The country’s biggest energy market struggles to reform amid soaring costs
- Think Big
- Jul 28
- 7 min read
Mid-Atlantic grid operator PJM is under intense political pressure to solve its interconnection backlog and other problems. But experts warn there are no easy fixes.
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.
Nor is PJM winning high marks for its efforts to fix its interconnection backlog. Critics say the grid operator has stalled on reforms that others have undertaken, including changes mandated by the Federal Energy Regulatory Commission. Last week, FERC ordered PJM to rework “conceptual proposals” that it said fail to meet federally mandated deadlines for implementing interconnection reforms.
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.
Many data center developers are seeking interconnection in multiple states for duplicative project proposals, he noted. Other U.S. grid operators are “doing a much better job trying to get a handle on the data center load growth,” including winnowing out speculative or duplicative requests, he said during last week’s webinar.
Without such safeguards, PJM runs the risk of overestimating the amount of new generation it will need to meet future demand, which will drive up prices, Silverman said. “If you believe the PJM load forecast, we need to add five nuclear units’ worth of generation to the market every year between now and 2030. And that’s just an enormous challenge, both financially and logistically.”
In the face of these issues, PJM has largely emphasized the need to keep fossil-fueled power plants online and has blamed state clean-energy policies for driving coal-fired power plants to close prematurely.
That argument has been echoed by Todd Snitchler, CEO and president of the Electric Power Supply Association, a trade group representing power plant operators with a preponderance of fossil-gas power plants in their portfolios.
“In recent years, a combination of state and federal policy shifts and poor market signals led to the premature retirement of essential generation,” Snitchler said in a statement after this month’s auction. “Now, as demand grows and supply tightens, we can’t ignore the consequences of past decisions, and we must accept that reliability comes at a cost.”
About 34 GW of coal capacity have retired across PJM since 2013, according to federal data. PJM’s independent market monitor forecast last year that as much as 58 gigawatts of generation will be retired by 2030.
But Citizens Utility Board has emphasized that those retirements are happening in both Republican-led states without clean-energy and climate mandates, including Ohio and West Virginia, as well as in Democrat-led states such as Maryland and New Jersey, indicating that state policies aren’t the chief driver. The main reason coal plants are closing is that they are increasingly unable to compete in energy markets against cheaper gas-fired power plants, renewable energy, and batteries.
Growing power demand is starting to slow the pace of closures. PJM noted last week that 1.1 GW of power plants have withdrawn their retirement plans since last year’s auction. PJM has also forced fossil-fueled power plants in Maryland that were set to close this year to remain open to maintain grid reliability.
The Trump administration may cite PJM’s growing capacity problems to justify using emergency federal powers to require aging fossil-fueled power plants to remain running. The Department of Energy has already used those powers to demand that a coal plant in Michigan stay open, as well as an oil- and gas-fired power plant in Pennsylvania — a move that PJM has publicly supported and that climate and consumer advocates are challenging.
At the same time, PJM has yet to advance near-term options for bringing power online quickly, Summers said. PJM’s proposal to reuse the grid connections left open at retiring plants for new resources, such as batteries, is still awaiting FERC approval, she said.
In February, FERC approved PJM’s plans to revamp another process known as “surplus interconnection service,” which allows existing projects to add new technologies to boost their grid value — for example, adding batteries to wind and solar farms. But the changes have not yet led to new capacity being brought into the market, Summers said.
Meanwhile, PJM’s attempt to fast-track new gas-fired generation won’t help in the near term, Summers said. In May, the grid operator announced 51 new projects selected through its Reliability Resource Initiative, which allows projects not already in the interconnection queue to propose additional resources to meet capacity needs. But most of the 9.4 GW of capacity secured through that process — and all of the newly built gas-fired power plant capacity — isn’t scheduled to be online until 2030 or later.
That’s not surprising. Major manufacturers have reported multiyear backlogs for gas turbines, restricting developers’ ability to add more capacity beyond what’s already in the works. These bottlenecks are likely to hamper similar fast-track efforts being undertaken by grid operators Midcontinent Independent System Operator and Southwest Power Pool.
Accelerating resources that can actually be built in the next two years — like solar and batteries — would be a better strategy to reduce costs, Silverman said.
“Prices are increasing right now because we don’t have enough supply,” he said. “We really have choked off that next generation of projects that should be coming in and taking those positions in the market.”
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