Prices for the PJM interconnector, the nation’s largest power grid, have nearly doubled since last year, according to a report released yesterday by Monitoring Analytics, an independent market monitor that acts as something of a watchdog for the grid. Who is the culprit? data center.
The wholesale price for one megawatt hour of electricity rose to $136.53, up from $77.78 at the same time last year. Crain’s Chicago Business first reported on the spike. Monitoring Analytics noted that data centers and PJM were not able to adequately handle the surge in demand.
Market watchers pulled no punches. “The price impact for customers is significant and irreversible,” Monitoring Analytics wrote. “Unless issues related to data center loads are addressed in a timely manner, the price impact will be even greater in the short term.”
PJM is an easy target for such criticism. In 2022, just as data center construction was in full swing, power transmission companies suspended applications for new power generation sources, citing a long backlog. We have only recently started accepting new requests. Meanwhile, power demand from data centers has increased significantly. The PJM grid includes Northern Virginia, a part of the country with a high concentration of data centers.
Rising prices are a reminder of a deeper problem. The U.S. power grid was not designed for the power demands of an AI-driven economy, and the gap between the power the grid can provide and the power industry needs is widening.
Monitoring Analytics bluntly stated that without the increased demand from data centers, “the capacity market would not have seen such tight demand-supply conditions or the same high prices.”
It added: “PJM’s current capacity supply is insufficient to meet the demands of large data center loads, and will not be sufficient in the near future.”
Monitoring Analytics blamed a lack of transparency in PJM’s decision-making and delays in much-needed software upgrades. “These upgrades are several years overdue, with no firm implementation date set,” the report said.
The report comes after a white paper examining the future of the power grid operated by PJM Interconnection. The white paper suggests three paths forward, none of which are appealing to AEP, one of the region’s largest utilities, which is at risk of leaving the PJM grid altogether.
Monitoring Analytics was similarly unimpressed with PJM’s white paper. The group said PJM was using the crisis “as a pretext” to disrupt the electricity market system. “The core elements of the PJM market design remain strong,” he said, suggesting instead that utilities have failed to respond to the surge in demand. The solution “starts with recognizing that data center load is the cause of the current problem,” the company said. I mean, it’s a data center, idiot.
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