PJM Proposes 6GW Auction to Cover Data Centre Power
Grid operator PJM has submitted a two-part plan to FERC, proposing a one-time 6GW capacity auction and shifting responsibility for new supply to large
Grid operator PJM has proposed a major overhaul of its capacity procurement to address a power shortfall driven by surging data centre demand. The plan, submitted to the Federal Energy Regulatory Commission (FERC) in late July and early August, aims to prevent household electricity bills from rising by an estimated US$70 per month by 2028.
PJM, the largest grid operator in the United States, failed to secure enough capacity in its latest auction to meet its reliability target for the 2028 delivery year. The operator attributes this deficit primarily to rising projections for data centre load and a lack of corresponding new power generation. PJM projects that demand from data centres and other large loads could grow by as much as 70 gigawatts (GW) by 2038.
A recent capacity auction cleared at the price cap of US$333.44 per megawatt-day, a 1,053% increase from just two years prior. The total cost of that auction reached US$16.4 billion, with data centres-including many not yet built-accounting for US$6.5 billion. According to projections from the Natural Resources Defense Council (NRDC), average households in PJM's region could see monthly bills increase by roughly US$70 by 2028 compared to pre-surge levels.
Reliability Backstop Procurement
The first part of PJM's plan is a one-time reliability backstop auction scheduled for this autumn. This auction will seek to procure approximately 6GW of new capacity, the amount needed to restore the grid's reliability position. The mechanism allows PJM to procure new capacity on behalf of new large loads, with the costs passed to utilities and, intended to be paid by the data centres themselves.
The auction will offer 15-year capacity contracts for a range of new resources. Resources that can be built quickly, such as battery energy storage systems (BESS), are expected to have a significant competitive advantage in the procurement.
| Resource Type | Contract Length | Notes |
|---|---|---|
| New Power Plants (Gas, Nuclear, Clean Energy) | 15 years | Included in auction |
| Battery Energy Storage Systems (BESS) | 15 years | Expected to have advantage due to speed of construction |
| Uprates to Existing Resources | 15 years | Included in auction |
Interim Resource Adequacy Service
The second part of the plan marks a significant policy shift. PJM will immediately stop procuring capacity supply for new large loads through its regular auctions. Instead, large loads like data centres will become responsible for securing their own power supply. If they fail to do so, PJM will not purchase it on their behalf.
Under this new framework, large loads that connect without securing new supply may face curtailment or interruption during grid emergencies. PJM will prioritise cutting power to these new loads before other customers, aiming to protect residential and commercial ratepayers from uncontrolled blackouts.
Stakeholder Reaction and Concerns
Claire Lang-Ree, a clean energy advocate at the NRDC, expressed cautious support for the proposals while highlighting key concerns. The NRDC largely supports the reliability backstop auction as a way to make data centres pay for their new supply. However, Lang-Ree emphasised that states and utilities must ensure these costs are channelled directly to the large load customers.
The NRDC plans to file a protest at FERC over one significant risk: the lack of locational requirements for new power plants. Under the current proposal, a plant built in one state to serve a data centre in another could leave all customers footing the bill for massive new transmission lines. "(NRDC is) saying there should be some locational component," Lang-Ree explained. She noted that such a requirement would also benefit clean energy like storage due to its siting flexibility.
On the second part of the plan, the NRDC strongly supports excluding large loads from the regular capacity auction. "It's just a clear signal that large loads are no longer going to be allowed to ride on the backs of other ratepayers," Lang-Ree said. Successful implementation, however, will require significant work at the state level to create new tariffs and curtailment procedures.
The NRDC is advocating for states to create pathways allowing large loads to use clean distributed energy resources during curtailment periods to maintain some service. Lang-Ree anticipates FERC will likely approve both filings but acknowledges uncertainty, as FERC can only approve or reject filings in their entirety. The NRDC hopes FERC will direct PJM to address the locational concern before granting final approval.
