PJM Stakeholders Approve Data Center Backstop as Grid Faces Two-Year Supply Gap
A two-part reliability procurement plan puts utilities and potentially data centers on the hook for supply shortfalls expected within two years.
PJM Interconnection stakeholders approved a two-part reliability backstop procurement plan on Tuesday (2026-06-30), directing utilities, load-serving entities, and potentially data center operators themselves to secure additional electricity supply as the grid faces a projected shortfall within two years.6
The plan puts utilities first in the procurement chain, with provisions that could extend obligations directly to large industrial consumers in a departure from conventional grid planning. Historically, industrial loads sat outside formal reliability procurement requirements; the backstop framework treats the largest demand drivers as potential participants in the solution.6
The vote formalizes a timeline PJM began accelerating in May 2026, when the grid operator said it would bring forward its backstop reliability auction to September 2026 rather than waiting until 2027. The stated reasoning was direct: a further delay carried unacceptable reliability risk as new load was being added faster than new supply could clear the interconnection queue.3
The urgency traces back to an IEA assessment that is hard to dispute. Data centers now account for roughly half of US incremental electricity demand growth. Global electricity demand from data centers rose 17% in 2025, the agency found, with AI-focused facilities growing at 50% over the same period.1
Supply has not kept pace. Only 13% of projects that filed interconnection requests between 2000 and 2019 had reached commercial operations by the end of 2024, with 77% withdrawn before completion, IEA data shows. Grid Strategies projects the US data center market will need between 65 GW and 90 GW of new power capacity by 2029. PJM's most recent reformed interconnection queue cycle drew 811 projects totaling 220 GW of proposed capacity, so developer interest is not the constraint. Converting queue entries into operating megawatts within any credible timeline is.1,2,4
PJM Western Hub spot power traded at $42.83 on Thursday (2026-07-02), a level reflecting standard summer load rather than the sustained scarcity that would sharpen investment cases for new-build gas or storage. The September 2026 backstop auction will set the first real price signal for how much capacity the market will deliver, and at what cost to load-serving entities already committed under the new framework.3,6
In a separate action, PJM told federal regulators in a filing dated Monday (2026-06-29) that it opposes a waiver sought by Advanced Power Services, a Boston-based independent power producer owned by ArcLight Capital Partners. The company had asked FERC to let its approximately $2 billion gas-fired Chestnut Run project reduce its capacity and remain in the fast-track Reliability Resource Initiative interconnection review. PJM's opposition signals that projects using the expedited path must hold to their original specifications, limiting flexibility for developers who want to resize after securing a fast-track position.5
Some large technology companies are not waiting for centralized procurement to move. Google has contracted more than 22 GW of clean energy since 2010 and built 1 GW of demand-response capacity through long-term agreements with the Tennessee Valley Authority, I&M, Entergy Arkansas, Minnesota Power, and DTE Energy, enabling it to curtail or shift compute workloads during peak periods. The bilateral model works, but it requires the scale and utility relationships that only a handful of operators can replicate.4
If September's backstop auction fails to attract enough new capacity at prices load-serving entities can absorb, PJM faces a narrowing window. The heaviest tranche of planned data center commissioning across its territory is expected between 2027 and 2028 — precisely when the backstop was designed to close the gap.6,3