PJM Interconnection operates the electric grid across 13 states, from Illinois to New Jersey. That is becoming an impossible task as energy use grows increasingly more quickly than new plants can be constructed. Consumers across PJM’s region are on the verge of having their electricity bills soar nearly 100 billion dollars. Otherwise, they could face an increase of more than 20% in the summer of 2025. Now, demand is skyrocketing—creating an increasingly dire perfect storm. Meanwhile, remaining older fossil-fuel power plants are shutting down prematurely.
Since 2018, PJM has signed off on enough projects to increase the region’s energy capacity by a whopping 46 gigawatts (GW). That staggering number is enough electricity to power about 40 million homes! However, even after getting approval, a large number of these projects are still unfunded. Local opposition, along with other factors like supply chain issues, are part of what’s pushing those delays. The demand for electricity is expected to increase by an additional 32 GW by 2030. This increase is mostly driven by the explosive growth of data centers — particularly in “data center alley” in Northern Virginia.
Capacity Strain and Price Surges
PJM’s network instability has led to prices at its annual capacity auction surging. They’ve increased by more than 800%. This ever-increasing price surge is a natural result of demand exceeding supply year after year. As PJM spokesman Jeffrey Shields noted:
“Prices will remain high as long as demand growth is outstripping supply – this is a basic economic policy. Right now, we need every megawatt we can get. New projects totalling about 46GW – enough capacity to power 40 million homes – have been cleared in recent years, but are not getting built because of local opposition, supply chain backups or financing issues that have nothing to do with PJM.”
Most concerning, older plants continue to close at an accelerating pace. Since 2016, we’ve lost more than -5.6 net gigawatts of generating capacity, adding further pressure on this stressed system. In some cases, state energy policies have pressured the closure of fossil-fuel power plants. This has had a dramatic effect on PJM, causing it to be left with inadequate replacements.
Impact on Consumers
The ramifications of these capacity issues will soon be at consumer’s doors across PJM’s sprawling service territory. Escalating energy expenses are not just a threat, they are a current concern. Now, the expected jump in electricity costs is adding to the economic anxiety facing families and employers. Pennsylvania Governor Josh Shapiro emphasized the need for transparency and efficiency from PJM amid these challenges:
“We need speed from PJM, we need transparency from PJM and we need to keep consumer costs down with PJM. I think they’ve taken some steps in that direction which is really encouraging to me, and we’re going to continue to work at it.”
As the PPA landscape continues to change, consumers need to prepare themselves for future increases in their electric bills. This is critical, particularly with a hot summer approaching.
Future Outlook
As recently as 2022, PJM announced that it would no longer accept new applications for connections to new power plants. They got inundated with over 2,000 requests from renewable energy projects. While it’s an admirable move, this ruling highlights the delicate balance the organization must walk between expansion and preservation throughout its vast network.
Additional uncertainty looms over PJM’s energy landscape. It aims to keep pace with increasing demand while faced with the realities of a new infrastructure procurement environment and changing market conditions. Stakeholders should monitor these developments closely in the coming years. They’re looking for information on how these changes will impact consumer electricity costs throughout the region.