The Southeast’s relatively low energy costs and available land have made it an emerging data center hotspot. But the region could reduce electricity prices even further — by an average of $10 a megawatt-hour — by building more long-distance transmission lines that bring in power from neighboring markets .
That’s according to the Department of Energy’s draft 2026 National Transmission Needs Study released this week. The study, which the Federal Power Act requires the DOE to publish every three years, offers an assessment of current and future bulk transmission constraints, as a resource for regional planning and federal financing.
Nationally, the report found that transmission congestion costs reached $11 billion in 2023 and $12 billion in 2024, down from a peak of $21 billion in 2022, when severe weather and natural gas prices caused a spike. Congestion bottlenecks, the report emphasized, both constrain the delivery of low-cost generation for data center growth and directly inflate wholesale electricity prices.
The report outlines four categories of transmission needs, including improving reliability and resilience, alleviating congestion within and across regions, and providing resource adequacy. The Southeast, DOE notes, is the only region that hasn’t already addressed at least one of those needs.
The Southeast doesn’t produce public data on locational marginal pricing, or LMP,because the region doesn’t have a wholesale power market run by a grid operator. LMP is the cost of supplying the next increment of energy at a specific location, which reveals where congestion is happening in organized markets.
That opacity has left a “geographic gap” in national congestion analyses, the report explained. DOE’s draft 2026 study for the first time tried to fill the gap by relying on modeling from two national labs to estimate the price disparities between the Southeast and neighboring regions as a proxy for how much value new transmission would unlock.
One model, designed by Lawrence Berkeley National Lab, uses historical utility operating cost data to estimate how much prices have differed between the Southeast and its neighbors. The second, from the National Laboratory of the Rockies (formerly NREL) uses a grid simulation layering in factors like power plant data and existing line ratings to estimate what prices would look like if an open wholesale market did exist in the Southeast.
Using those models, the report found that long-term congestion for interregional links in the Southeast costs around $10 per megawatt-hour on average. That’s lower than many organized markets, but still high enough to limit the delivery of lower-cost energy from neighboring regions. Congestion between the Southeast and its neighbors ranges as high as $28 per MWh in years with extreme weather.
Cross-border challenges
The Southeast has long been the target of criticism over its transmission planning, which is more fragmented than other parts of the country. In general, each utility makes transmission investments independently, rather than through a regional process that weighs the Southeast’s needs as a whole. That’s particularly problematic in the context of the region’s load growth projections.
Utilities in the Southeast expect data centers to account for roughly two‑thirds or more of their forecasted demand growth in coming years. In response, they are proposing thousands of megawatts of new gas capacity and pipeline expansions.
In November 2022, the Southeast launched the Southeast Energy Exchange Market, a voluntary system that lets members trade power in 15-minute increments.
But SEEM doesn’t create a single market-clearing price like the centralized auctions in ISO and RTO markets, nor locational prices. In other words, the Southeast still lacks a clear public signal for where congestion is most severe.
The DOE report notes that transmission constraints didn’t significantly limit SEEM trading in 2023 or early 2024, with many of the market’s busiest transmission segments still available 90% of the time. But DOE cautioned that congestion could start to have more of an impact as the market gets more active.
According to the two models, the biggest opportunity for the Southeast to reduce congestion costs lies along its borders with neighboring grid operators PJM, MISO South, and Florida, which tend to have vastly different power prices from the Southeast.
The three specific links with the highest congestion value in 2022 and 2023, the report found, were between: Southern Company and the Florida Reliability Coordinating Council; Duke Energy and PJM; and the Tennessee Valley Authority and MISO South. Building across those high price-spread borders would do more to reduce congestion than adding lines within the region.
It’s not just the Southeast that needs to build interregional lines, of course. The highest-value lines nationally include paths from ERCOT to neighboring regions, where price differences average $31 to $48 per MWh, the widest gap of any pathway the study measured.
National investments in transmission held steady between 2016 and 2024, though investment varied drastically between regions, DOE found. In total, around 85,000 circuit-miles were either constructed, upgraded, or rebuilt during that period. About 40% of those miles were driven by reliability needs, though factors like load growth and the interconnection of new generation also played a role.
