VALLEY FORGE, Pa., July 21 — PJM Interconnection, the largest grid operator in the United States, is facing a power supply crunch that its engineers describe as a structural shift rather than a passing squeeze. The trouble is simple arithmetic: demand for electricity in its 13-state footprint is now growing at an expected 5 percent per year, after averaging roughly zero growth from 2005 to 2020. The driver is data centres — vast, power-hungry server farms that are sprouting across the mid-Atlantic and Midwest.
PJM was formed in 1927 as the Pennsylvania-New Jersey Interconnection, a co-operative venture among three utilities that agreed to dispatch plants on the lowest-cost basis. By 1956 it had absorbed additional utilities and was rechristened the Pennsylvania-New Jersey-Maryland Interconnection, the PJM acronym that stuck.
It now serves 67 million customers and counts more than 1,000 member companies. The technical reality is that PJM’s system is enormous. As of 2024 it had 182 gigawatts of generating capacity, 1,436 individual electric power generators, and 88,333 miles of transmission lines.
It delivered more than 800 terawatt-hours of electricity in 2024. That makes it the biggest power grid in the United States and, until the European Integrated Energy Market took shape in the 2000s, the world’s largest competitive wholesale electricity market.
PJM is regulated by the Federal Energy Regulatory Commission, which approves its open access transmission tariff. The rules that now govern the market were largely set by FERC Orders 888 and 889 in the late 1990s, which forced interstate transmission owners to offer non-discriminatory access and created an electronic information-sharing system.
The demand surge nobody planned for
For fifteen years PJM saw almost no demand growth. The grid had spare capacity; generators were mothballed or retired for environmental or economic reasons without causing alarm. That era is over.
Demand is now rising at roughly 5 percent annually, driven almost entirely by new data centres that consume electricity at rates comparable to small cities. Simultaneously, many generation plants have been shut down — and getting permits to build new ones has become a slow, litigious process.
The combination means PJM is anticipating future supply shortages that could test the reliability of the world’s most complex power system. The detail that matters is timing. Permitting a new plant can take years; a data centre can be planned and built in months.
Grid operators like PJM cannot simply order more electrons into existence. They must ensure that enough generation capacity is available to meet peak demand — typically in summer — plus a reserve margin.
The margin is shrinking.
A history of co-operation, a future of constraint
PJM began as an engineering solution to a simple problem: share the cheapest power. The founding utilities agreed to connect their systems and dispatch the lowest-cost generators first, regardless of whose customers were using the power. That principle — economic dispatch — remains the core of PJM’s wholesale market today.
The grid has expanded to cover all or parts of 13 states. Its headquarters remain in Valley Forge, Pennsylvania.
What happens next will depend largely on how quickly new generation — whether gas, nuclear, solar, or wind — can be brought online, and on whether regulators can streamline permitting without igniting legal battles. PJM has its own market mechanisms — capacity auctions, transmission rights, and locational marginal pricing — that are supposed to signal scarcity and incentivise investment. Whether those signals are strong enough, and fast enough, to close the gap before the lights flicker is the open question.
For now, the grid is holding. The data centres keep humming.
But the margin for error has never been thinner.
