityneeds it to perform when PJM calls, not when it is convenient.

The demand-side leg of AI power is now a financing decision on a hyperscaler's balance sheet rather than a line on a utility bill. Google has shown the template: fund the aggregator, take the capacity obligation, and let other people's batteries and thermostats stand behind 1,070 MW of firm claims. The money follows the obligation — to Constellation Energy on the supply side, to Voltus and the device owners on the demand side — and the rate base gets smaller. Hyperscalers now set the terms of AI power rather than accept them.