This story was originally published by Canary Media.
Data centers are facing a new challenge as PJM Interconnection, the largest grid operator in the United States, implements a plan to ensure these facilities secure their own energy or risk being cut off during grid emergencies. This move comes as a response to concerns over rising utility bills across the 13-state territory PJM covers, including Ohio.
The plan, largely dependent on state and utility enforcement, was sent to the Federal Energy Regulatory Commission (FERC) by PJM’s board. Approval from FERC is necessary for its execution. The strategy aims to address pressure from various stakeholders, from state governors to federal authorities, to manage the increasing costs associated with energy demand.
“Historically, PJM has been very nervous to step into what it considered — or what are legally — the states’ rights,” said Julia Hoos, who leads coverage of Eastern U.S. power markets for Aurora Energy Research. The new proposals, however, mark a shift as PJM seeks state collaboration to meet its objectives.
PJM predicts significant growth in energy demand from data centers and other large loads, projecting an increase of 30 to 34 gigawatts by the early 2030s and potentially reaching 70 GW by 2038. To meet such demand would impose substantial costs on utility consumers.
State lawmakers and advocates have been urging PJM to disconnect data centers from the grid during high-demand periods unless they can independently manage their power resources.
Data Centers: A New Responsibility
The proposed Interim Resource Adequacy Service (IRAS) by PJM outlines a framework where data centers can avoid power cuts by ensuring their energy supply through a “bring your own new capacity” approach. This system requires data centers to form bilateral agreements with capacity providers, including traditional power plants, renewable energy sources, and innovative solutions like virtual power plants.
Kent Chandler, a former Kentucky Public Service Commission chairman, noted, “If a large load shows up and has brought brand-new capacity to meet their needs, I think they’re good to go.” However, from June 2027, those failing to secure their power supply may face disconnection before pre-emergency measures activate.
The strategy also aligns with PJM’s authority to direct local utilities to manage loads during emergencies, although states retain jurisdiction over the specifics of load management.
State-Level Action Required
PJM’s proposals shift significant responsibility to states and utilities. Some states are already adopting measures to control costs, but the IRAS plan demands more extensive efforts. Clara Summers from the Citizens Utility Board emphasized the dual role of PJM and states, stating that no state is fully prepared yet.
Summers highlighted state policies, like Illinois’s POWER Act, that could support PJM’s plan by requiring data centers to offset their grid impact with clean energy. Other states are exploring tariffs linking grid costs directly to data centers.
Despite high capacity prices, PJM struggles to procure enough capacity to meet future peak demand, hindered by a slow interconnection process for new energy projects. Data center industry groups might challenge PJM’s proposals, although these companies have pledged not to inflate electricity bills.
Chandler remarked that mandating data centers to secure their energy might filter out feasible projects from those that aren’t viable, given the grid’s current capacity constraints.
“Talking to data center folks, their commercial teams are engaged effectively 24–7 trying to find projects” that can meet their energy and capacity needs, Chandler explained, indicating a serious approach from those with substantial financial resources.
Original Story at ohiocapitaljournal.com