PJM Board Approves Grid Reliability Plan to Address Surging Data Center Demand

The PJM Interconnection Board of Managers on July 27 directed the grid operator to pursue a series of near-term measures intended to strengthen electric system reliability as rapidly growing large electricity users outpace the addition of new generating resources. The board authorized two filings with the Federal Energy Regulatory Commission: one establishing a one-time Reliability Backstop Procurement alongside a process to facilitate bilateral supply agreements, and another creating an interim framework to manage large new loads during periods of capacity shortages. The actions are designed to preserve reliability while broader market reforms continue to be developed.

The board acted after a stakeholder process examining how accelerating demand from data centers and other large industrial customers is reshaping the region’s electricity needs. PJM projects that large loads could increase by roughly 70 gigawatts by 2038, while approximately 15 gigawatts of generation have retired since 2022. The most recent capacity auction for the 2028/2029 delivery year also produced a shortfall relative to the grid operator’s reliability requirement, underscoring concerns that new demand is arriving faster than replacement supply.

To address those challenges, PJM plans to conduct a one-time central procurement beginning Sept. 30 to secure new generation commitments of up to 15 years, with results expected before the December capacity auction for the 2029/2030 delivery year. The proposal would work in parallel with a bilateral contracting initiative launched earlier this year, allowing electricity suppliers and customers to negotiate private agreements that would reduce the amount of capacity PJM ultimately needs to procure. Eligible resources include newly developed generation, certain transferred interconnection rights, qualifying demand response and distributed energy resources, provided they enter service by June 1, 2032.

The board also directed PJM to establish a Large Load Registry to improve transparency and forecasting of high-demand customers. The registry will support an interim reliability framework under which new large electricity users that do not secure sufficient generation could face curtailment during periods of system stress before broader emergency load reduction measures are activated. PJM also intends to remove incremental new large loads from future auction demand calculations unless those customers bring or contract for the supply needed to serve them, reflecting the board’s view that existing consumers should not bear higher capacity costs created by new demand.