Report: Grid Operator Has Reached ‘Inflection Point’

Reforms to PJM Interconnection electric generation project approval processes are needed to prevent price spikes and ensure a reliable grid in the face of rapidly rising demand, a new report suggests.

“Tackling the PJM Electricity Cost Crisis,” a report from Synapse Energy Economics consultants, analyzed the lengthy PJM interconnection approval process and makes a number of findings that it said would result in reduced energy costs and increased deployment of clean energy resources. The report was prepared in conjunction with Evergreen Collaborative, a climate action advocacy group.

PJM manages the wholesale electric grid for all or part of 13 states, including Pennsylvania and Washington, D.C., and is responsible for ensuring reliable electric service at all times to more than 67 million people. The grid is facing a rapid increase in demand for electricity from a growing number of energy-intensive data centers and industrial projects and continuing electrification of vehicles and residences.

At the same time, the amount of available electric generation is tightening as fossil-fuel fired plants that provide around-the-clock electricity are retiring due to policy and economic pressures, and the number of new generation projects joining the grid is not keeping pace due to a number of factors, including PJM’s complicated interconnection processes.

New generation projects seeking to connect to the grid, many of them solar power, must first submit a request. PJM then studies the impacts on the grid, identifies needed upgrades, and works out an allocation of costs for those upgrades. In recent years, a large backlog has built, making it challenging for developers trying to bring new projects online due to uncertain timelines and costs. As a result, many projects are withdrawn or never built.

The tightening in supply and demand has led to higher prices, and last year the Shapiro administration filed a complaint against PJM over its capacity auction power purchasing procedures and a subsequent settlement in which PJM agreed to temporarily put a cap on its maximum auction prices while it seeks to make changes to bring new generation online faster.

The report argues PJM has reached “an inflection point.” The report analyzed what would happen under a status quo scenario, where PJM continues under its current rules, and the results under an expanded queue reform scenario, where PJM implements the report’s recommended reforms and other constraints, including local permitting and siting processes, are loosened.

It determined that PJM residential customers would see a reduction of more than 20 percent in their bills compared to the status quo from 2025-2040. Commercial and industrial customers would also see cost savings, while the electric system costs to PJM decrease by about 24 percent. In addition, the reform scenario would add an additional 57 gigawatts of renewable energy capacity and an additional 117 GW of battery storage capacity, which would lead to lower CO2 emissions due to less fossil fuel generation.

Key recommendations in the report include setting a mandatory 150-day study timeline on new projects, using study automation; implementing the first-ready, first-served approach; using realistic assumptions for battery storage and alternative technologies. Others include allowing new projects to use the interconnection agreements held by existing power plants even after they retire; and increasing cost certainty for developers through a fixed interconnection entry fee, planned and modeled for each zone.