Investment incentives and market dysfunction

The nation’s largest electric grid operator outlines its plan to manage rapid growth in data center electricity demand.

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PJM Interconnection, the nation’s largest grid operator, is preparing to file a wide-ranging proposal with federal regulators aimed at managing the rapid growth of electricity demand, including AI-driven data centers. The plan stands out as one of the first comprehensive efforts by a grid operator to address surging load from new technologies while maintaining system reliability and limiting cost impacts on consumers.

The proposal arrives at a moment when the electric grid is under growing stress. Tightening power supply-demand balances, high-profile grid failures, and a series of narrowly avoided outages have raised concerns about whether the power system can continue to meet demand reliably. At the same time, those pressures have increasingly shown up in electricity prices, which have increased sharply in many areas.

PJM’s proposal tries to answer a question grid operators across the country are now facing: how to say “yes” to large new loads without turning reliability into a gamble or costs into an afterthought. The plan lays out a structured approach to integrating data centers and other large loads, with an eye toward keeping commitments realistic and aligning responsibility with impact.

Abe Silverman is an assistant research scholar with the Ralph O’Connor Sustainable Energy Institute at Johns Hopkins University and a former general counsel to the New Jersey Board of Public Utilities. Tom Rutigliano is senior advocate for climate and energy at the Natural Resources Defense Council, where his work focuses on PJM. Both participated in the policy discussions surrounding PJM’s proposal, and provide their perspective on its potential impacts on grid reliability, consumers, and the potential rate of datacenter growth.

Abe Silverman is an assistant research scholar with the Ralph O’Connor Sustainable Energy Institute at Johns Hopkins University and a former general counsel to the New Jersey Board of Public Utilities.

Tom Rutigliano is senior advocate for climate and energy at the Natural Resources Defense Council, where his work focuses on PJM.

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Communities Are at Risk If We Don’t Slow the Roll on Data Center Development https://kleinmanenergy.upenn.edu/commentary/blog/communities-are-at-risk-if-we-dont-slow-the-roll-on-data-center-development/

Energy System Planning: New Models for Accelerating Decarbonization https://kleinmanenergy.upenn.edu/research/publications/energy-system-planning-new-models-for-accelerating-decarbonization/

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