PJM Plans Backstop Procurement as Data Center Power Demand Outpaces Supply
PJM plans a one-time procurement, a large-load registry, and new curtailment rules as data center electricity demand grows faster than available generating capacity.
Microgrid Media Editorial Desk
Published · 6 min read
PJM Interconnection said on July 27 that it plans to seek federal approval for a one-time capacity procurement, a large-load registry, and new curtailment rules as data center demand grows faster than available generation across its 13-state electricity market.
PJM projects that large electricity users could add approximately 70 gigawatts of demand by 2038, while its latest capacity auction secured about 6.8 gigawatts less than the region’s stated reliability requirement.
The proposals respond to a widening imbalance between electricity demand and available generation across the regional grid. PJM data center power demand is increasing faster than new power plants and other capacity resources are entering service, creating concerns about future reliability and electricity costs.
The PJM Board of Managers announced the measures on July 27 following an accelerated stakeholder process. The two principal proposals must be filed with and approved by the Federal Energy Regulatory Commission before they can take effect.
PJM forecasts 70 GW of new large-load demand
PJM projects that new large electricity users could add approximately 70 gigawatts of demand by 2038. Much of that growth is associated with data centers, artificial-intelligence computing facilities, advanced manufacturing, and other customers requiring large and relatively continuous amounts of power.
At the same time, approximately 15 GW of generating capacity has retired within the PJM region since 2022, according to the board’s July 27 decisional letter.
The concern became more immediate after PJM’s latest capacity auction procured approximately 6.8 GW less than the system’s stated reliability requirement. Capacity prices reached the applicable cap of $325 per megawatt-day, but the high price was not sufficient to attract enough eligible resources to meet PJM’s planning target.
Reuters independently reported that the shortfall was larger than the one recorded in PJM’s preceding auction.
An auction shortfall does not mean blackouts are certain. Actual reliability will depend on weather, generator availability, transmission conditions, demand growth, imports, conservation, and resources that enter service before the relevant delivery period. It does indicate that PJM has not yet secured the full reserve margin it considers necessary for extreme conditions.
How the backstop procurement would work
PJM proposes to conduct a one-time Reliability Backstop Procurement from September 30 through October 21, 2026, with results expected in early December.
The procurement would seek additional generating capacity to address the shortfall identified through the capacity market. Its final target could be reduced when large customers demonstrate that they have secured bilateral supply agreements or self-supply arrangements that add new capacity.
Qualifying resources could receive commitments lasting up to 15 years. Eligible projects may include new generating facilities, certain transferred capacity-interconnection rights, annual demand-response resources, and distributed energy resource aggregations.
New demand-response and distributed-energy resources would need identified sites and customer contracts covering the required commitment period. Eligible resources would generally need to enter service by June 1, 2032, while project developers would remain responsible for applicable transmission-network upgrades.
PJM’s backstop procurement proposal would cap the total cost of accepted supply offers at $555 per megawatt-day. The final procurement design, eligibility rules, contract terms, and cost allocation remain subject to federal review.
A registry would track major electricity users
PJM also plans to establish a Large Load Registry containing information about the location, expected demand, service area, and supply arrangements of major electricity users.
For this proposal, PJM defines a large load as an end-use customer with at least 50 MW of cumulative peak demand at a single site, or within a one-mile area served through one or more delivery points.
The registry is intended to improve load forecasting and help distinguish mature projects from preliminary or duplicative requests. Data center developers may evaluate several possible locations before deciding which facility to build, creating a risk that grid planners count the same potential demand more than once.
Undercounting demand creates a different risk. New transmission lines, substations, transformers, and generating resources can require years to permit, procure, and construct. A data center may be ready to operate before the infrastructure needed to serve it is complete.
Some new data centers could face curtailment
The second proposed filing would establish an Interim Resource Adequacy Service, previously described during the stakeholder process as Connect and Manage.
Under the framework, new large loads that do not bring their own generation or otherwise secure sufficient supply could be required to reduce withdrawals from the grid during capacity shortages. The reductions would occur before PJM deploys its existing pre-emergency load-management resources.
PJM does not directly control every retail data center connection. Curtailment would require coordination with electric distribution companies, load-serving entities, and state authorities. Compensation for customers directed to reduce consumption would also depend on a FERC-approved rate and applicable state jurisdiction.
What the plan could mean for microgrids
The proposals create a potential role for data center microgrids, on-site generation, battery storage, demand response, and distributed energy resource aggregations.
A large customer capable of producing part of its own electricity or reducing demand during grid stress may be able to limit its exposure to curtailment. A microgrid combining generation, storage, controls, and flexible loads could help maintain critical computing operations while reducing the facility’s dependence on regional capacity.
On-site backup equipment would not automatically qualify as a PJM capacity resource. Eligibility would depend on interconnection status, dispatch capability, metering, operating duration, fuel availability, performance requirements, and the final rules approved by FERC.
A battery system’s contribution would similarly depend on how long it can sustain the required output and whether it remains available throughout a reliability event.
Who would pay for the additional capacity?
PJM’s board said existing consumers should not bear higher capacity costs caused by new large loads that fail to provide or contract for the electricity supply required to serve them.
Under the proposed framework, backstop procurement costs would initially be allocated among load-serving entities in affected zones or service areas. State regulators and retail authorities would then determine how those obligations are assigned among customer classes where state law applies.
This leaves an important issue unresolved. PJM can establish regional wholesale-market and reliability rules, but it generally cannot determine exactly how a retail utility charges an individual data center. State utility commissions, utility tariffs, and service contracts will remain central to deciding whether infrastructure costs are assigned directly to large-load developers or spread more broadly.
What happens next
PJM is expected to submit the backstop procurement and Interim Resource Adequacy Service proposals to FERC. The commission may approve them, reject them, request revisions, or allow parts of the framework to take effect subject to additional proceedings.
The key questions will be how much capacity PJM seeks to procure, which resources qualify, how costs are assigned, and what a data center must demonstrate to receive firm service without becoming subject to the proposed curtailment framework.
The Microgrid Media Editorial Desk reports on microgrids, energy storage, grid modernization, data center power demand, distributed energy resources, and energy policy. Reporting published under the Editorial Desk byline is developed from primary regulatory records, utility filings, government documents, company disclosures, and independently verifiable sources, and is reviewed under Microgrid Media’s editorial standards.
Editorial oversight: Jonas Muthoni, Editor-in-Chief
