Biggest US Grid Must Redesign to Cope With AI Boom, CEO Says
(Bloomberg) -- The biggest US power grid needs a revamp to cope with the unprecedented surge in electricity demand stemming from the data-center boom, said Chief Executive Officer David Mills.
As currently structured, PJM Interconnection LLC, which serves 67 million people across 13 states, can’t ensure ample electricity supplies while simultaneously shielding residential consumers from soaring bills, Mills wrote in a letter to stakeholders.
“The current situation is not tenable,” Mills wrote in the letter published Wednesday. The “stress now visible in prices, reserve margins and investment pipelines reflects something more fundamental than a design that needs recalibration.”
The crises stressing PJM include looming power shortages expected to hit the grid as soon as next year and the threatened defection of one of the largest US utilities — American Electric Power Co.
Skyrocketing household electricity bills and the influx of power-hungry data centers have become electoral issues in some locales. Power costs have jumped across the PJM region, with rates climbing 51% in Maryland in the past five years and 41% in Illinois during that period, according to a US Chamber of Commerce report released on Tuesday.
“The region has years, not decades, to make these choices deliberately,” Mills wrote.
A policy paper put forward alongside Mills’ letter outlined three potential paths to mitigate a “credibility gap” between the need for high prices to entice power-plant construction and protecting consumers from higher bills.
“Generators, utilities, investors and consumers must all believe, at a basic level, that the rules are fair, stable and the product of a process they recognize as credible,” Mills wrote.
PJM is taking too long to find solutions and that the “devil is in the details” with each of the proposals put forward, according to Ryan Levine, an analyst at Citigroup Inc.
“We worry that the continued back and forth is leading PJM to miss the opportunity,” Levine wrote in a note. Data center projects “will just move to other regions around the world if it really takes years to figure things out.”
(Updates with comment from Citigroup analyst from penultimate paragraph.)
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