PJM Interconnection envisions a power system in which data centers drive most new electricity demand, but its five-year strategy begs a critical question: how much responsibility should the regional grid operator assume for turning uncertain load forecasts into generation, transmission and reliability commitments?. PJM’s Board of Managers approved the strategy in July, and PJM released it August 19.
The plan calls for a more dynamic approach to grid operations, faster planning and interconnection, stronger alignment with states and more efficient decision-making.. But the document does not resolve the governance and capacity-market changes now under scrutiny at the Federal Energy Regulatory Commission (FERC).
Those decisions will come through separate proceedings and filings.. The strategy arrives as FERC presses PJM to rethink how it accommodates rapidly growing Large Loads.. On June 18, FERC opened a Section 206 proceeding against PJM, directing the grid operator and transmission owners to justify existing tariffs governing large-load service or propose reforms.
PJM was given 60 days to respond.. Related:Flex Pays $4.4B for EPC Power as AI Data Centers Push 800V Architecture. Elizabeth K.
Whitney, managing principal at Meguire Whitney, said the strategy largely reflects work that began before FERC intensified its scrutiny this year.. “This is really a routine, long-range document that merely reflects those more recent developments, rather than a fresh response to the most pointed pressures facing the organization,” Whitney said..
“I don’t take this document to be particularly telling of where PJM is actually headed with respect to its governance changes and capacity market reforms,” she said. “We’ll have to wait for those detailed filings to get a picture of how things will unfold.”. Four Priorities Set.
PJM organizes the strategy around four priorities: operating a dynamic grid; ensuring durable market incentives and state alignment; adapting planning processes; and improving decision-making efficiency.. The plan calls for modernizing grid operations, using AI and automation in the control room, advancing market reforms, improving generation and transmission interconnection, and streamlining PJM’s stakeholder process..
PJM says its stakeholder process “was built for a different era” and calls for faster decision-making and targeted governance reforms that preserve PJM’s independence.. Whitney said those objectives amount to a work list rather than a detailed roadmap.. “Slashing the interconnection queue, improving the accuracy of the demand forecast, reforming the capacity market – these are a to-do list, not a strategy,” she said..
Related:SLB’s $4.1B Kelvion Deal Expands AI Data Center Push. “If all that takes five years, we’re in real trouble.”. PJM’s Role Expands.
PJM says more than a decade of predictably flat load growth is over, with data centers accounting for most of the incremental demand through 2035.. The strategy says system stress could increase through 2031 even under a downside scenario with slower AI-related load growth, given the pipeline of Large Loads and data centers already under construction.
Uncertainty rises significantly after 2030.. PJM says generation is struggling to come online quickly enough because of permitting, transmission, interconnection, equipment and infrastructure constraints.. “As the region faces accelerated demand growth, driven by the continued growth of large loads and data centers, the state of the interconnection is not tenable,” PJM said..
The strategy says PJM will take a more proactive role as an “orchestrator” of resource adequacy, while emphasizing that responsibility remains shared with states and other stakeholders.. Neil Osnato, founder of Persistence Analytics Group, sees that as a meaningful evolution..
“PJM is moving from forecasting resource adequacy toward actively managing the conditions required to produce it,” Osnato said.. Related:Solid-State Transformers Power Next-Gen AI Data Centers. Whitney sees the language differently..
“This looks less like PJM managing resource adequacy than it does like PJM reminding states the capacity market wasn’t meant to solve all problems,” she said.. Whitney said PJM’s strategy could put more pressure on states to address resource-adequacy gaps.. “I’d expect PJM to get a little more explicit about what they can’t do, and more muscular about telling the states where there’s a gap that needs to be filled,” she said..
As PJM makes consequential decisions around projected demand, Osnato said the division of responsibility raises a larger question.. “What evidentiary threshold causes projected large load to become a resource-adequacy obligation?” he said.. If PJM procures generation, accelerates transmission or creates long-term obligations around projected demand, the quality of those forecasts becomes as important as the quality of the supply being procured..
