In the digital economy, power has become the new gold. Capacity auction prices have skyrocketed between 2024 and 2025 as grid constraints intensify across major U.S. markets. This technical development carries profound implications for real estate investors, particularly those tracking the data center sector where established operators now find themselves controlling an increasingly scarce and valuable commodity.
The Power Advantage
The U.S. data center sector continues its rapid expansion, driven primarily by hyperscalers and large tech companies urgently building out digital infrastructure. What distinguishes today’s market from previous growth cycles, however, is the emergence of power constraints as a defining competitive factor.
Leading data center REITs command the second-highest enterprise values across all REIT asset classes, trailing only tower REITs. This premium valuation reflects their strategic foresight in securing power capacity years in advance, creating a significant barrier to entry for new competitors who now face severe access limitations.
The most astute operators transformed power acquisition from a routine operational matter into a decisive competitive advantage. While new market entrants struggle to secure basic power needs, established players leverage their early agreements to drive record profitability. What once represented a potential growth constraint has ironically become a profit catalyst for data center REITs with secured capacity.
Demand Drivers Creating Perfect Storm
Two powerful trends converge to create unprecedented electricity demand: artificial intelligence adoption and nationwide electrification. Data center electricity consumption has tripled in less than a decade, now representing a significant percentage of total U.S. electricity usage with projections suggesting continued dramatic growth.
AI workloads require extraordinary power resources with energy consumption from AI-related servers skyrocketing in just a few years. Modern AI facilities demand rack densities several times higher than traditional data centers, often requiring dedicated substations to meet their enormous power requirements.
Broader electrification compounds these pressures. Heat pumps increasingly outsell fossil fuel heating systems in major markets, while electric vehicles capture growing market share globally. These simultaneous transitions strain grid capacity, creating a supply-demand imbalance that benefits those who secured resources early.
Investment Implications
Forward capacity auctions signal severe supply constraints ahead. PJM auction prices have reached historic levels with the 2026-2027 auction hitting the price cap, a significant year-over-year increase. Similar price spikes affect other regional markets, confirming the national scope of this challenge.
For investors considering the data center REIT sector, power access now represents a critical evaluation factor that directly influences growth potential and profit margins. Companies that secured substantial power capacity early now enjoy a strategic advantage that translates directly to their bottom line and future growth prospects.
As digital transformation accelerates and AI adoption expands, the companies controlling power access will likely continue outperforming peers. This power shortage dynamic creates both risks and opportunities within the sector, rewarding those operators who recognized early that electrons would become as valuable as real estate itself.