Commentary: Taylor Millard: Largest grid operator puts data centers on notice
PJM Interconnection, the largest US power-grid operator covering 13 states and D.C., has warned data centers they must secure their own power supplies or face electricity curtailments due to massive projected demand increases and declining generation capacity. Pennsylvania Governor Josh Shapiro has responded with an executive order removing data centers from a fast-track permitting program and directing utilities to implement similar curtailment rules. Some companies like Meta, Microsoft, and Amazon are already exploring nuclear energy to meet future power needs.
The PJM Interconnection Board of Managers, America's largest power-grid operator serving 13 states and the District of Columbia, has issued a stark warning to data centers regarding their escalating electricity demands. PJM projects new large loads, primarily data centers, will add 70 gigawatts of electricity demand to the grid by 2038, while the generating fleet has lost 15 gigawatts since 2022. This imbalance has led to significantly higher capacity-auction prices and shortfalls in securing reliable capacity, with PJM's independent market monitor identifying data center demand as the primary driver.
In response, PJM plans a "carrot-and-stick" approach starting in June. New data centers using at least 50 MW that haven't secured sufficient new power supplies could be required to reduce electricity use during grid emergencies, prior to residential curtailments. While not mandating on-site generation, data centers would need to build, buy, or contract new power plants elsewhere on the PJM system. This framework aligns with the White House's Ratepayer Protection Pledge, which advocates for large loads bearing their own infrastructure costs.
Pennsylvania Governor Josh Shapiro has already taken decisive action, issuing an executive order on August 18. This order directs state officials to create rules that would mandate utilities curtail data centers before other customers, unless those facilities have secured their own incremental generation. It also assigns PJM backstop costs directly to data centers and prohibits utilities from passing these costs to other customers if a data center operator becomes insolvent. Furthermore, Shapiro's order removed data centers from Pennsylvania's fast-track permitting program.
Major tech companies are already exploring solutions. Meta plans to use nuclear energy for data centers in Ohio, while Microsoft and Amazon Web Services have similar agreements in Pennsylvania, though these projects are not expected to be fully operational until the late 2020s or 2030s. PJM's message remains clear: new data centers must ensure their own power generation or accept interruptible service when the grid is under stress.