Across the country, the decline of fossil fuels and the rise in electricity demand are on an unstoppable collision course, spiking prices and fueling partisan brawls over clean energy policies.
The Americans living closest to the nation’s capital may feel the brunt of this crisis, as the nation’s largest electrical grid manager — which covers D.C., Maryland, Virginia and 11 other states — says it will have to increase prices for on-demand, reliable electricity up to 1,200% in the coming year.
That unprecedented price spike won’t be completely passed on to consumers (it’s only part of an individual’s electricity bill), but bills will undeniably increase — and noticeably. The announcement, which regional grid operator PJM made late last month, shows just how far behind the nation is in preparing for the clean energy transition.
Republican leaders are blaming clean energy policies for the electricity price hikes. Clean energy advocates have responded by blaming the grid operators and utilities for failing to plan for the transition. Grid operators blame siting and permitting issues, arguing that developers aren’t building the projects that do get approved. The disagreement threatens to jeopardize the future of the energy transition and the Biden administration’s climate goals.
“We need to build a lot more generation capacity, but we need to do it clean,” said John Podesta, the White House senior climate adviser, when asked about the rising prices.
The U.S. is forecast to close half of its coal generation by 2026, just 15 years after it peaked. In March and April, the amount of electricity generated from wind in the U.S. actually exceeded coal. Simultaneously, electricity demand in the United States is increasing for the first time in decades due to data centers, AI, electrification of homes and cars, and the return of heavy manufacturing.
“People are pulling their hair out on data centers and AI and the load on power systems going up, and there’s some reality to that,” Podesta said. “It’s part and parcel of a change that we’ve seen from the last 20 years where electricity demand was basically flat … and now it’s going up.”
Demand is now forecast to increase at a rate not seen in the 21st century.
While conservatives are pushing for a return to fossil fuels to address the problem, clean energy developers have countered with demands for massive grid transformation, build-outs of transmission lines and new battery storage.
PJM said on-demand, reliable electricity costs (called capacity) are going to increase more than 800% from this year. In Maryland (where coal plants have announced plans to shutter) and Virginia (the largest data center hot spot in the country), those increases are more like 1,200%.
Such an increase is unprecedented over the last several decades. In Maryland, the spokesperson for the Maryland Public Service Commission called the costs “profound,” and People’s Counsel David Lapp said he was “obviously very alarmed.”
“It’s very significant. The affordability issues here are real. This is going to be very expensive for consumers,” said Abraham Silverman, now an electricity and utility expert at Johns Hopkins University and the former attorney for the New Jersey Board of Public Utilities. Silverman cautioned that the prices might take a year or so to appear on bills for consumers and it’s impossible to predict the exact increase, though there will be one.
While retiring fossil fuel plants have caused a decrease in available supply, data center demand is clearly playing a key role in driving prices, according to Silverman. The Virginia territory, where prices went from $28.92 ($/MW-day) to $444.26, is also home to Loudoun County, which claims to house the world’s largest concentration of data centers and the majority of Virginia’s entire data center industry.
“PJM has been one of the worst in handling this transition,” Silverman said. “New resources have no effective means of coming into the market, even as load is starting to increase and you have older resources retiring.”
Clean energy developers say that the new wind and solar projects, many of them with batteries, waiting for approval from PJM could address much of the problem. Since about 2020, thousands of projects have sat in an increasingly stagnated line awaiting approval as PJM became overwhelmed with the volume of applications. Before clean energy projects became cheap and viable, usually only a handful of fossil plants would apply each year, so PJM has never dealt with a backlog like this before.
Though every part of the country is struggling with interconnection, nowhere has a backlog as dramatic as in PJM, according to Jon Gordon, the policy director at Advanced Energy United.
“I know PJM is trying, and it’s not easy,” Gordon said. “But the clean energy community does not have a big voice at PJM. I’m engaged at PJM all of the time, and you know, they don’t like to talk about this interconnection problem very much. It’s a pretty ugly problem.”
PJM denied the idea that the backlog of projects could be responsible, citing projects that have already been approved but haven’t been built for other reasons, like permitting issues, siting issues and financing.
“I think what we have is a nationwide problem that is living and breathing out in PJM, but it’s happening everywhere,” said Susan Buehler, PJM’s chief communication officer.
“I do think we reformed the process quickly, it was with member approval and FERC approval, and we study more interconnection queue projects than any other ISO and RTO in the country, but nothing is getting built,” Buehler said.
In Virginia, where capacity prices have increased the most, Glenn Davis, the director of the state Department of Energy under Republican Gov. Glenn Youngkin, is concerned about high prices but blames a different culprit: clean energy goals.
“The people that say that there’s enough in the queue aren’t paying attention to the details,” Davis said. “This is self-created. The states are retiring dispatchable power at a time when we’re seeing unprecedented growth in power demand. We brought this on ourselves, and we should take a step back and reconsider our policies.”
There is a chance that new gas generation plants do become increasingly popular choices, Silverman said. If prices stay high and energy demand continues to increase, gas could become “locked in” for the foreseeable future. PJM implied as much in its release of the new price data, calling the higher prices a signal that would encourage the build-out of resources that could take advantage of those prices.
When asked about the coming years of increasing prices, Podesta doubled down on his push for clean energy. “We’re closely following that and trying to improve and enhance the performance of the grid,” he said. “Our view is still for more and more investment along the lines that we’ve seen over the last few years.”
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Anna Kramer is a reporter at NOTUS.