Dive Brief:
- PJM Interconnection stakeholders recently endorsed a two-part reliability backstop procurement plan designed to secure electricity for data centers and address an anticipated power shortage in the coming years.
- The strategy will involve utilities and other entities requesting PJM to auction a specific capacity. They will charge larger users for this procurement, with an overall cost capped at $555 per MW-day.
- PJM’s board will review this plan and aims to present a final proposal to the Federal Energy Regulatory Commission (FERC) later this month. They are also looking into a framework for connecting and managing data centers, although consensus has not been reached on this aspect.
Dive Insight:
The procurement plan was put forward by the Data Center Coalition alongside various utilities, including major players like Dominion Energy and Exelon. This initiative is a part of PJM’s broader goal to ensure adequate power supply for consumers across 13 states and Washington D.C.
PJM has issued warnings about possible electricity shortages due to retiring power plants and rising demands fueled by expanding data center operations. Earlier this year, the grid operator set up special stakeholder groups to explore a one-time procurement process and a management framework for data centers.
The procurement plan emphasizes a model to avoid excess purchasing and effectively distribute costs, addressing concerns about cost-shifting. It also includes a contracting phase to bolster the central procurement approach.
The Natural Resources Defense Council applauded the approved plan, emphasizing its potential to protect the public from the financial burden of building new power plants for data centers. The plan further encourages PJM to prioritize local energy sources over distant fossil fuel plants.
PJM intends to conduct the backstop procurement in September, with expectations of solid commitments ahead of the capacity auction scheduled for December 9. Although proposals for connecting and managing data centers did not gain enough support, a revised plan from PJM received favorable feedback from stakeholders.
The PJM board is set to communicate the finalized plans to its members before filing with FERC.