Pennsylvania lawmakers and power industry stakeholders are working to figure out how to meet the state’s growing demands for electricity without putting consumers in the poor house.
PJM Interconnection, the regional transmission organization for Pennsylvania and several other states, expects consumer electricity bills to increase up to 30 percent following its energy capacity auction held in July that cleared $4.7 billion.
There’s also currently a freeze on new projects in wind and solar until 2025, said State Rep. Greg Vitali (D-Delaware County), chairman of the Pennsylvania House Environmental Resources & Energy Committee, which Oct. 16 held a hearing to consider some solutions, entitled “PJM: Meeting Emerging Electricity Demand Trends.”
“This does not bode well for those who care about climate change and want to bring on wind, solar, and other carbon-free energy projects,” Vitali said. “And the problem is just expected to get worse.”
For instance, PJM projects that the demand for electricity will increase 25 percent over the next 15 years during summer peak demand, largely due to transportation electrification and the proliferation of data centers.
Asim Haque, senior vice president of Governmental and Member Services at PJM, testified that the RTO’s mandated focus is on reliability, and there are challenges to adhering to this mission.
PJM has definitely seen an uptick in demand, according to its most recent forecast released in January, said Haque, and there’s now been a price laid atop it that is being reflected in capacity pricing.
“We are deeply empathetic for consumers who will have to pay more during this supply and demand crunch,” Haque said. “But unfortunately, I don’t think this problem is going to go away.”
If demand is rising and supply is decreasing, then what will the net result be? “It will be less reliability and a higher price — that’s the reality we’re looking at,” Haque said.
One of the drivers for demand is from the data center sector, he said.
PJM’s existing installed capacity mix is a diverse set of resources that includes nuclear, oil, solar, hydro, wind, coal, and natural gas, said Haque, with the largest of PJM’s total 180,287 megawatt (MW) mix being natural gas (87,272 MW), followed by coal (39,904 MW), and then nuclear (32,538 MW).
But there are challenges looming.
“Largely due to federal and state decarbonization policies, we are forecasting a significant number of retirements by 2030,” said Haque, citing a 60-percent reduction in coal and 30 percent reduction for natural gas. “This will impact a significant portion of PJM’s current installed generation.”
In response, part of what PJM has been trying to do is to advance interconnection queue capacity reform efforts to get newer resources developed more quickly, including hundreds of renewable projects, he said.
“But the supply-demand crunch is very real,” Haque testified, “and we expect it to continue.”
This situation, said State Rep. Martin Causer (R-Mckean County, Cameron County, Potter County), the Republican chair of the committee, has caused many lawmakers to be very concerned about grid stability and the cost of electricity.
“I think very much that we need to be focusing on reliability, keeping the lights on, and bringing the cost down,” Causer said.
“Unfortunately, what we see over and over is energy policy that takes us backward and actually makes the situation worse,” he said, citing the Democratic-supported Regional Greenhouse Gas Initiative, known as RGGI, as one example.
“Pennsylvania is an energy powerhouse with abundant resources. We have the ability to power this state certainly and every state around us with these abundant resources,” said Causer. “We need the energy policy to match that and that’s what we should be focused on.”
Sam Robinson, Democratic Gov. Josh Shapiro’s deputy chief of staff for consumers and the environment, agreed that certain policies would be helpful.
“Some of the steps that I talked about in my testimony and that we look forward to working with the General Assembly to move forward are permitting, making sure that our incentive structures are appropriate, making sure that there are sites where entities can build, that there are pad-ready sites, that we’re addressing local concerns and making sure that things can move forward through that process,” Robinson testified.
“But I think the governor is a great cheerleader for Pennsylvania, and he always instructs staff — and I’m actually contractually required to mention that we want to get stuff done here — and so we’ll want to send that signal to the market that we’re open for business. The competition is beginning now and so we absolutely want to be competitive.”
Rob Gramlich, president of the consulting firm Grid Strategies, agreed that interconnection queue reforms could help.
“Obviously more supply will help reduce the prices. The delay has been very unfortunate and restricted the supply, but it looks like in the PJM testimony they hope to get nearly 50 gigawatts connected of nameplate capacity this year and next,” Gramlich testified. “That will certainly help with that if that happens. So, I think keeping an eye on the results, the actual performance — do they get these interconnection agreements signed and does that new supply come into the market.”
Gramlich also offered a few suggestions for what the state can do going forward, saying lawmakers should try to get the structure reformed “to where we really have load serving entities on one side procuring from generation and a lot of the dollars transact outside of this central market to do that.”
What states can and should do, he testified, is look at the rules around retail load service and make sure that if a company wants to serve load in Pennsylvania or other states, it is financially well enough equipped to do it.
“That means higher creditworthiness standards and some other regulatory changes,” Gramlich said.
Some others said during the hearing that the electricity demand is not being met quickly enough due to local opposition to proposed projects.
State Rep. Justin Fleming (D-Dauphin County) told the press after the hearing that Pennsylvania is a well-resourced state with plenty of methods for energy generation, including nuclear power, coal-fired plants, and natural gas. He’s concerned the high price of energy that was purchased at PJM’s recent auction will be passed down to consumers.
“It’s going to be incumbent upon us to work with our partners in the federal government to find solutions to make sure that… either that more of that cost is borne by the generators and producers and not all of it is passed down to the consumers,” Fleming said. “We’ve got to create a market where people can afford electricity rather than price them out.”