Facing mounting pressure over the soaring cost of electricity, the organization that manages the Mid-Atlantic’s electric grid has outlined plans to curb the outsized impact of data centers.
PJM Interconnection, which oversees the grid in 13 states and Washington, D.C., is requesting approval from federal regulators to make several changes, including forcing data centers to supply their own power or risk being cut off during peak demand.
“The present trajectory of rapid load growth, tightening supply and rising capacity costs is not sustainable,” PJM Board Chair Paula Conboy wrote in a recent letter to stakeholders.
“The region needs substantial new investment in supply, and the central affordability question is how the costs of that investment should be allocated.”
PJM’s role is to act like air traffic control for electricity, including predicting supply and demand and coordinating how electrons flow through transmission lines.
The organization does not own power infrastructure or profit from the sale of electricity, but includes governing members that do, such as utility companies, as well as consumer advocates and power marketers.
PJM runs an annual capacity auction to determine the upcoming energy needs of its massive service area. Officials calculate how much electricity will be needed as backup during peak demand, such as the hottest and coldest days of the year.
Power operators, such as Dominion Energy, then submit bids demonstrating the amount of energy they could supply in case of emergencies, and PJM picks the cheapest ones that satisfy the needed amount.
The more energy capacity is offered, the less PJM has to pay to participating power plants.
But demand is currently outstripping supply, said Claire Lang-Ree, an energy sustainability advocate at the nonprofit Natural Resources Defense Council.
The past few auctions have set record-high prices, which utilities then often pass on to customers.
PJM also has a notoriously long process for reviewing energy projects trying to connect to the grid, making it harder for new power plants to come online.
The organization has been working to change that, among other things, such as better long-term transmission planning.
But the latest pair of proposals focuses on two central issues from growing data center demand: reliability and cost.
Lang-Ree said the plan is the result of a laborious and highly watched process over the past year and a half that included input by state governments and the White House.
The first element is creating a secondary auction, tailored to data centers, to procure energy to cover the region’s shortfall.
“PJM doesn't have enough power plants, in the future, to cover all expected demand plus a reserve margin,” Lang-Ree said. “So what PJM is going to do is take that roughly 6-gigawatt shortage and say, ‘OK data centers, you're in charge of buying this new supply.’”
Ideally, she said, it would result in data centers “paying their fair share of the new power plants built to serve them, because data centers are the ones that are driving that capacity shortfall.”
The second proposal would essentially halt new “large load” customers from being included in the larger capacity auction unless they’ve paid for or created their own sources of power.
That could include building solar panels and battery storage on site, for example, or more likely, entering a power purchase agreement with a project elsewhere within the PJM region.
Data centers that do not bring their own power could have their power cut off or interrupted during emergencies.
Lang-Ree said these actions are good news for consumers.
However, because PJM’s auctions happen several years in advance, power bills will likely stay high through at least 2030.
And the benefits hinge on how state governments decide to implement the changes.
PJM does not have jurisdiction to directly allocate costs to individual data centers, so “state action will be essential,” Conboy wrote in the board’s recent letter.
In Virginia, for example, the State Corporation Commission signs off on what and how Dominion Energy charges customers, and would be responsible for ensuring that costs are allocated to data centers. (The SCC recently ordered Dominion to develop a policy charging data centers for the cost of related transmission infrastructure.)
PJM said it plans to help inform state officials by creating a new database of data centers and other “large load” customers to track their location and energy usage.
The organization is asking the Federal Energy Regulatory Commission to approve the proposals within the next two months.
