A❤️464-word🧡3-minute💚read
Monday’s post highlighted a new data center-specific utility tariff that puts hyperscalers on the hook for 85% of their forecasted power needs whether they use it or not. The Ohio tariff is designed to minimize shifting the cost of grid upgrades and capacity additions to the average ratepayer.
American Electric Power (AEP) may have moved the needle on that goal within its territory, but there may be no respite for most of the customers within PJM’s purview.
For those not immersed in the rat’s nest of entities that comprise grid management, PJM is the largest Independent System Operator ((ISO). They manage grid operations for 65 million people in 13 states, including an epicenter for data centers – Virginia.
That management includes ensuring sufficient power to handle peak demand. To that end, it conducts capacity auctions to secure future power at a prescribed price. The advent of data centers – and predicting their future power demands - has made the process significantly more complex.
As a result, auction prices have skyrocketed. Last year the price paid to guarantee capacity set a record at $270 per-megawatt-day.
Get this: That price was up from $29/MW-day in the previous year.
The almost 10-fold increase caused regulators to impose a cap of $330/MW-day on this year’s auction.
Guess what?
The auction closed at nearly that price.
Shocking!
It’s expected that for most ratepayers, prices will rise between 1.5% and 5%. And that’s on top of the increases that resulted from last year’s auction.
𝗛𝗼𝘂𝘀𝘁𝗼𝗻, 𝘄𝗲 𝗵𝗮𝘃𝗲 𝗮 𝗽𝗿𝗼𝗯𝗹𝗲𝗺.
PJM attributed last year’s spike on the narrowing gap between supply and demand.
Duh.
On the demand side it cited AI/data centers, and the move toward electrifying everything. On the supply side, PJM noted construction delays and the retirement of older fossil fuel plants.
Came you say corporate blame deflection?
In my book this boils down to one thing: very poor senior leadership.
An example of this inept management is PJM’s interconnection queue backlog. Most of the over 63 gigawatts of potential new power waiting for permission to connect is renewables-related. The situation got so bad, PJM imposed a moratorium on even submitting new projects to its queue.
The question I have is this: how incompetent does a management team have to be before something is done?
Did I mention that compared to other such organizations, PJM utility regulators have fewer rights to impact its decision-making process?
The PJM situation is not unique, but it does serve as a harbinger of things to come for most U.S. utility customers.
If regulators don’t quickly get a handle on this, and drive more tariff decisions like that of AEP, we’re all going to be subsidizing some of the most deep-pocketed corporations in the world.
And that would be an absolute travesty.
#datacenters #utilities #ai #electrictyprices