PJM Interconnection Releases White Paper on Proposed Changes to Grid Operations and Market Rules

PJM Interconnection released a white paper this week stating that the region has years, not decades, to make fundamental changes to the way it operates. “The current situation is not tenable,” PJM CEO David Mills wrote in a foreword to the report. The grid operator oversees the grid for some of the densest data center developments on Earth, including the compute-dense region of Northern Virginia.

What happens in PJM’s territory will send ripples throughout the tech world, TechCrunch reported. American Electric Power is considering pulling out of PJM altogether. Bill Fehrman, AEP’s CEO, said on an earnings call Tuesday that the current state of PJM’s performance and stakeholder approval process does not give him great confidence that these issues will be resolved anytime soon.

Bill Fehrman said he expects that if something is not done now, the same conversations could still be occurring in 10 years. He stated that the PJM market worked very well when supply exceeded demand and that the region is now in a very different time. PJM paused applications in 2022 for new generating sources to connect to its grid due to a years-long backlog.

In 2022, more than 300 gigawatts worth of projects were in the PJM interconnection queue. Of the projects in the 2022 PJM queue, only 103 gigawatts ended up signing agreements. Only 23 gigawatts have been connected from the projects that were in the 2022 PJM queue.

Since PJM reopened the queue, power companies and project developers have filed more than 800 interconnection requests representing 220 gigawatts of new power. The white paper is 70 pages long. PJM currently requires utilities and power generators to commit to supplying a certain amount of electricity for three years.

The white paper proposes an option that would require utilities and power generators to make bigger, longer-term commitments. PJM’s white paper proposes changing reliability guarantees so that customers who pay less might get their power cut first. It also proposes moving closer to a real-time market where supply and demand dictate prices while retaining some stability from long-term contracts.

The report arrives as cloud computing and artificial intelligence have begun to strain PJM’s existing generating capacity. Demand in the region remains so large that the reopened queue has drawn hundreds of new proposals despite the earlier pause. PJM Interconnection’s territory includes Northern Virginia, a compute-dense region with a large number of data centers.

TechCrunch reported that politicians, businesses, households and power companies all believe the organization needs an overhaul. Yet not every stakeholder is convinced PJM can execute the changes it has outlined.