On a quiet road in Valley Forge, Pennsylvania, not far from the field where George Washington's starving soldiers waited out the winter in 1778, sits the headquarters of PJM Interconnection, the largest electric grid operator in the United States. Inside, operators are waging war against inclement weather and power surges to ensure reliable delivery of electricity to 65 million customers in 13 states and the District of Columbia. The control panel looks like something out of a disaster movie – it covers the walls and extends almost from floor to ceiling – but by design it's a fairly drama-free environment.
However, as the US grapples with soaring electricity demand, that could change.
At the end of September, the governors of 11 PJM member states united in Philadelphia demand a greater role in grid energy decisions given the rapidly rising costs facing their constituents. Some have even threatened to leave the 13-state network altogether.
“We need states to have more say in how PJM operates,” said Pennsylvania Gov. Josh Shapiro, who has led the effort. “We need to move faster on energy projects, and we need to contain costs. If PJM can't do that, then Pennsylvania will have to go it alone.”
Pennsylvania is a net exporter of electricity and could theoretically pass legislation requiring generators to leave the nonprofit and join a new grid operator, but that would require federal approval; In addition, power producers will have to reimburse PJM for a ton of payments already made by the grid operator. Shapiro's statements are likely intended to force change within PJM and ensure state officials have a greater role in the system they rely on.
Ultimately, what governors really want is lower retail electricity prices. In fact, preventing the steep rate hikes that customers are seeing now that tech companies rush to build energy-hungry data centers were the reason for the creation of PJM. Until about 30 years ago, U.S. electric utilities controlled both the means of producing energy through power plants and the transmission and distribution systems that delivered that energy to consumers. Rising prices in the 1980s and 1990s led many states to rule that utilities could no longer own power plants, breaking the monopoly control of producers in the region. The moves come after the federal government took steps to open the nation's grid to independent power producers that could compete with utility-owned power plants.
Today, PJM acts as a kind of intermediary. It operates a daily energy market that buys electricity from generators offering the lowest prices and then sells it to local utilities to meet real-time demand. But to do that, PJM must ensure there are enough power plants (or solar panels, or wind turbines) offering to sell their electricity at any given time. That's why each year PJM also holds what it calls a capacity market, which estimates the total amount of electricity the entire region is projected to use over the next three years. PJM uses this amount to pay power plants to ensure they are ready to operate when needed.
To estimate the capacity needed, PJM looks at historical data and new load requests—potential customers who want to be connected to the grid—and then adds additional capacity so regions have wiggle room instead of facing rolling blackouts when problems like extreme weather occur. About 25 percent of all utility bills reflect this “capacity market” — the amount of money PJM expects to pay to provide reliable service on the hottest and coldest days of the year over the next three years.
Capacity auctions rarely make headlines, but Silicon Valley's push for artificial intelligence is pushing this dynamic into the spotlight as PJM member states like Pennsylvania, New Jersey, Ohio and Virginia aggressively court the industry. In March, President Trump joined Pennsylvania Senator Dave McCormick will announce $90 billion in private investment at the Energy and Innovation Summit in Pittsburgh to transform Pennsylvania into a national hub for data centers and artificial intelligence. Virginia is already home to the so-called Data Center Alley, a cluster of facilities through which 70 percent global Internet traffic eventually flows, and Ohio emerging as a major player in technology infrastructure. The result is an unprecedented number of high-load requests flooding the network.
A report Union of Concerned Scientists officials found that taxpayers in seven data center-friendly states in PJM were charged $4.4 billion for data communications upgrades needed for data centers to come online. For example, in Washington, clients saw an average increase of $21 in their monthly energy bills.
Soaring prices in PJM's capacity auctions are a key factor putting pressure on consumer prices. In July P.J.M. announced that the value of the latest capacity auction had risen to $16.1 billion, up from $2.2 billion just two years ago. According to Monitoring Analytics, PJM's watchdog group, this was “almost entirely due to existing and projected increases in load on large data centers on the PJM network.” The group also pointed to “extreme uncertainty in load forecasts” as a “unique and unprecedented situation” that needs to be addressed. Monitoring Analytics and the Natural Resources Defense Council (NRDC) have proposed that PJM adopt a “bring your own generation” system in which particularly power-guzzling customers, such as data centers, would be required to build their own power sources in advance rather than drain the grid.
Valerie Plesch/The Washington Post via Getty Images
Much of the uncertainty about the future of the grid, experts at NRDC and the Sierra Club warn, stems from the fact that some of this seemingly bottomless demand for electricity may turn out to be little more than a mirage. For example, a technology company wanting to build a single data center may submit bids to a utility operator in three different areas before they finally receive the land. They end up building a single data center, but payers still have to pay the costs of three data centers because all three applications have been priced into the capacity market. Indeed, according to some estimates, approximately 75 to 90 percent of requests to data center load won't give anything.
PJM has also faced criticism for leaving new power sources sitting idle, waiting to come online. The grid operator has a so-called interconnection queue, mostly full of renewable energy projects that have been waiting years to come online. Earlier this month, 105 lawmakers signed letter urging PJM to clear its pipeline of renewable energy projects to take advantage of tax credits that are set to expire at the end of the year. (The current federal government shutdown may further complicate efforts to meet this deadline.)
Part of the problem is logistics, according to Robert Routh, policy director for NRDC in Pennsylvania. “For a long period of time, PJM has been accustomed to interconnection requests … coming in quite slowly,” he said. Previously, PJM dealt with large fossil fuel power plants that were built next to transmission lines and had a fairly standardized interconnection process. But as renewable energy has become cheaper, the number of small energy projects trying to connect to the grid has increased. In 2022, PJM stopped accepting new interconnection requests to deal with a backlog expected to last until the end of 2026.
“The sheer volume of requests began to overwhelm them,” Raut said. “They did not adapt to these circumstances.”
Meanwhile, member state governors are demanding more influence over how PJM allocates its resources and moves generation online. While states are actively pursuing investment in technology in general and data centers in particular, lawmakers are concerned that the investment boom is driving up consumer electricity prices to unsustainable levels.
A PJM spokesman said the company is “doing everything within its authority to manage this unprecedented increase in expected electricity demand.” PJM is seeking public input on an initiative called the Accelerated Pathway to Solving Critical Issues, which would speed up implementation of government-sponsored energy projects associated with heavy load demands; task utilities with filtering out duplicate requests; and require states to approve capacity market forecasts. Requiring state approval puts the onus on governors, who are “essentially pointing the finger at PJM,” said Rao Konidena, an energy market analyst.
Under the updated plan, states will be able to select large energy projects that will be allowed ahead of the queue and power those data centers. But critics say this will inevitably lead to more oil and gas projects – given regulatory obstacles clash with solar and wind energy under the Trump administration and desperate race to create superintelligence, it is unlikely that technology companies will Wait for clean energy. Shapiro's office did not respond to a request for comment when asked how they planned to reconcile Pennsylvania's emissions goals with the billions of dollars in artificial intelligence investments the state has been pursuing.
“So many of them [tech] “They can't do that if they add more fossil fuels to the grid because of these data centers,” said Nick Abraham, senior communications specialist for the League of Conservation Voters, an environmental advocacy group.
Editor's Note: The Natural Resources Defense Council is a Grist advertiser. Advertisers have no role in Grist's editorial decisions.
