“States have made a lot of noise about improving state and local permitting, but we are still waiting to see the output,” said John Miller, a managing director and energy transition policy analyst at investment bank TD Cowen. Meanwhile, other PJM states — namely Ohio — are doing the opposite, and making it harder for clean energy projects to get permitted.
Yearslong interconnection wait times have also taken their toll. Many of the developers Silverman interviewed for his 2024 PJM interconnection report “effectively suspended all permitting and siting work and all equipment procurement work because they simply didn’t know when it was going to come out of the queue,” he said. “In the meantime, there was a pandemic, there was inflation, and the economics radically changed for a lot of these projects.”
Even so, he said, “I think we’re seeing an increased interest in working with state and local siting and permitting issues,” particularly with data center developers willing to spend enormous sums of money to get the power they need.
Energy developers agree. “If the new hyperscalers can sign contracts for new generation, a lot of the pieces will fall into place,” said Glen Thomas, president of the PJM Power Providers Group, a trade organization representing major power project developers.
Bring your own capacity for data centers: Batteries or gas?
States may soon have another potent tool to advance the construction of these greenlit power plants — forcing data centers to contract with the project owners.
PJM’s most pressing problem is its need to secure adequate capacity to meet peaks in power demand. Capacity market prices have spiked more than eightfold over the past several years to reach a record high of $16.4 billion in its past two auctions, driving up utility rates in many PJM states.
Data centers could try to secure their own capacity by contracting with projects that haven’t yet won interconnection rights. They could even stake their futures on the highly speculative gas power plants being promised by the Trump administration.
But PJM’s proposed capacity regime sets a 2032 deadline for securing resources. Projects that haven’t already secured interconnection agreements by now or early next year will have a hard time getting online by then, said Julia Hoos, head of USA East at Aurora Energy Research, an analysis firm that covers PJM issues.
And while there are just under 5 GW of gas-fired power plants in that category, PJM also has roughly an equivalent amount of batteries that could be ready to deploy, she said.
Solar and wind are unlikely to be the chief targets here, as they don’t count much toward capacity needs given their intermittency. Batteries, however, are a stronger fit, said Tom Rutigliano, senior advocate for climate and energy at the Natural Resources Defense Council. But they’ll face some stiff competition from gas plants.
Batteries with a typical four-hour duration are roughly equivalent in cost to more-efficient gas-fired combined cycle power plants, and a better deal than less-efficient combustion turbines, according to analysis from Aurora Energy Research. But gas plants have been the favored choice for data center developers in the region so far — largely because they’re a tried-and-true workhorse of the U.S. generation fleet.
But batteries have a major “time to power” advantage over gas plants. The manufacturing backlogs for gas turbines and fierce competition for engineering and construction firms to build gas plants are pushing timelines for completing them into the five to seven years range. Battery projects can be brought online much sooner.
“We hear you can build storage about two years faster than gas,” Rutigliano said — and with data center demand at a fever pitch, “being available two years earlier makes a big difference.” That puts pressure on data centers, which are willing to “throw enough money at [batteries] to get them built,” and on states “to get rid of any other nonfinancial barriers.”
Unlike California and Texas, which have both built tens of gigawatts of grid batteries, PJM has barely built any, Silverman added. That leaves lot of room to expand PJM’s capacity for storing energy generated by lower-cost solar and wind power for use at times of grid stress, particularly if states can goose the market with energy storage mandates, as is happening in New Jersey and Illinois.
Connecting to cheap, fast, and ready-to-go clean energy
Capacity isn’t PJM’s only problem. Booming demand for power is also driving up the energy prices that utilities and wholesale power purchasers pay to get the electricity they need from one hour to the next across the region, which adds more upward pressure on utility rates. And right now, the only near-term source of new energy to relieve that pressure is the energy that’s cleared PJM’s interconnection queues, Silverman said.
That brings us back to the same elephants in the room: the tech giants behind the data center boom.
The projects these companies could target are distributed across PJM’s territory, encompassing all or part of 13 states and Washington, D.C. States that can move them ahead quickly could see jobs and economic benefits as well as lower power prices.
These tech companies may be compelled to make up for their climate backsliding by seeking out clean energy in PJM. They could also be enticed by the opportunity to lock in lower-cost electricity — wind, solar, and storage remain the cheapest form of new generation capacity available in the U.S.
None of these state actions on their own can solve all PJM’s problems. But with public opposition to data centers surging, now might be the time for these tech companies to focus on building the clean energy projects that have made it through PJM’s queue — and for states to hold their feet to the fire to make it happen.
“We have to ask the question: Are they serious about their climate commitments?” Silverman said. “I’d like to think they are — but we need to see some results.”
