Dive Brief:
- PJM Interconnection stakeholders on Tuesday approved a two-part reliability backstop procurement plan to help supply data centers with electricity and meet an expected power supply shortfall in two years.
- Under the plan, utilities and other load-serving entities, and potentially data centers themselves, would ask PJM to buy a specific amount of capacity in a one-time auction. Load-serving entities would bill large loads for the procurement. The entire procurement’s average cost would be capped at $555/MW-day.
- The PJM board will consider the plan when it drafts a final backstop procurement proposal, which it aims to submit for review to the Federal Energy Regulatory Commission this month. The grid operator also plans to submit a “connect and manage” framework for data centers, but stakeholders failed to reach a consensus on that issue.
Dive Insight:
The procurement plan that cleared the stakeholder process was developed by the Data Center Coalition and a group of utilities that includes Buckeye Power, Dominion Energy, Duke Energy Ohio, Duke Energy Kentucky, Duquesne Light Co., East Kentucky Power Cooperative, Exelon, Old Dominion Electric Cooperative, PPL Electric Utilities and Southern Maryland Electric Cooperative.
The stakeholder groups’ action is part of PJM’s broad effort to ensure it has enough power supplies to meet the needs of consumers across its footprint, which includes 13 Mid-Atlantic and Midwestern states and the District of Columbia.
PJM has been warning of possible electricity supply shortfalls later this decade due to a combination of power plant retirements, a lack of new generating resources and rising demand, driven by data center development.
Earlier this year, PJM created “critical issue fast path” stakeholder groups to consider options for a one-time procurement process outside the grid operator’s regular capacity auctions, as well as for a connect-and-manage framework for data centers.
The stakeholders’ backstop procurement plan is centered on a “registry-based subscription model” that addresses concerns about potential over-procurement, cost allocation and cost-shifting, the coalition said.
Their plan also includes a bilateral contracting phase, as proposed by PJM staff. “A strong bilateral contracting phase will improve the likelihood of success of the central procurement proposed by the Coalition,” the DCC and utilities said.
The Natural Resources Defense Council praised the “common sense” plan after the votes.
“The approved proposal for the Reliability Backstop Procurement ensures that the public will not be stuck with the bill to build new power plants for data centers,” Tom Rutigliano, senior advocate for climate and energy at NRDC, said in a statement.
The plan also directs PJM to focus on new supply located close to data centers instead of building transmission lines to move power from distant fossil-fueled power plants, he said.
“This is good news for clean energy, and avoids an expensive boondoggle that benefits fossil fuel companies at public expense,” Rutigliano said.
PJM plans to hold the backstop procurement in September. The grid operator said Wednesday that it expects to finalize commitments from the procurement before it holds a capacity auction for the 2029/30 delivery year on Dec. 9.
Although no connect-and-manage proposals won enough support for approval, most stakeholders appeared to support a revised proposal from PJM staff, according to ClearView Energy Partners, a research firm.
Instead of having a process for curtailing data centers, as originally proposed, PJM staff suggested that it create a large load registry that would give state regulators critical data they need to set their own load-reduction priorities for retail customers.
“Ultimately, PJM will partner with these state-led programs by using the registry as an informational and operational tool in managing the grid during stressed system conditions,” staff said in the proposal.
The PJM board plans to issue a letter to its members with the details of its final plans before filing the proposals at FERC.
