PJM Interconnection files backstop auction plan at FERC to address capacity shortfall; forecasts 70 GW data center demand growth through 2038
The PJM Interconnection filed a proposal at the Federal Energy Regulatory Commission on Friday to conduct a one-time reliability backstop auction from September 30 to October 21, aimed at filling a 6.8-GW capacity shortfall from its last base capacity auction for the delivery year starting mid-2028.
PJM failed to secure sufficient capacity to meet its 20% reserve margin target—a level designed to ensure the grid experiences no more than one unexpected power outage every 10 years. The shortfall stems primarily from growing data center load forecasts and insufficient new power supplies to match them. PJM estimates that data center and other large load demand could grow by up to 70 GW by 2038.
Through the backstop auction, PJM will source new power plant capacity to supply data centers built through 2027, with costs potentially reaching up to $20 billion, according to the Natural Resources Defense Council. The grid operator proposed a $555/MW-day price cap for the auction, up from $325/MW-day for its last base capacity auction.
Under PJM's two-part approach, the grid operator will simultaneously facilitate bilateral deals between data centers and power suppliers. The backstop auction's procurement target could be reduced if bilateral contracts materialize before the auction begins.
Auction costs will be allocated to PJM zones based on their pro rata share of the procurement target, then passed to utilities and other load-serving entities within those zones. PJM emphasized that the plan's success depends on individual states taking steps to protect retail customers from cost shifts. "The RBP framework relies on each of the PJM states to refine, for purposes of cost allocation, which retail loads—including which 'large loads,' as each state defines such loads—should be allocated the costs of resources procured through the RBP," PJM stated in the filing.
PJM expects to announce backstop auction results by December 2, before holding a base capacity auction for the 2029/30 delivery year.
In a separate action, PJM plans to file a proposal at FERC on August 7 that would allow the grid operator to curtail large loads without their own power supplies when grid emergencies loom. The Interim Resource Adequacy Service proposal—previously known as "connect and manage"—will create a registry of all large loads to provide "critical data transparency needed to establish load reduction priorities for retail customers." These rules would affect data centers coming online after June 1, 2027, according to Jeffrey Shields, a PJM spokesman.
Tom Rutigliano, NRDC senior advocate for Climate & Energy, characterized the move as significant: "Requiring future data centers to bring their own power might be the single best thing they could have done to stabilize the grid. Now PJM needs to finish the job by supporting state efforts to manage demand from existing data centers, enabling rapid deployment of energy storage, and accelerating the connection of new energy projects to the grid."