AI's Massive Power Grab: The PJM Grid Crisis Explained
On Friday, April 11th, PJM took another step to meeting the rapid growth of large - principally data related - loads. These loads have mushroomed up quickly. Consider in May of 2024, AEP Ohio served 600 MW of data load. Today it has 11,000 MW. Dominion has 25,000 MW of large load with connection dates through December 31, 2031, and an additional 45,000 MW of large-load interconnection requests.
In response, PJM proposes a one-off procurement process for 14,900 MW of new capacity to serve large loads. With the assistance of consulting firm Charles River Associates (CRA), PJM would facilitate a bilateral contracting process between large loads and supply from September through next March.
Qualifying resources include new generating projects, capacity up-rates on existing power plants, repowered generators that have been deactivated, as well as new demand response and distributed energy resources. Delayed power plant retirements are unable to participate.
PJM and CRA will serve as intermediaries, and provide match-making services, with contracting parties would setting terms and conditions, and contracting out of PJM’s purview.
The concept arose from the January White House meeting with the 13 PJM states, a meeting to which the grid operator and data center companies were not invited.
Here’s the problem: Turbine supplies are limited and wanted all over the world.
Then there’s the $325/ MW-day price cap for the next two PJM capacity auctions. Developers are unlikely to bid into the BRA and accept a capped capacity price for only a single year, when could bid that new resource into a bi-lateral auction and fix a price for 2 to 15 years. Especially when data companies are willing to pay nearly any price.
The likely outcome is that little to no new capital focuses on serving existing PJM capacity markets.
This approach may have collateral impacts to other parties in PJM. It might be that it’s now AI’s world. We only live - and consume and pay for electricity – in it.