The Hindu: Published on 10th July 2025:
Why in News?
America’s largest power grid operator, PJM Interconnection, is facing a severe electricity supply-demand imbalance, as AI-driven data centers consume massive energy while new power plants are delayed. Electricity bills are expected to rise over 20% this summer, and governors like Pennsylvania’s Josh Shapiro are threatening to exit PJM if reforms are not implemented.
Background:
PJM operates the grid across 13 U.S. states, serving 67 million customers.
The crisis began after auction prices rose 800% in a year due to high demand and insufficient supply.
PJM stopped accepting new power plant applications in 2022 due to backlog from renewable projects.
In 2023, demand soared further due to AI systems like ChatGPT, increasing the burden on the grid.
Key Issues:
Delayed auctions and paused applications led to power supply stagnation.
High interconnection wait times and local opposition slowed down new projects.
Over 46 GW of projects approved, but not built due to logistics, opposition, and finance.
Data centers are driving demand — expected to add 32 GW more by 2030.
Current pace of plant commissioning is lower than even smaller U.S. grids like in Texas or California.
PJM lost 5.6 GW of net capacity in the last decade.
Government & Public Response:
Governor of Pennsylvania warned PJM to cut costs or face exit of the state.
Consumer advocacy groups have filed complaints demanding auction reforms.
Trump administration stepped in to keep two oil and gas plants running to avoid blackouts.
Impact & Implications:
Electricity bills may surge by 20% or more.
Risk of blackouts during extreme weather due to limited reserve capacity.
Growing tension between energy regulators, consumers, and state governments.
Strain on energy infrastructure from AI and digital economy expansion.
Potential fragmentation of grid governance if states pull out.
What Next?
PJM is reforming its structure:
- Auctions will now be held every 6 months.
- Price caps introduced to control spikes.
- Fast-tracked 51 energy projects, though completion may take until 2030–31.
- Key question: Can PJM modernize fast enough to serve AI and green transition needs?
