PJM board calls for backstop auction in data center interconnection plan

PJM Interconnection is finally acknowledging how tight the power situation has become.PJM Interconnection is finally acknowledging how tight the power situation has become.

After its most recent capacity auction came up about 6.6 GW short of its reliability target and cleared at record-high prices, PJM is moving toward a reliability backstop auction. This is a temporary, emergency procurement to secure new generation outside the normal capacity market when that market fails to deliver enough supply.

At a basic level, the problem isn’t new. Electricity demand has been rising for years, driven largely by data centers and other large loads. What’s changed is that supply has not kept pace, and the capacity market is now visibly failing to close the gap in time.

What’s notable is how aligned the response has suddenly become.

A reliability backstop auction is designed for exactly this kind of shortfall. It allows PJM to procure new or incremental generation outside the standard auction, with longer-term revenue commitments intended to make projects financeable. The goal is not to replace the capacity market, but to cover a clearly defined gap, in this case the roughly 6.6 GW that did not clear despite high prices.

Based on how this is structured, the most likely outcome is more peaker plants. That may be understandable given the urgency, but it raises a real question. Do these emergency measures risk locking in expensive, fossil-based solutions simply because the system did not plan ahead?

PJM’s board is pairing the backstop with other near-term steps:

• Faster interconnection for large loads that bring new, dedicated generation, meaning power added to the system rather than reallocated.
• Curtailment rules for large loads that rely entirely on the grid during emergency conditions.
• A broader review of whether today’s capacity market can support new investment under current cost, permitting, and policy constraints.

At the same time, the White House and governors from PJM states are pushing in the same direction. Their message is that data centers should pay for the new power they require, rather than shifting those costs onto households and small businesses.

Talen Energy’s CEO has been clear that a backstop auction should be targeted and temporary. Generators would compete on price and location to fill a defined shortfall, and costs would follow the load that created the problem.

This is not about politics. It is about timing, approvals, and physics. Even when projects are permitted and financed, new power plants take years to build. Transmission takes even longer. Demand is arriving now.

If handled carefully, a short-term backstop could protect reliability and limit further bill increases while longer-term fixes take shape. If it becomes a permanent crutch, it risks masking deeper market issues.

The real test is whether this moment finally forces alignment between how fast load is approved, who pays for the supply it requires, and how quickly the system can realistically build new generation as electricity demand keeps climbing.