Europe's Energy Squeeze: Datacenter Demand, Deindustrialisation and a Policy Gap

Two data points, published weeks apart, sketch the same problem from opposite ends.

In the eastern United States, the market monitor for the PJM Interconnection reported that the total cost of wholesale power rose from $77.78 per megawatt-hour in the first three months of 2025 to $136.53 in the same period this year. That is a rise of 75.5%, and Monitoring Analytics put the blame squarely on datacenters. The report is unusually direct about cause and effect, and it offers little comfort about what comes next.

In Bavaria, the final shift at Playmobil's Dietenhofen plant ended in late June. Around 350 jobs went with it.

The Horst Brandstätter Group, which owns the brand, said it would move production of the plastic figures to existing facilities in Malta and the Czech Republic. It named high energy prices, along with elevated wages and ancillary labour costs, as the decisive factor. One is a market report. The other is a plant closure. Both point to the same mechanism: electricity and gas prices are no longer a background cost in industrial decisions. They are a deciding one.

What the PJM report actually says

The PJM Interconnection serves all or parts of 13 states and the District of Columbia, including Northern Virginia, which The Register notes holds the densest cluster of datacenters in the world. Monitoring Analytics acts as the official market monitor for that grid.

Data center load growth is the primary reason for recent and expected capacity market conditions, including total forecast load growth, the tight supply and demand balance, and high prices. But for data center growth, both actual and forecast, the capacity market would not have seen the same tight supply demand conditions.

The report states that the price impacts on customers have been very large and are not reversible, and that they will be even larger in the near term unless the issues associated with data center load are addressed in a timely manner. On the evidence the monitor itself presents, timely resolution looks unlikely: PJM has upgraded its power commitment and dispatch software, but further planned upgrades have slipped multiple times with no implementation date scheduled.

Monitoring Analytics also takes aim at a proposed one-time backstop auction intended to procure new generation for datacenter projects, requested by the Trump administration and the governors of PJM states. The auction structure as proposed, the monitor says, would generally shift significant risk to other PJM customers, and that temptation should be resisted.

Its alternative is blunt: datacenters should be required to bring their own power, with fast-track interconnection for those that do and a queue that only connects them when there is adequate capacity. PJM told The Register it is working with states and member companies on consumer impacts, citing market caps in place since the 2025/2026 auction, transmission expansion projects and wholesale market rule reform. Monitoring Analytics did not respond to questions.

Europe's version of the same bill

The European picture is messier because the price shock has more than one source.

pv magazine reported in May that residential heat pump sales rose 17% year on year across 11 European countries in the first quarter of 2026, with around 575,000 units sold against 494,000 a year earlier, according to the European Heat Pump Association. France, Germany and Poland averaged 25% growth. The EHPA attributed the surge to a sharp jump in gas and oil prices after Iran closed the Strait of Hormuz on 2 March. That is a demand response, not a supply fix.

Meanwhile the industrial side is contracting. Brussels Signal reported that Playmobil's closure came as German household electricity prices remain among the highest in the world, the fifth most expensive globally and the second highest among major industrial nations, with energy-intensive processes exposed since the 2022 energy crisis despite partial government relief. The site framed the decision as another symbolic blow to German manufacturing, with unions calling it a catastrophe for the region.

Playmobil is not an isolated case, and the dossier does not pretend otherwise. Declining sales and financial pressure had already hit the company, but management made clear the cost environment in Germany had become unsustainable for labour-intensive plastic injection moulding. Administrative and logistical functions stay in Germany. The figures themselves will now be made entirely outside the country that created them.

The politics of the price tag

Energy prices are also colliding with the AI debate, though not in the way the loudest voices suggest.

POLITICO reported on 24 September that European tech leaders and cybersecurity experts are pushing back hard on US-generated warnings about AI extinction. James Wise, a partner at Balderton Capital and chair of the UK government's sovereign AI fund, told the outlet: "Sadly, it has jumped up to the Terminator is coming. I don't think the Terminator is coming at all."

The skeptics argue the panic is crowding out practical work. Marcus Hutchins, the cyber threat researcher known for stopping WannaCry, said the doomer material is very counterproductive and cited disaster fatigue that prevents basic steps such as security updates. Vincent Strubel, who leads the French cybersecurity agency ANSSI, wrote on LinkedIn that AI creates significant risks and opportunities requiring serious work under time constraint, but what it does not require is starting a new panic every other week. That argument matters for the energy story because the datacenter buildout driving PJM's capacity crunch is justified in part by the same frontier-model narrative. If the near-term capabilities are being oversold, the load forecasts resting on them deserve more scrutiny than they are getting.

The gap between diagnosis and policy

What the two situations share is a widening distance between how clearly the problem is described and how little is being done about it. Monitoring Analytics says the current supply of capacity in PJM is not adequate to meet demand from large datacenter loads and will not be adequate in the foreseeable future. Germany's energy-intensive manufacturers have been saying something similar for years.

The remedies on the table are contested. In the US, the monitor wants datacenters to pay for their own generation rather than socialise the risk. In Germany, the shift away from nuclear and coal without sufficient baseload alternatives, combined with bureaucracy and wage pressures, is what some economists describe as creeping deindustrialisation. Neither problem has a cheap fix, and neither is waiting.

There is one more number worth holding onto. Monitoring Analytics notes that Americans have grown increasingly hostile to new datacenter projects, with 71% of respondents to a Gallup survey saying they opposed projects in their neighbourhoods, and multiple projects abandoned after local pushback. The load forecasts that underpin the capacity market assume those projects get built. If they do not, the tight supply and demand balance the report describes could loosen for reasons nobody in the market planned for.