PJM faces looming energy crisis as gas reliability falters

In a recent government meeting, officials discussed significant challenges facing the PJM Interconnection, the regional transmission organization responsible for managing the electricity grid across parts of the Eastern United States. Since 2011, over 40 gigawatts of coal-fired power plants have been retired, primarily due to competition from natural gas. While this transition has generally been effective, it has led to two critical issues that have emerged since the late 2010s.

The first issue is the reliability of gas-fired plants. Although these plants are individually reliable, they have a tendency to fail simultaneously during peak demand periods, as evidenced by near blackout events in 2014 and 2022. This simultaneous failure risk was not adequately accounted for in PJM's planning, leading to a false sense of security regarding energy availability. Following Winter Storm Elliot, PJM reformed its market strategies to address these risks, resulting in a significant reduction in the reliability ratings of gas plants, which dropped from 90-95% to 60-80%. This adjustment revealed a growing capacity shortage that had been developing over the years.

The second issue is the stagnation of PJM's interconnection queue, which has seen minimal project approvals since September 2020. Out of 157,765 megawatts of submitted projects, only 1 megawatt has been brought online as of June 2023. This backlog, combined with ongoing retirements and increased demand, has tightened the reliability outlook significantly, leading to a projected $14.7 billion bill for addressing these issues.

PJM officials indicated that to maintain reliability, the organization needs to add between 5 to 8 gigawatts of capacity annually starting in 2026. Although there are numerous projects in the queue—primarily renewable resources—many are unlikely to be completed due to historical low completion rates. PJM has initiated interconnection reforms aimed at clearing the backlog by 2027, but significant new capacity is not expected until 2028.

Despite the challenges, PJM's current energy mix remains heavily reliant on fossil fuels, with less than 5% of its energy coming from wind and solar. Even with ambitious renewable energy goals, this figure is projected to rise only to 20-22% by the mid-2030s. In contrast, states like Texas and California currently operate with 34% and 27% renewable energy, respectively.

Officials emphasized that the reliability issues facing PJM are not indicative of a need for new fossil fuel plants but rather a timing issue in bringing new resources online. They proposed solutions focused on enhancing the reliability of existing gas plants, suggesting that increasing their availability from 76% to 90% could add the equivalent of over a dozen large power plants to the system, thereby mitigating the risk of blackouts during extreme winter conditions.