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America's largest grid struggles to meet the demand from AI

America's biggest power grid is being strained by data centers and AI bots that consume more power than can be produced. In some areas of PJM Interconnection territory, which includes 13 states from Illinois to Tennessee to New Jersey, electricity bills will increase by over 20% this summer. This region has the most data centres in the world. Pennsylvania's governor has threatened to abandon the grid. The CEO announced his departure. And the chairman of PJM’s board of directors and another member of the board were voted out. The turmoil at PJM began a year ago when prices at the annual capacity auction jumped by more than 800%. The auction prices are passed on to the power bills of everyday people.

Now PJM is rushing towards its next auction of capacity on Wednesday when prices could rise even more.

The auction is designed to prevent blackouts. It establishes a rate that generators will agree to supply electricity at during times of extreme grid stress, which are usually the coldest and hottest days of the year.

The auction's high prices should have spurred new power plant construction. However, this hasn't been done quickly enough in PJM’s region where aging power plants are continuing to retire while data center demand is exploding.

PJM made things worse by delaying the auctions and pausing applications for new plants. This was according to more that a dozen experts, including power developers, energy lawyers, and regulators.

In an interview, Pennsylvania Governor Josh Shapiro said: "We need speed and transparency from PJM. We also need to keep costs low for consumers with PJM." "I'm encouraged by the fact that they have taken steps in this direction. We'll continue to work on it."

PJM claims that the crunch in supply and demand is largely due to factors beyond its control. These include state energy policies, which closed fossil-fuel-fired power plants too early, and the growth of data centers in "Data Center Alley", in Northern Virginia, and other burgeoning Mid-Atlantic hubs.

Jeffrey Shields, PJM spokesman, said that prices will continue to rise as long as the demand for energy continues to grow faster than supply. "Right away, we need all the megawatts we can get."

Shields stated that new projects with a total of 46 gigawatts – enough to power 40,000,000 homes – have been approved in the past few years. "But they are not being built due to local opposition, supply-chain backups, or financing issues which have nothing to do PJM," Shields explained.

PJM lost over 5.6 gigawatts of net power in the past decade, as more plants closed than were put into service. This is according to a PJM report filed this year with regulators. PJM will add about 5 gigawatts to its power generation capacity by 2024. This is less than the smaller grids of California and Texas.

Data center demand continues to grow. PJM anticipates an increase in demand of 32 gigawatts on its system by 2030. All but two of these gigawatts will come from data centers.

POWER HUNGRY CHABOTS

In the last few years, a convergence of events has resulted a skyrocketing rate for power capacity at PJM.

PJM regulators have repeatedly delayed auctions as they considered multiple rule changes, giving developers less planning time for the construction of power plants.

In 2022, PJM halted processing new applications for power plants connections, after being overloaded by more than 2,000 requests. Each of these projects required engineering studies to connect to the grid. PJM claims that its interconnection line has not caused the shortage in supply.

In 2023, ChatGPT was a household brand and the demand for it exploded. The tech giants began searching the U.S. grid for available capacity, which contributed to a spike in the auction prices in 2024.

Consumer advocates from Maryland and New Jersey, among other states, filed complaints to federal regulators asking for the auction to be re-done.

Shapiro repeatedly threatened to remove Pennsylvania from the grid, as it is the largest electricity exporting state, and the "P", in PJM if the costs didn't come down. In June, when asked if the option of leaving PJM was still open, Governor Shapiro replied: "It's on the table."

During the fallout of the scandal, PJM CEO Manu Ashthana announced that he was leaving his post by the end the year. He cited a move to Texas with his family.

Asthana has not responded to any requests for comment.

In May, citing fears of blackouts and the need to maintain two natural gas and oil power plants in Pennsylvania that were scheduled to retire by May, the Trump Administration ordered them to operate through the summer.

DELAYS IN CONNECTION Shields stated that PJM, in response to the backlash of protests, has implemented multiple reforms. These include capping prices at 325 megawatts per day and holding auctions every 6 months instead annually.

PJM has also moved to speed up the connections of 51 projects to its network, although many are expected to be online in 2030 or 2031. Constellation Energy’s Three Mile Island Nuclear Plant, now known as Crane Clean Energy Center and restarted by Microsoft, is one of them. The plant won't be ready to operate until at least 2027, even under PJM’s expedited plan.

Joshua Macey is an energy expert at Yale Law School and says that PJM does not process new applications quickly enough. He said, "It is pointless to fix the interconnection queue if it hasn't been done." Reporting by Laila KEARNEY (Editing by Liz Hampton, Michael Learmonth and Michael Hampton)

(source: Reuters)