Benjamin Roberts
Associate Editor
The largest U.S. grid operator proposed cutting power to newcomers during periods of high demand in a Wednesday white paper.
PJM Interconnection serves over 67 million consumers across its operational area. Its infrastructure is now strained by data center expansion and disruptive environmental policy, according to the operator’s “Powering Reliability Through Market Design” document. (RELATED: Voters Oust Half Of Missouri City Council For Greenlighting $6 Billion AI Data Center)
“Unprecedented surge in demand driven by the rapid expansion of large-load data centers and broader economy-wide electrification,” is noted by PJM as one of the the three drivers of grid strain, alongside “the accelerated retirement of dispatchable generation due to environmental policy and economics; and significant supply chain and permitting frictions that have extended the time required to bring new resources online.”
Data centers are the primary drivers of rising electricity consumption, according to the U.S. Energy Information Administration (EIA). The EIA expects electricity demand to grow by 1% in 2026 and 3% in 2023, potentially outpacing new energy supply.
“The result is a transition from an era of managing surplus to an era of managing scarcity,” the memo continues, highlighting long lead times on new energy developments. “Construction timelines have doubled,” the report continues. “Today, a new natural gas turbine plant – the reference technology for the capacity market – requires at least four years under optimistic assumptions from financial investment decision to commercial operation.”
Permitting requirements contribute considerably to long development times. The average environmental review takes over four years to complete, according to the Council on Environmental Quality.
PJM’s white paper highlights three paths toward keeping the grid solvent.
Path A aims to stabilize markets “through long-term forward commitments either through mandatory Load Serving Entity (LSE) hedging requirements or through a PJM-administered, long-term procurement, such as a tiered, multiyear capacity market.”
LSE is a catchall term for any authorized seller of electricity to its principal users.
Alternatively, PJM’s Path B institutes differential reliability.
“This could be implemented geographically (different states or zones procuring different levels of reliability) or by customer class (for example, with residential and native loads insulated from curtailment while unbacked new large load additions are curtailed first),” the memo notes.
Under the differential reliability model, data centers using preexisting supply would be subject to throttling during periods of high demand. Residential consumers who contributed to existing supply would be prioritized for output.
Path C aims to partially transition grid use to a supply-and-demand pricing model, while maintaining long-term contract optionality. PJM would “pursue a deliberate, phased shift of revenue recovery from the capacity market” combined with “long-term forward energy contracting requirements to protect consumers from increased energy price volatility and to support investment.”
“Constrained supply” is at the heart of PJM’s complaints. This shortage largely stems from the many regulatory reviews required to break ground on energy developments, according to the Consumer Energy Alliance.
The Trump administration has employed statutory actions to cut regulation and expedite permitting, notably overturning the Obama-era endangerment finding that allowed for federal regulation of carbon emissions.
These actions have not been made law by Congress. Though the House of Representatives passed the Standardizing Permitting and Expediting Economic Development Act in December 2025 to modify the National Environmental Policy Act, the legislation is frozen in the Senate.
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