Struggles in overhauling the nation's primary energy market as expenses skyrocket
In the heart of the United States, the PJM Interconnection, the country's biggest power market, has been grappling with a significant challenge: a delay in connecting new energy sources to its grid. This issue, which has been brewing for over a decade, has resulted in a backlog that is expected to be cleared by the end of 2026, leaving hundreds of gigawatts of potential new supply in limbo.
The interconnection process, overseen by PJM Interconnection LLC (PJM) itself, has come under scrutiny. Advanced Energy United gave PJM a D- score for its interconnection processes in a 2024 survey, the lowest of any U.S. grid operator. PJM's track record is among the worst, with projects taking an average of more than five years to move through the steps required to plug into the grid.
The backlog primarily consists of solar, wind, and battery projects, many of which were initiated before the COVID-19 pandemic. The reasons for the delays extend beyond PJM's control, including permitting timelines, supply chain constraints, and evolving project economics.
The delays have had a ripple effect on utility bills. Residential customers could see utility bills rise by up to 5% in the years to come, or more than $100 in annual household costs. Commercial and industrial electricity costs could also increase, with estimates suggesting a 23% cut through 2040 if comprehensive interconnection reforms are implemented.
The spiraling costs have galvanized both Republican and Democratic governors of states served by PJM to demand immediate reforms. Last week, the Federal Energy Regulatory Commission (FERC) ordered PJM to rework "conceptual proposals" that it said fail to meet federally mandated deadlines for implementing interconnection reforms.
Despite the challenges, PJM has made progress in addressing the backlog. It has processed over 60% of its interconnection queue backlog. In its latest annual capacity auction, PJM reported a new record, with prices increasing to $16.1 billion. About 2.7 gigawatts of new generation and "uprates" had been added to its available pool of resources since its last auction, marking the first such increase in the past four auctions.
However, questions remain about PJM's approach to calculating future demand growth from data centers. Abe Silverman, an attorney, energy consultant, and research scholar at Johns Hopkins University, has expressed concerns about this aspect. The forecasted demand for electricity on PJM's grid has increased by 5.5 GW in the past four years, largely due to new plans for data centers in the region.
As PJM navigates these challenges, it's clear that comprehensive reforms are needed to expedite the interconnection process, reduce costs for consumers, and ensure a more sustainable energy future. Other U.S. regional grid operators are facing similar issues, underscoring the need for nationwide solutions.
