PJM filed a plan with FERC on Friday to spend up to $20 billion securing new capacity for the data center load growth headed for its grid, part of an expected 70 gigawatts of new large load growth by 2038. The plan pairs new large loads with new generation through a bilateral matchmaking process, and requires data centers that don't bring their own power supply to curtail their electricity use during grid stress starting in 2027.
A two-phase procurement built around a smaller number
PJM's plan has two phases. First, a bilateral matchmaking phase will pair new large loads, like data centers, with new generation. Any capacity shortfall left after that matchmaking will be filled by a one-time auction. PJM is aiming to procure only 6.8 gigawatts through this process, the amount its latest capacity auction failed to secure, rather than the full 24-gigawatt shortfall the region expects by 2030. Both the procurement plan and a separate curtailment requirement depend on a new large load registry that will track any site larger than 50 megawatts, including its location, size and onsite generation.
Julia Hoos, head of USA East at Aurora Energy Research, called the procurement plan, the curtailment rule and the registry together a workable stopgap for problems PJM has to fix on an extremely short timeline. But she added a warning: "this is a system that is designed to break within a year or two," and it may not lower costs for ratepayers in the meantime. PJM will still need to procure capacity for its non-data-center load, likely through its regular central capacity auction, Hoos said, and that complicates incentives for generators. A generator that can sign a long-term bilateral deal directly with a data center through the new matchmaking process has little reason to also compete in that main auction, she said, asking why a new generator planning to build in 2032 would bother with the regular auction under the current system.
Brent Nelson, managing director of markets and strategy at Ascend Analytics, said the same capacity market cost pressure would eventually show up even without data centers. Growth from new housing, manufacturing or EV charging would cause the same problem, he said: "you push demand past where supply sits, you still end up with a shortage problem." Nelson has told Latitude Media that avoiding that outcome means directing revenue specifically toward new supply, through mechanisms like state-sponsored solicitations or direct bilateral contracts between retailers and developers, rather than relying on the general capacity auction. So far, he said, that option exists only for large loads.
Curtailment enforcement goes to the states
For data centers that don't bring all their own capacity, PJM is proposing a backup called the Interim Resource Adequacy Service. Under it, a data center can still connect if it doesn't supply 100% of its own capacity, but it must curtail its power use during tight grid conditions. PJM itself has no authority to force a load to curtail, an issue PJM's independent market monitor raised last summer during a debate over whether data center flexibility in the region was a "regulatory fiction." To work around that, PJM has assigned enforcement, both cost allocation and physical curtailment, to states and utilities, said Mary Yang, chief operating officer at 804 Advisory and an energy attorney who previously served as PJM's regulatory counsel.
For supply procured through the auction rather than bilateral deals, PJM plans to pass wholesale costs down to local utilities using standard allocation formulas. State regulators will then decide whether and how to assign those costs to specific data centers, and whether to compensate loads for ramping down. If states don't take on that role, Yang said, PJM's position is that costs get allocated to everybody, including retail ratepayers, and "you guys deal with the political fallout." The shift comes as states are separately asking for a bigger role in PJM's governance.
Hoos said the decision to push enforcement down to states reflects today's politics: anger over high electricity prices and local opposition to data centers. She said developers a year or two ago could demand fewer regulatory barriers because of the tax revenue and other benefits a data center project promised a region, making it hard to ask them to curtail. That has changed, she said, and the option to simply build somewhere else no longer exists in the same way. Data centers that once said no flexibility was acceptable are now willing to accept some, Hoos said, when the alternative is not getting connected to the grid at all.
Whether the plan lowers prices is unresolved
Yang said the new plan, combined with a separate FERC-directed proceeding on co-located load, is meant to push large loads toward bringing their own generation, which benefits providers of onsite power like long-duration battery storage, gas turbines and distributed resource aggregation. A large load without onsite generation already in PJM's interconnection queue is already behind, Yang said, and she expects data centers to bring their own capacity as the default going forward.
Hoos said the biggest obstacle is how hard it still is to physically build new generation, even for projects with guaranteed buyers already lined up; supply chain, construction and interconnection challenges are bigger than anything PJM can solve on its own. And even if every megawatt of procured new generation is built on schedule, Yang said, it will still be "a drop in the ocean" of what the region needs to keep up with load growth and plant retirements. Yang said "people are at odds" over whether, and how soon, the new approach will lower prices for consumers, with some observers estimating it could take three to five years to see an effect. Both Yang and Hoos described the plan as untested. Yang called the proposals quick, without much precedent to draw on. Hoos put it more simply: "We're at the start of a very big experiment."
