In the second panel, PJM market experts talked about what improvements they would like to see. Several experts argued over the value of each state being responsible for their own generation. Currently Maryland, Virginia, Delaware, Washington DC, and New Jersey are all highly reliant on other states (mainly Pennsylvania and West Virginia) for electricity. If the states were required to build more of their own generation it would raise costs, but it would help to ensure reliability.
Another major topic for debate was the effectiveness of the capacity market. A representative from PPL said that the capacity market has drastically increased costs for customers without ensuring that new reliable generation is built. Others argued that there has been a significant response to the high-capacity prices including generators staying online that were planning to retire, and that new investment in generation has started but will take several years to be fully online. Most parties agreed that consistency in the power markets is essential for new investment to occur, and that the delays in recent capacity auctions have set back new generation.
When considering the root causes of reliability issues, data centers took the blame. Unless there are some changes to the cost allocation system, data centers will require billions of dollars in upgrades, and everyone will have to pay for it.
The third panel consisted of state representatives. All the states agreed that they wanted more of a role in PJM planning and decision making, especially around issues that affect electricity affordability and grid reliability. When asked why they thought gird reliability issues were occurring, several representatives argued that it was not due to an imbalance in new generation and retirements, but due to load forecasts from previous years not accounting for the load growth that we now see from data centers.
They were concerned that data center load predictions could still be very inaccurate, since one data center developer might consider development at several sites but only intend to build at one of them. This could cause load predictions to account for four or five data centers when in reality we will only see one built. Although many states are hoping data centers will support the local economy, under the current system, the investment will cause high prices for electric customers and strain on the grid.
The final panel on PJM was comprised of other PJM stakeholders including data center representatives, industrial customers, consumer and environmental advocates, and generation owners. Despite their varied interests, they agreed that better load forecasting was essential to ensure an adequate amount of generation is built. Additionally, when talking about the capacity market, most panelists agreed that a sub-annual market which took fuel security into consideration would be a better way to ensure reliability and prioritize the correct resources.
Unsurprisingly, the conversation shifted to regulations around data center development. Panelists discussed how load growth modelling for data centers could be improved through stricter regulations, including requirements on contract length and minimum payments. This would incentivize data center developers to only apply for interconnections on sites when they plan to build and prevent the double counting issues seen in some load models. FERC commissioners asked if data centers could use their backup generation to support grid reliability, but according to a representative from google, those systems are meant to be used very occasionally and it could drastically reduce the reliability of data centers if they are forced to rely on them too often.
Although the conference has not created any changes to the way PJM operates yet, these discussions have opened the door for market changes in the future, and it is very likely that NERC will change how they evaluate resource adequacy in the next few years. The PJM capacity market has seen many changes throughout the last few years, but the overall concept of an incentive for plants which support grid reliability will be here to stay. One possible change would be PJM switching to a seasonal capacity market, since certain resources like solar and gas have very different production curves depending on the time of year.
For more information, check out the FERC page about the event.
