PJM plan aims to speed data center power deals and backstop capacity procurement
PJM has proposed a two-phase Reliability Backstop Procurement and a framework for large new loads to bring their own generation or scale back usage. The plan could speed bilateral power deals for data centers while adding a backstop auction to address supply shortfalls.
PJM Interconnection has proposed a plan to manage burgeoning power demand from data centers by having new large power users either bring their own new generation to the grid or operate under a "connect-and-manage" framework. The proposal also outlines a two-phase Reliability Backstop Procurement and a fast-track backstop power capacity auction to help prevent shortfalls across PJM's footprint.
PJM’s latest proposal for the Reliability Backstop Procurement starts with a bilateral contracting process that PJM helps facilitate, but has no financial say in. In the first phase, PJM will serve as a matchmaker, pairing buyers with sellers, and it states that its role is limited to finding the new generation for the load because it will be up to the parties to set terms and conditions and execute a contract. PJM plans to issue a Request for Information to gather interest from both large loads and new generation capacity, including demand-side resources, by Thursday, April 16, and expects a response in two and a half weeks. PJM is planning to start Phase I in September and Phase II in March 2027.
In the second phase, any unmet capacity need will be procured through a pay-as-bid centralized auction, distinct from PJM’s existing Reliability Pricing Model uniform-price design. PJM will only consider the leftover load that did not find a seller in Phase I. PJM will settle using a contract for differences method, so the RBP Commitment Price for a resource will be compared with the RPM Clearing Price, and only new capacity with a guaranteed in-service date of June 1, 2031, will be allowed in RBP.
PJM said last month it had begun discussions on creating a backstop auction, marking a step towards procuring the power needed to meet growing power demand in its footprint. Analysts said the risk of being pulled into the proposed backstop mechanism gives data centers a stronger incentive to pursue bilateral deals with power producers, and the bring-your-own-generation element could particularly boost deals between data-center owners and power producers.
PJM also proposes strong accountability for non-delivery. An RBP resource that fails to deliver its committed UCAP will not be compensated for the shortfall and will incur an additional penalty equal to 20% of the RBP commitment price, assessed daily. If a resource is delayed three years past its first committed delivery year, the RBP commitment is rescinded entirely, although resources delayed solely due to network upgrades can avoid the penalty by demonstrating readiness through test energy and seeking interim deliverability.
PJM states that its initial procurement target is 14.9 gigawatts and is proposing that the 2029 load forecast is the firmest load forecast in this proposal. Electric distribution companies will have the opportunity to increase the target to account for large load PJM is unaware of, or did not represent in its forecasts, or incremental native load the electric distribution company would like to procure for.
The proposal comes as U.S. electricity demand continues to climb. The Energy Information Administration's January outlook shows power consumption rising again in 2026 and 2027, after setting a second straight annual record in 2025, driven in part by rapid growth in artificial intelligence. Analysts cautioned that implementing the plan could face hurdles, including permitting challenges, state-level approvals and a long interconnect queue.