“If PJM is going to procure generation, accelerate transmission or create long-duration obligations because a forecast says several gigawatts of incremental load are coming, then the quality of the load assumption becomes as important as the quality of the generation procurement,” Osnato said.. Large Loads Add Risk.
PJM also identifies the behavior of Large Loads as a growing reliability concern.. “The proliferation of Large Loads is creating new reliability and operational risks, especially around data centers with their unique operating characteristics, which can include significant load fluctuations,” PJM said..
On July 22, a transmission fault in Northern Virginia caused nearly 4,000 MW of data center load to transfer away from the PJM grid.. PJM said the event produced a large generation-load imbalance and voltage and frequency swings but did not create an overall reliability impact. PJM and Dominion Energy are reviewing whether Large Load ride-through requirements or practices should change..
Osnato said the episode demonstrated why data centers cannot simply be modeled as large blocks of static demand.. “Large Load has behavior,” he said.. Protection systems, ride-through characteristics, backup generation, transfer logic, ramp rates and reconnection behavior all affect how a large data center interacts with the grid..
“A Large Load Registry is useful, but a registry that only tells PJM where the megawatts are is not enough,” Osnato said. “PJM increasingly needs to understand what those megawatts do under system stress.”. Faster Buildout Needed.
PJM wants major improvements in its new-services process and identifies “one-year generation interconnection” as an example of the speed it wants to achieve.. A one-year target does not mean every generator will connect to the grid within a year.. Osnato said an accelerated study or interconnection agreement should be distinguished from the time required to build the physical infrastructure needed to deliver power..
“A study can be accelerated. Steel cannot always be,” he said.. Transformers, switchgear, transmission construction, permits, gas infrastructure, financing and equipment delivery can remain on the critical path after PJM completes its interconnection work..
The strategy calls for closer coordination between transmission planning and interconnection, including more sophisticated Large Load forecasting and modeling and greater attention to construction risks.. Cost Risk Remains. The strategy leaves unresolved how the cost of serving new Large Loads should be divided among data centers, utilities, generators and other ratepayers..
A data center may fund its immediate interconnection facilities while contributing to the need for upstream transmission, additional capacity or other reliability investments. If projected demand arrives late, develops more slowly than expected or never materializes, other customers could be left carrying the cost of infrastructure built around that forecast..
PJM’s recent resource-adequacy actions have sought to prevent new Large Loads from shifting their capacity costs to existing customers, but states retain important authority over retail cost allocation.. Osnato said the policy debate needs to go beyond assigning costs when a project actually connects..
“The next stage of large-load policy has to move beyond: ‘Who pays if the load arrives?’” Osnato said.. “The harder question is: Who bears the risk if the load does not arrive or does not persist as represented?”. States Hold Key Levers.
PJM’s strategy repeatedly emphasizes working with states on resource adequacy.. Whitney said the emphasis reflects the limits of PJM’s authority.. “It is ultimately a creature of FERC, which is a creature of statute,” she said.
“So it all ultimately comes back to whether its structure, operations, and outcomes are just and reasonable.”. FERC’s June proceeding is part of a broader effort to determine whether existing large-load tariffs remain just and reasonable and what changes are needed to integrate new demand while protecting reliability and existing customers..
Whitney said that does not mean PJM should simply receive more authority over resource adequacy.. “PJM is clearly saying it cannot be solely responsible for resource adequacy just because it maintains a market,” she said. “The states have to step in here.”.
She also pointed to PJM’s description of its role as serving the “public interest,” saying the Internal Market Monitor has argued that such a responsibility should become a statutory mandate rather than remain rhetorical.. The strategy calls for targeted governance reforms that support PJM independence in responding to critical issues while continuing to consider stakeholder input..
PJM’s plan makes clear that the grid operator believes its old planning model is no longer adequate for the pace and scale of demand growth.. The harder test will be whether the new model can distinguish durable demand from optimistic forecasts – and determine who carries the cost when those forecasts fail.
