The country’s biggest power market is caught in a trap of its own making — and the more than 65 million people from the mid-Atlantic coast to the Great Lakes who rely on it for electricity will pay the price.
Last week, PJM Interconnection announced a new record in its annual capacity auction, the means by which the grid operator secures the resources it needs to maintain a reliable transmission grid across 13 states and Washington, D.C. Prices increased to $16.1 billion, up from last year’s already record-setting $14.7 billion and an eightfold increase compared to $2.2 billion for the 2023 auction.
Prices would have spiked even further if not for a cap instituted as part of a settlement agreement with Pennsylvania Gov. Josh Shapiro (D) reached in April. Even so, PJM estimates that residential customers could see utility bills rise by up to 5% in the years to come, or more than $100 in annual household costs — rate hikes that will occur on top of bill increases just now starting to hit customers as the result of last year’s auction.
These spiraling costs have galvanized both Republican and Democratic governors of states served by PJM to demand immediate reforms. “With billions of ratepayer dollars and the stability of our grid at stake, it is critical that PJM take concerted, effective action to restore state and stakeholder confidence,” governors from Delaware, Illinois, Kentucky, Maryland, Michigan, New Jersey, Pennsylvania, Tennessee, and Virginia wrote in a July letter to the grid operator.
But it’s unclear whether PJM can quickly solve the problems that are driving up costs. That’s because the core issue — barely any new generation capacity has been able to connect to the grid — will take years to resolve.
“You have a massive technical problem, which is the challenge to fix this broken interconnection queue and bring new resources online in a time of global uncertainty with tariffs, inflation, and supply chain issues that are slowing the construction and development of new generation resources,” Jon Gordon, a director at clean-energy trade group Advanced Energy United, said in a webinar last week dissecting the grid operator’s current predicament.
PJM isn’t the only U.S. regional grid operator struggling to get new power plants, solar and wind farms, and grid-scale batteries connected. But it has one of the worst track records, with projects taking an average of more than five years to move through the steps required to plug into the grid. Advanced Energy United gave PJM a D- score for its interconnection processes in a 2024 survey, the lowest of any U.S. grid operator.
The consequence has been a paltry amount of new generation and battery storage. PJM reported last week that about 2.7 gigawatts of new generation and “uprates” — existing projects that have augmented their capacity — had been added to its available pool of resources since its last auction. That’s the first such increase in the past four auctions, and a fraction of PJM’s roughly 180 GW of generation capacity.
In 2022, PJM froze the process for new projects seeking interconnection to deal with a backlog stretching back to the late 2010s. That backlog won’t be cleared until the end of 2026, leaving hundreds of gigawatts of prospective new supply in limbo.
“The market can’t work until the interconnection queue delay is fixed,” Clara Summers, campaign manager for the Citizens Utility Board, an Illinois-based utility customer watchdog group, said during last week’s webinar. An April study from research firm Synapse Energy Economics found that comprehensive interconnection reforms at PJM could save customers an average of $505 per year in utility bills and cut commercial and industrial electricity costs by 23% through 2040.
PJM noted in last week’s press release that it has processed more than 60% of the backlog in its interconnection queue. It also highlighted that more than 46 GW of “already-approved resources have yet to be built,” with many projects “navigating challenges outside PJM’s scope, such as permitting timelines, supply chain constraints and evolving project economics.”
Gordon pointed out that PJM’s interconnection bottlenecks have put energy developers in a very tough position. Nearly 95% of the grid operator’s backlog consists of solar, wind, and battery projects, and “many of those projects came into the queue pre-COVID,” he said.
Since then, interest rates have gone up dramatically, equipment costs have risen, and the Trump administration and Republicans in Congress have undone federal incentives and policies supporting clean energy growth. “Whatever those developers were thinking about those projects back then, the economics, everything has completely changed,” he said.
Booming demand makes matters worse
The forecasted demand for electricity on PJM’s grid has also increased enormously in the past four years. The AI bubble has driven up PJM’s projected load growth by 5.5 GW from last year’s auction, largely due to new plans for data centers in the region.
But PJM may not be applying the proper amount of skepticism to calculating future demand growth from data centers, said Abe Silverman, an attorney, energy consultant, and research scholar at Johns Hopkins University.
