With an extensive background in energy management and electricity delivery, Christopher Hailstone is a leading voice on the stability and security of the American power grid. As our go-to expert on utilities, he offers critical insights into the unprecedented challenges facing our energy infrastructure. Today, we delve into a pressing issue in the PJM Interconnection, the nation’s largest grid operator: a conflict between the explosive demand from data centers and the fundamental need to keep the lights on for everyone. We’ll explore the real-world risk of blackouts, the regulatory battle over who has the power to hit the brakes, the staggering costs being passed on to consumers, and what the future may hold as we try to power the digital age without compromising our energy security.
Monitoring Analytics told FERC it isn’t “just and reasonable” for PJM to connect data centers it can’t reliably serve, citing the risk of blackouts. What specific reliability metrics are most at risk, and can you walk us through what these periodic blackouts might look like for consumers?
The most fundamental reliability metric at risk is our resource adequacy—the basic ability to have enough generation online to meet demand at every moment of the day. When you add massive, constant loads like data centers without adding equivalent supply, you shrink your safety margin to zero, or even go negative. For consumers, these “periodic blackouts” won’t feel random. They will be controlled, rolling outages, likely on the hottest summer afternoons or coldest winter mornings when the grid is already strained. Imagine your utility provider announcing that your neighborhood will be without power for two hours, then a different neighborhood goes dark, and so on. This isn’t a flickering light; it’s a deliberate, managed shutdown to prevent the entire system from collapsing into a catastrophic, uncontrolled blackout. It’s the last line of defense, and we’re being told to plan for it as a routine operational procedure, which is simply unacceptable.
The complaint highlights a disagreement, where PJM stakeholders were unwilling to affirm the grid operator’s authority to queue new loads until supply is adequate. What are the core arguments from stakeholders against this authority, and what are the practical consequences if FERC doesn’t clarify PJM’s power?
The core argument from many stakeholders often boils down to a belief in market forces and a fear of stifling economic growth. They contend that PJM’s role is to be a neutral facilitator, connecting new businesses and allowing the market to respond to the new demand signal by building more power plants. They see giving PJM the authority to pause interconnections as picking winners and losers and overstepping its mandate. The practical consequence if FERC doesn’t step in is a dangerous state of paralysis. PJM would be caught in a bind, legally obligated to connect new loads while knowing it lacks the physical resources to serve them reliably. This inaction essentially sanctions a future of managed blackouts. Without a clear ruling from FERC affirming PJM’s authority to maintain reliability above all else, the grid operator’s hands are tied, forcing it to plan for failure rather than engineering for success.
The monitor states data centers drove up PJM capacity revenues by $16.6 billion in the last two auctions. Could you break down how these costs are passed on to residential and commercial customers, and what specific market indicators point to this trend getting worse without intervention?
Certainly. Think of the capacity market as an insurance policy for the grid. PJM pays power plants to be available, ensuring they’re ready to run when we need them most. That cost is a direct pass-through. It goes from PJM to your local utility, and then it shows up as a line item on every single residential and commercial electricity bill in the region. That $16.6 billion figure isn’t an abstract number; it’s a real cost spread across millions of households and businesses. The most direct market indicator is the clearing price in those capacity auctions. As the projected demand from data centers skyrockets while the supply of power plants struggles to keep pace, the price to secure that “insurance” goes through the roof. Without a mechanism to align new demand with new supply, we are locked into a cycle where every future auction will see higher prices, and every customer’s bill will continue to climb.
Before filing this complaint, your team at Monitoring Analytics proposed that new data centers secure matching, new power supplies before connecting. Please explain what a “matching” supply entails in practice and describe the primary objections that caused this proposal to fail during the stakeholder process.
The concept of a “matching” supply is quite straightforward: if you want to add a massive new load to the grid, you must also bring an equivalent amount of new, dedicated generation with you. This doesn’t mean building a power plant on-site, but rather securing contracts for a new solar farm, wind project, or natural gas plant that adds its capacity to the system specifically to serve your load. In essence, you bring your own power to the party instead of just taking from the communal bowl. The proposal failed primarily due to objections centered on cost and market philosophy. Data center developers viewed it as a significant financial and logistical burden that would slow down their rapid expansion. Other market stakeholders argued it interfered with the established market design, which is supposed to let price signals from new demand organically encourage new supply, rather than having it mandated upfront. It was seen as an overly prescriptive rule in a system designed to be market-driven.
What is your forecast for how grid operators and regulators nationally will balance the immense electricity demand from AI and data centers with the urgent need for grid reliability and affordability over the next five years?
My forecast is that the next five years will be a period of significant and often contentious realignment. The era of connecting any load, anytime, anywhere is over. This PJM complaint is the leading edge of a national reckoning. I predict FERC will be compelled to issue a landmark ruling, establishing clearer authority for grid operators to manage the interconnection queue based on reliability, not just first-come, first-served. We will see a shift toward more proactive, long-range planning where large loads are required to be more of a partner in grid expansion, not just a customer. This will likely involve tougher interconnection standards, requirements for on-site generation or energy storage, and more dynamic pricing to encourage flexibility. It will be messy and politically charged, but the alternative—a less reliable and more expensive grid—is simply not sustainable for the country. We are being forced to mature our regulatory framework in real time to handle the demands of the 21st century.
