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The Trump administration wants PJM Interconnection, the country’s biggest power market, to force data center developers to pay directly for the new power plants they need. It’s the latest attempt to curb skyrocketing energy costs for the roughly 67 million people PJM serves from Virginia to Illinois.
On Friday, the National Energy Dominance Council and governors of some PJM states released an agreement that urges the grid operator to take action to solve its massive affordability and grid-reliability problems.
Specifically, it presses PJM to speed up the construction of more than $15 billion worth of “reliable baseload” power plants by providing them with 15 years of revenue certainty. It also directs PJM to “require data centers to pay for the new generation built on their behalf — whether they show up and use the power or not.”
But industry experts warned that these demands would be difficult, if not impossible, to execute fast enough to make a difference for the region.
“It’s not at all clear how this can actually get implemented,” Rob Gramlich, president of consultancy Grid Strategies, told Canary Media. “How would this ever get implemented — and would this require changes that usually take five years?”
The vision, according to an anonymous White House official quoted by Bloomberg, is to require PJM to set up an emergency auction by September, which would compel data centers and other “large loads” to pony up the $15 billion to spur new power plant construction.
PJM is already under a December order from the Federal Energy Regulatory Commission to overhaul its rules for how massive data centers can interconnect to its grid.
The grid operator has also been slowly working on reform of its own. Its monthslong effort to get stakeholders — including utilities, power plant owners, big corporate energy users, data center developers, and consumer advocates — to agree on new structures to deal with the rising cost impacts of data centers ended in deadlock late last year. In a twist of fate, PJM released its decision on this matter later on Friday.
That plan has not yet been reconciled against the Trump administration’s just-released principles — PJM itself was not invited to the Friday White House event at which the agreement was announced, spokesperson Jeffrey Shields told Bloomberg.
Now, “PJM is reviewing the principles set forth by the White House and governors,” Shields said in a statement to Canary Media. “We will work with our stakeholders to assess how the White House directive aligns with the [large-load plan].”
The agreement’s goal is ultimately to curb PJM’s skyrocketing capacity costs, which are driven by the grid operator’s inability to build new generation or energy storage capacity fast enough to meet booming demand.
PJM’s rising utility rates are driving backlash from consumers — and demands from politicians to take action, including limiting data center growth.
“The principle of new large loads paying their fair share is gaining consensus across states, industry groups, and political parties,” Gramlich said. “The rules that have been in place for years did not ensure that.”
But Gramlich highlighted that Friday’s plan will run into the same state-vs.-federal jurisdictional conflicts that have stymied PJM’s efforts to reform data-center interconnection to date.
First off, PJM’s capacity auctions operate by allowing power plants, battery projects, demand-response providers, and other “supply-side” providers to bid their capacity into the system. Those capacity costs are then passed along to utilities, he noted. Utility customers themselves — including data centers — are not part of that equation.
“Even if the large loads voluntarily participate, there’s no mechanism currently for direct participation of a retail customer in a wholesale auction,” Gramlich said.
What’s more, data centers remain customers of utilities regulated at the state level. “It might require changes in state law in any PJM state” to alter those facts, he said.
Even if such state policies were put in place, there’s no guarantee that the prospective data centers would play ball, he said. “It’s easy to hold an auction, but the hard part is compelling anyone to participate.”
The new agreement faces other fundamental challenges, too.
While the text doesn’t specify the exact type of power plants it wants PJM to build, its call for “reliable baseload power generation” is code for fossil fuels or nuclear power. That will pose problems. Demand for gas turbines has pushed delivery orders for new power plants out to 2028 or later. Almost all of the new gas-fired power plants secured in PJM’s fast-track procurement last year aren’t set to come online until 2030 or later. And nuclear power plants usually take about a decade to build.
Meanwhile, more than 100 gigawatts of potential new grid resources, the vast majority of which are solar, wind, and batteries, remain stuck in PJM’s badly congested interconnection queue. PJM is still working on efforts to fast-track these resources by, for example, pairing batteries with existing solar and wind farms.
Ultimately, an auction of the kind the White House plan envisions could drive investment in more power plants, according to Julia Hoos, head of USA East at Aurora Energy Research — but it could also “exacerbate some other elements of PJM’s challenges.”
“Everyone agrees that PJM is struggling to bring online new generation fast enough, and that some sort of intervention is required,” Hoos wrote in a Friday email. But she added that “PJM already has several ongoing reform processes to address these issues — and it’s pretty unprecedented for this sort of top-down intervention to direct PJM’s efforts.”
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