Manufacturers across the Midwest and Rust Belt are confronting historic spikes in electricity prices, a trend driven largely by the rapid expansion of AI data centers. The Institute for Energy Economics and Financial Analysis (IEEFA) reports that PJM capacity prices surged from $28.92 per megawatt‑day in 2024 to $329.17 per megawatt‑day in 2026.
These higher costs are hitting the factory floor hard. According to Reuters and U.S. Department of Energy data, industrial electricity rates have risen 26% year‑over‑year in Ohio and 31% in Pennsylvania, compared with a modest 7% increase nationwide.
Projected load growth and its impact
PJM’s Load Forecast Report released in January 2026 projects net energy load growth of 5.3% per year over the next decade and 3.4% per year over the next two decades. Goldman Sachs estimates that data centers will account for roughly 40% of that overall demand growth.
PJM’s independent market monitor attributes more than $23 billion in customer capacity cost increases through 2028 primarily to new data‑center load.
Federal incentives under pressure
At the same time, the window for taking advantage of federal clean‑energy incentives is tightening. The Clean Electricity Investment Credit, which replaced the Energy Investment Tax Credit after its phase‑out at the end of 2024, offers a base credit of 6% and up to 30% of project costs, plus a 100% bonus depreciation that allows a full first‑year deduction.
The One Big Beautiful Bill Act, signed on July 4, 2025, and Section 48E further phased out many clean‑energy tax credits. Companies that began construction on solar projects before July 4, 2026 can still claim the 30% federal solar tax credit, provided the projects are completed within four years.
However, the 30% commercial solar investment tax credit expires permanently for any project not fully placed in service by December 31, 2027. While the credit itself ends, the 100% bonus depreciation remains available after 2027.
Why timing matters for manufacturers
Commercial‑and‑industrial (C&I) solar projects typically require six to fifteen months to move from budget approval through permitting, procurement, construction, and final commissioning. To capture the 2027 credit, companies must complete their corporate budget approval cycle by the fourth quarter of 2026. Delaying budget decisions into 2027 risks missing the credit entirely.
On‑site, behind‑the‑meter solar systems can lock in electricity costs and provide balance‑sheet savings, offering manufacturers a more predictable energy expense in an era of volatile rates.
Grid reliability concerns
PJM’s 2027/2028 base residual auction report recorded a record $333.44 per megawatt‑day but fell short of the region’s reliability requirement by 6,516.6 MW, underscoring that AI‑driven demand is not a temporary blip. Grids will need to adapt to accommodate this new level of consumption.
For Midwest and Rust Belt manufacturers, the challenge now is twofold: manage rising electricity costs and evaluate long‑term energy strategies that reduce dependence on a grid increasingly dominated by high‑consumption AI infrastructure.
By treating energy infrastructure as a strategic manufacturing asset rather than a short‑term expense, companies can better align capital decisions with both operational stability and the nation’s broader energy goals.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
