PJM Interconnection Proposes Power Cuts for New Users
The largest electricity transmission operator in the U.S. has suggested, in a recent white paper, that power should be cut to new users during peak demand periods.
PJM Interconnection serves over 67 million customers within its network. The document titled “Enhancing Reliability Through Market Design” highlights that their infrastructure is currently under pressure due to the growth of data centers and aggressive environmental policies.
The report cites “an unprecedented surge in demand” spurred by the rapid expansion of data centers and the widespread shift toward electrification in various sectors. Alongside this, it notes the “accelerated retirement of distributed power plants” driven by economic and environmental policies, plus supply chain and permitting issues which are delaying the introduction of new energy resources.
According to the U.S. Energy Information Administration, rising electricity usage is a main contributor to these challenges. Projections indicate that electricity demand might rise by 1% in 2026 and 3% in 2023, surpassing the growth of energy supply.
The memo also points out a significant shift from managing surpluses to scarcity, highlighting the lengthy lead times for new energy projects. It mentions that constructing a new natural gas turbine plant now takes a minimum of four years from the financial decision to when it can go live, assuming optimal conditions.
Permit processes greatly influence the duration of these developments. On average, environmental reviews for new projects take about four years, according to the Council on Environmental Quality.
The white paper puts forward three strategies to ensure grid reliability.
Path A focuses on stabilizing the market through long-term commitments led by PJM-managed procurements, including mandatory hedging requirements for load-serving entities (LSEs) or tiered multi-year capacity markets.
LSE refers to authorized sellers of electricity to major users.
Path B aims to set up differential reliability. This could mean different states or regions would require various levels of reliability, or, perhaps, prioritizing existing residential and native loads over new, unverified large load additions during high-demand times.
In this differential reliability model, data centers might face restrictions in their usage during peak demand periods, while existing housing consumers who contribute to the current supply would receive priority.
Path C envisions a partial move toward a supply and demand pricing model while still maintaining long-term contracts. PJM intends to gradually shift its revenue collection from capacity markets, combined with long-term energy contract requirements, which should help shield consumers from price volatility.
At the core of PJM’s concerns are “supply constraints.” The primary issue stems from regulatory reviews, which the Consumer Energy Alliance suggests are necessary to prepare for energy development.
Notably, the Trump administration rolled back some Obama-era regulations aiming to hasten the permitting process, but these reforms have yet to be solidified in law. While a bill intended to standardize permitting and promote economic growth passed in the House, it remains stalled in the Senate.
