With power in short supply, data centers are asked to make their own

Facing soaring demand for electricity, the Mid-Atlantic power grid operator says it will serve new data centers if they can generate their own power — or agree to get cut off and run on their own generators when the grid is stressed.  

That’s one of several proposals PJM Interconnection, which runs the grid, recently announced as part of a radical new plan to deal with the surging demand from data centers and the limited amount of power available to serve them.  

Other parts of the plan include encouraging data centers to bring their own power to bolster the grid, creating a new auction to put money on the table to attract additional generation, and improving data center power-demand forecasting to reduce electricity prices overall. 

The plan is only an outline and needs to be fleshed out. Much of it would also need to be approved by the Federal Energy Regulatory Commission. Still, it represents a stark departure from past practice, in which data centers were freely allowed to connect to the grid — resulting in forecasts of future data center power demand far beyond the grid’s capacity. 

Now the idea is to let them connect, but under rules designed to create more power generation. 

No ban on new data centers 

The plan does not include an idea put forward by several PJM members and outside groups to put new data center connections on hold until utilities are able to make adequate plans for them.    

“The Board does not support approaches that seek to limit or eliminate this (data center) growth,” the PJM board wrote in a letter explaining its plans to stakeholders. 

“This is not a yes/no to data centers,” board chair David Mills said in a release. “This is, ‘How can we do this while keeping the lights on and recognizing the impact on consumers at the same time?’”  

Julie Bolthouse, land-use director at the Piedmont Environmental Council, says that’s unrealistic. She argues that constraints on permitting, the supply chain, transmission lines, gas supplies, and new renewable energy projects will make it impossible to generate enough power needed for the data centers waiting in line. 

“It's extremely complicated, and the crux of the issue is that we have to pause,” she said. “We have to pause and plan, because if we continue to approve more and more data centers and more and more load getting put into this system, there is no way we can build out this energy.” 

The problem of data center overload is well-recognized. Last month, PJM held an auction to reserve electricity for the year 2027-28, but there were not enough power reserves to safely meet demand on peak power days. Meanwhile, the auction’s prices hit a new high, driving up electricity costs for everyone.    

“This auction leaves no doubt that data centers’ demand for electricity continues to far outstrip new supply, and the solution will require concerted action involving PJM, its stakeholders, state and federal partners, and the data center industry itself,”  said Stu Bressler, PJM’s chief operating officer, explaining the auction results.  

PJM’s solution involves encouraging new data centers to bring their own new generation to the grid by building their own sources of power generation on-site or off-site to offset their power demand.  

Such new power sources would get an “expedited” connection to the grid — a process that until now has been bogged down in PJM’s notoriously slow interconnection queue.  

If a new data center chooses not to generate its own power, it will be subject to “curtailment” — meaning its power would be cut off on peak power-use days if the grid is stressed to its limits. Typically, this would happen on the hottest and coldest days of the year. If that happens, the board said it would be “reasonable for certain large loads, including data centers, to move to their backup (diesel-powered) generators or to curtail their demand.”  

While PJM offered assurances that these instances would be brief, it also proposed setting up a permanent framework under which PJM would decide how much load in the system had to be curtailed and when. States and utilities would then choose which data centers would be cut off. No more details were provided. 

It is not also clear how much notice would be given before “curtailment.” A new rule adopted Jan. 3 by the Virginia Department of Environmental Quality said that if data centers receive more than 14 days’ notice of power shutoff, they would have to obtain cleaner Tier 4 generators. If they received less than 14 days’ notice, they could run on their dirtier emergency Tier 2 generators.   

Those who don’t bring power and don’t agree to be cut off could also end up being charged for new generation created by a new, so-called “backstop” auction. The idea is that utilities may bid on 15-year contracts for electricity, hoping the bids are high enough to stimulate power companies to build new power plants. 

Under the plan, the utilities may then allocate those costs to the data centers that did not provide their own power. However, PJM acknowledges that the details are yet to be worked out. 

PJM spokesman Jeff Shields said PJM would have to file with the Federal Energy Regulatory Commission to set up the auction. Other parts of the plan would require FERC filings as well, he said. 

The new PJM plan parallels a list of recommendations for PJM action issued by a White House task force and a panel of 13 governors on the same day, Jan. 16, that PJM announced its plan. But Shields said the PJM board had not seen an advance copy of the recommendations.  

“We did not ask to see the letter nor did they share the letter with us,” he said. 

But he noted that both groups were working off the same script — a dozen proposals on how to handle data center load that were drafted by PJM members, promulgated in December, and sent to the board for a decision.  

“The White House/Governors proposal last week had the same proposals to work with,” he said.