PJM Is Paralyzed by Its Data Center Dilemma

The members of PJM Interconnection, the country’s largest electricity market, held an advisory vote Wednesday to help decide how the grid operator should handle the tidal wave of incoming demand from data centers. Twelve proposals were put forward by data center companies, transmission companies, power companies, utilities, state legislators, advocates, PJM’s market monitor, and PJM itself.

None of them passed.

“There was no winner here,” PJM chief executive Manu Asthana told the meeting following the announcement of the vote tallies. There was, however, “a lot of information in these votes,” he added. “We’re going to study them closely.”

The PJM board was always going to make the final decision on what it would submit to federal regulators, and will try to get something to the Federal Energy Regulatory Commission by the end of the year, Asthana said — just before he plans to step down as CEO.

“PJM opened this conversation about the integration of large loads and greatly appreciates our stakeholders for their contributions to this effort. The stakeholder process produced many thoughtful proposals, some of which were introduced late in the process and require additional development,” a PJM spokesperson said in a statement. “This vote is advisory to PJM’s independent Board. The Board can and does expect to act on large load additions to the system and will make its decision known in the next few weeks.”

The surge in data center development — actual and planned — has thrown the 13-state PJM Interconnection into a crisis, with utility bills rising across the network due to the billions of dollars in payments required to cover the additional costs.

Those rising bills have led to cries of frustration from across the PJM member states — and from inside the house.

“The current supply of capacity in PJM is not adequate to meet the demand from large data center loads and will not be adequate in the foreseeable future,” PJM’s independent market monitor wrote in a memo earlier this month. “Customers are already bearing billions of dollars in higher costs as a direct result of existing and forecast data center load,” it said in a quarterly report released just a few days letter, pegging the added charges to ensure that generators will be available in times of grid stress due to data center development at over $16 billion.

PJM’s initial proposal to deal with the data center swell would have created a category for new large sources of demand on the system to interconnect without the backing of capacity; in return, they’d agree to have their power supply curtailed when demand got too high. The proposal provoked outrage from just about everyone involved in PJM, including data center developers and analysts who were open to flexibility in general, who said that the grid operator was overstepping its responsibilities.

PJM’s subsequent proposal would allow for voluntary participation in a curtailment program, but was lambasted by environmental groups like Evergreen Collaborative for not having “any semblance of ambition.” PJM’s own market monitor said that voluntary schemes to curtail power “are not equivalent to new generation,” and that instead data centers should “be required to bring their own new generation” — essentially to match their own demand with new supply.

A coalition of environmental groups, including the Natural Resources Defence Council and state legislators in PJM, said in their proposal that data centers should be required to bring their own capacity — crucially counting demand response (being paid to curtail power) as a source of capacity.

“The growth of data centers is colliding with the reality of the power grid,” Tom Rutigliano, who works on grid issues for the Natural Resources Defense Council, said in a statement. “PJM members weren’t able to see past their commercial interests and solve a critical reliability threat. Now the board will need to stand up and make some hard decisions.”

Those decisions will come without any consensus from members about what to do next.

“Just because none of these passed doesn’t mean that the board will not act,” David Mills, the chairman of PJM’s board of managers, said at the conclusion of the meeting. “We will make our best efforts to put something together that will address the issues.”