AI, Data Centers, and Grid Pricing Glossary

A

Ancillary Services

Services used by grid operators to maintain the reliability and stability of the power system, including frequency regulation, spinning reserves, and voltage support. These services have their own markets and pricing. — See also: Reserve margin, ISO/RTO

B

Baseload

The minimum level of electricity demand over a given period, or the generation that runs continuously to meet that demand. Data centers are often described as baseload loads due to their high, consistent power consumption. — See also: Load factor, Peaker plant

Behind-the-Meter Generation

Electricity generation installed on the customer side of the utility meter, such as rooftop solar or on-site natural gas generators. Data centers increasingly use behind-the-meter generation as backup or to reduce grid exposure.

C

Capacity Market

A forward market in which generators are paid to be available to produce electricity during peak demand periods, typically one to three years in advance. Used in certain regions (e.g., PJM, ISO-NE) to ensure resource adequacy. — See also: ISO/RTO, Reserve margin, Resource adequacy

Carbon Intensity

The amount of carbon dioxide emitted per unit of electricity generated, typically expressed in grams of CO₂ per kilowatt-hour. Varies by region based on generation mix. — See also: Generation mix, PPA

Co-location Facility

A data center that leases rack space, power, and cooling infrastructure to multiple tenants. Co-location facilities can be very large electricity consumers and may be treated as a single large load by utilities. — See also: Hyperscale data center, Interconnection

Curtailment

The reduction or shutoff of electricity generation output, often applied to renewable sources when supply exceeds demand. Can also refer to instructed reductions in large load consumption during grid emergencies. — See also: Demand response, Reserve margin

D

Demand Response

Programs that incentivize electricity consumers to reduce or shift their usage in response to grid conditions or price signals. Can help grid operators manage peak demand without building additional generation capacity. — See also: Baseload, Peak demand, TOU

Deregulation

The restructuring of electricity markets to introduce competition among generators and, in some states, among retail electricity suppliers. Affects how electricity prices are set and who can offer service to consumers. — See also: Retail electricity market, Wholesale electricity market

Dispatchable Generation

Generation sources that can be turned on or off or adjusted in output on demand, such as natural gas plants or hydropower. Contrasted with variable renewable generation (solar, wind) whose output depends on weather. — See also: Peaker plant, Reserve margin

F

FERC

The Federal Energy Regulatory Commission, the U.S. federal agency that regulates interstate transmission of electricity and natural gas, wholesale electricity markets, and hydroelectric licensing. — See also: ISO/RTO, Interconnection

G

Generation Mix

The combination of fuel sources (coal, natural gas, nuclear, wind, solar, hydro, etc.) used to generate electricity in a region. Affects both the carbon intensity and the cost structure of electricity. — See also: Carbon intensity, Dispatchable generation

H

Hyperscale Data Center

A very large data center, typically operated by major cloud and technology companies, that can consume hundreds of megawatts of power. Hyperscale facilities often have a significant impact on local grid planning. — See also: Co-location facility, Load factor

I

Integrated Resource Plan (IRP)

A long-range planning document filed by utilities with state regulators that outlines projected electricity demand, planned generation resources, and infrastructure investments over a multi-year horizon. A key source for tracking load forecast revisions. — See also: Reserve margin, Peak demand, FERC

Interconnection

The process by which a new generator or large load connects to the transmission or distribution grid. Requires engineering studies and often infrastructure upgrades, creating a queue that can cause significant delays. — See also: Interconnection queue, FERC, Transmission congestion

ISO/RTO

Independent System Operator (ISO) or Regional Transmission Organization (RTO): entities that operate the transmission grid and wholesale electricity markets across large multi-state regions. Examples include PJM, MISO, CAISO, ERCOT, ISO-NE, NYISO, and SPP. — See also: LMP, Capacity market, Wholesale electricity market

L

LMP

Locational Marginal Price: the cost of supplying one additional megawatt-hour of electricity at a specific location on the grid at a given time. Reflects energy, congestion, and transmission loss components. Used in wholesale markets to set prices. — See also: Transmission congestion, Wholesale electricity market, ISO/RTO

Load Factor

The ratio of average electricity consumption to peak consumption over a given period, expressed as a percentage. A high load factor (close to 100%) indicates consistent, near-constant demand. Data centers typically have very high load factors. — See also: Baseload, Hyperscale data center

P

Peak Demand

The maximum level of electricity consumption in a region during a given period. Grid infrastructure is often sized to meet peak demand. Rising peak demand from data centers can require new generation and transmission capacity. — See also: Reserve margin, Demand response, Capacity market

Peaker Plant

A power plant that operates only during periods of high demand, often natural gas turbines that can start quickly. Peaker plants tend to have higher operating costs and are a key driver of electricity prices during peak periods. — See also: Baseload, Dispatchable generation, Reserve margin

PPA (Power Purchase Agreement)

A long-term contract in which a buyer agrees to purchase electricity directly from a generator at a set price. Large technology companies use PPAs to secure electricity, often from renewable sources, at predictable costs. — See also: Carbon intensity, Generation mix

PUE (Power Usage Effectiveness)

A metric used to measure data center energy efficiency, calculated as total facility power divided by IT equipment power. A PUE of 1.0 would mean all energy goes directly to computing; values above 1.0 reflect cooling and overhead. — See also: Hyperscale data center, Demand response

R

Rate Case

A formal proceeding before a state public utility commission in which a regulated utility requests approval to change its rates. Determines how costs—including those from grid upgrades needed for large loads—are allocated among customer classes. — See also: Retail electricity market, FERC

Reserve Margin

The percentage by which total available generating capacity exceeds expected peak demand. Grid operators and regulators maintain reserve margin targets (often 15–20%) to ensure reliability. Declining margins can increase price volatility. — See also: Peak demand, Capacity market, Dispatchable generation

Resource Adequacy

The ability of the electricity system to supply enough power to meet demand at all times, including during peak periods. Resource adequacy planning is a primary function of grid operators and utilities. — See also: Reserve margin, Capacity market, IRP

Retail Electricity Market

The market in which electricity is sold to end-use customers (residential, commercial, industrial). In deregulated states, multiple suppliers may compete for customers. In regulated states, a single utility typically serves all customers in its territory. — See also: Deregulation, Wholesale electricity market

T

TOU (Time of Use)

A pricing structure in which electricity rates vary based on the time of day or season, with higher rates during peak demand periods. TOU pricing is sometimes used with large commercial customers, including data centers. — See also: Demand response, Peak demand

Transmission Congestion

A condition in which the physical limits of transmission lines prevent electricity from flowing freely from low-cost generation areas to high-demand areas. Causes divergence in LMPs across locations and can raise electricity costs in constrained regions. — See also: LMP, ISO/RTO, Interconnection

V

VPP (Virtual Power Plant)

An aggregation of distributed energy resources (batteries, solar, demand response assets) that can be coordinated to act like a conventional power plant from the grid's perspective. An emerging tool for managing grid demand flexibility. — See also: Demand response, Behind-the-meter generation

W

Wholesale Electricity Market

The market in which electricity is bought and sold between generators, utilities, and large traders, typically through organized markets run by ISOs/RTOs or through bilateral contracts. Wholesale prices influence but do not directly equal retail rates. — See also: LMP, Retail electricity market, ISO/RTO

Related pages

• AI energy price watchlist — Indicators to monitor
• How to monitor AI data center impacts — Sources and what to look for
• Back to AI Data Centers & Electricity Prices hub