America’s largest power grid is short on electricity and over-extended on new data centers seeking connection. Part of a proposed solution opens the door to paying tech companies to shut down when grid conditions become tight.
Last week, the power grid operator PJM submitted interim plans to the Federal Energy Regulatory Commission (FERC) on how to deal with new large loads that do not bring their own source of electricity. The PJM grid stretches from Washington, D.C., to Chicago with interconnected power lines that serve 67 million people in 13 states.
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“New large loads are developing more quickly than generation and transmission can be built,” Christopher Pilong, director at PJM, wrote in an affidavit attached to the federal filing.
In the latest proposal, known as the Interim Resource Adequacy Service (IRAS), the grid operator wants federal approval to stop power from flowing to data centers when system-wide electricity demand exceeds supply. Known as curtailment, taking large portions of electricity demand off the grid can prevent blackouts.
The PJM proposal also floats compensation for any data center that has its power involuntarily shut off. If implemented, the money would likely come from other utility customers, including residents and small businesses.
“A large load that is ordered to reduce its power usage could receive credit for helping maintain grid reliability,” PJM wrote in an announcement on its website. “States and their local utilities would manage how these retail costs are shared among customers in affected areas.”
PJM also said data center companies could opt out of receiving a credit, citing the White House’s nonbinding ratepayer protection pledge, which promises to prevent residents and small businesses from facing costs as a result of data center development. But the details are murky.
“It’s a punt to states, and really, it’s unclear on how the compensation will work,” said Nikhil Kumar, program director at the nonprofit GridLab, in an email to Straight Arrow.
What is the problem with PJM?
The IRAS proposal is only one component of PJM’s plan to ensure the grid has enough power.
“PJM has been struggling to add new generating capacity even before this data center phenomenon exploded so massively,” said Jon Gordon, policy director at Advanced Energy United.
PJM buys power generation commitments several years in advance. At a July auction for long-term electricity capacity, PJM fell 6.8 gigawatts short of its target. That’s a deficit large enough to power several million homes despite a record-high price paid. At the same auction, PJM saw prices hit the auction’s cap, due to surging demand.
To solve supply woes and bring data centers online, PJM is now seeking FERC approval for a one-time emergency auction — known as reliability backstop procurement — exclusively for data centers to purchase power for their facilities. FERC, which pushed for the auction along with the White House, is expected to approve those plans in time for an auction at the end of September.
PJM has also encouraged data center developers to establish private contracts directly with power companies to build power plants, rather than going through the systemwide marketplace.
But there are no guarantees that enough power companies are interested in building on the PJM grid, and it can take years to connect resources to the system. That’s where IRAS comes in.
How would PJM’s interim solution work?
Data centers that are not able to secure electricity supplies through direct contracts with power companies or the larger auction can have their power shut off if the grid enters an emergency, according to PJM’s plan. The grid operator would keep a registry of eligible facilities.
“When electricity supply on the grid approaches dangerously low levels,” PJM said a new emergency procedure would direct utilities to stop power flowing to registered data centers “ahead of any action that would serve to shut off traditional consumers, including residential consumers.”
FERC has 60 days to deliberate on the proposal. The PJM filing mentions the possibility of compensating facilities that are affected, but how that could work falls to the jurisdiction of each of the 13 states.
“One of the fundamental problems at PJM is political, not economic, not the physics of the grid,” Mark Christie, a former FERC chairman, said in an interview with Straight Arrow earlier this year, referring to how differing state policy affects grid operations.
It wouldn’t be the first time industrial facilities have been paid for shutting down amid stress on the grid. In 2023, the bitcoin company Riot Platforms made $31.7 million for allowing its power demand to be controlled by Texas’ grid operator through a voluntary demand response program. But under the IRAS plan, data centers in PJM that don’t secure their power would not have a choice.
“We are really in uncharted water here,” Gordon said. A few years ago, he said “the idea of singling out a specific type of customer for curtailment would be unthinkable,” but the fact that it’s happening now is a sign of how drastic a shift data centers are causing in how the grid is run.
Round out your reading
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- Inside the effort to make data centers pay their share of electricity costs.
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- Photos and video show exactly where and when Trump visited Ground Zero after 9/11.
