Data centers and other concentrated electric consumers increasingly seek to buy their power directly through nuclear generators in PJM, raising concerns among state regulators, consumer advocates and utilities that they may be able to skirt paying their fair share.
Five years after shuttering, Three Mile Island Unit 1 is being resurrected as the Crane Clean Energy Center (CCEC) to supply Microsoft with energy through a power purchase agreement, while Talen Energy seeks to amend the interconnection service agreement (ISA) for its Susquehanna Nuclear Plant to reduce its output to PJM and instead supply a co-located data center sold to Amazon Web Services. (See Constellation to Reopen, Rename Three Mile Island Unit 1 and Talen Energy Deal with Data Center Leads to Cost Shifting Debate at FERC.)
The latter has drawn protests from Exelon, American Electric Power and the Pennsylvania Public Utility Commission arguing that more information is needed about how the configuration may affect the grid and whether it will benefit from ancillary services, such as black start and regulation, without being assessed proper transmission fees.
During a Sept. 24 hearing on co-located load held by the Maryland Public Service Commission, FirstEnergy Chief Risk Officer Abigail Phillips said nuclear generation can help meet a resource adequacy gap identified in 2029, with load forecasts driven by data centers and thermal resource deactivations outpacing development in PJM.
“Right now it doesn’t seem like the capacity markets are paying for those capital costs of generation, and the price signals that PJM talked about this morning are increasing the prices, but in the past auction, no new dispatchable generation is going to come online,” she said. “So how long is it going to take to make those price signals work, and how long are we willing to wait and depend on that before we need to do something to get new generation on in Maryland and the rest of PJM?”
Data center developers could be choosing to co-locate with dependable generators out of a concern that the PJM grid may not offer the same security it traditionally has, Phillips said, which underscores the need to determine how to ensure adequate capacity. Additional nuclear generation could hold the promise to meeting resource adequacy needs and climate goals at once, she said.
“Nuclear is getting back into the conversation as a part of a zero-carbon solution. I know Maryland has clean energy goals, and I think that having nuclear back in the game is going to be helpful with achieving long-term capacity and long-term goals, not only for Maryland, but for PJM and the country,” Phillips said.
Greg Poulos, executive director of the Consumer Advocates of the PJM States, drew a distinction between the CCEC and co-located load requests, saying that most advocates are supportive of bringing new nuclear generation online as the balance between supply and demand grows increasingly tight in PJM. Whereas the CCEC will bring about 835 MW of new generation online to serve existing load, he said co-location may be taking generation out of the markets to serve load not considered part of the grid and exempt from service charges.
Where Poulos does see common ground between the CCEC PPA and co-located load configurations is the potential for major market impacts caused by the addition of large data centers, whether they are in or out of PJM’s market.
He stressed that consumer advocates are supportive of the economic development that data centers promise the states they locate within, so long as there are rules to ensure that they pay their fair share for any services they consume or grid impacts they prompt. Co-location could also push transmission costs lower by reducing the need for new lines, he said.
Advocates are also concerned about market power, Poulos said, with the potential for generation owners with a broad portfolio within a tight zone having the ability to pick a resource to take out of the market and push energy and capacity prices higher. Generators could contract with a data center to provide power well below the regional clearing price, knowing that other resources in their portfolio will clear at a higher price. Co-located configurations have the potential to distort price signals even without market manipulation by removing large volumes of load and generation from a zone, he said.
“The market is supposed to provide the appropriate price signal, but if you have this other massive load being served in the same area offline, so to speak, it could impact the price signals. It could make them not accurate so the price signals aren’t reasonable in the market and for consumers,” Poulos said.
PJM stakeholders had considered several proposals to change the market rules for co-located configurations last year, but none of them received majority support, and the topic was dropped. Poulos said it’s unlikely stakeholders will be able to make progress while FERC and state commissions are looking at the topic, and it will likely have to be FERC that makes the first move on the broad legal and jurisdictional questions. (See “Proposed Rules for Generation with Co-located Load Rejected,” PJM MRC Briefs: Oct. 25, 2023.)
The RTO issued guidance around co-located configurations recommending that parties receive firm transmission service while stating that it does not have the authority to prevent private contracts between generators and load seeking to co-locate off the grid. (See “Additional Guidance on Co-located Load,” PJM MRC Briefs: April 25, 2024.)
During the PSC hearing, Aftab Khan, PJM’s executive vice president of operations, planning and security, said the RTO has requests to study about 8 GW of co-located load configurations, mostly to serve data centers. When such requests are received, he said PJM conducts the “necessary studies” to ensure there is no adverse impact to the grid. Any required transmission upgrades to support the configuration are identified and must be implemented at the cost of the generator before the co-located load can come online.
He said PJM considers non-network load co-located with interconnected generators to also be electrically connected to the RTO’s grid and benefiting from ancillary services, but it has no way of assessing fees.
“Under any configuration, co-located load is electrically connected and synchronized to the PJM system when consuming power and therefore benefits from the use of the transmission system and ancillary services, such as black start and regulation services,” Khan said. “PJM network load accounts for such services, but there are no transmission or ancillary service charges to the off-system load. PJM previously tried to address this with proposed rule changes for ancillary services, but the proposal did not achieve the consensus of the PJM members.”
Independent Market Monitor Joe Bowring also said the load is part of PJM’s grid and the broad impact should be holistically studied to identify impacts, rather than examined through amendments to generators’ ISAs.
“All load, including co-located load, is on the grid, affects the grid and benefits from the grid,” Bowring said. “As a result, decisions about co-located load affect all customers.”
Bowring said the Monitor’s analysis of co-location configurations did not find a substantial difference between cost allocation to consumers regardless of whether the load is considered part of PJM’s network or if the large load additions were made miles away from the generator. Instead, he said the underlying issue is how PJM identifies and studies large consumers.
“It’s not just a question of co-located load; it’s a question about load in general. … What that illustrates and emphasizes is that the analysis has to be done carefully,” he said.
Phillips told the PSC that it’s critical that the consequences of allowing generators to take their output off the market to serve non-network load is fully understood, both in terms of costs and reliability.
“Any reduction in dispatchable, on-demand generation that’s available to serve residential customers should be analyzed before we make any changes to policy or regulation. We have to really understand when you co-locate and what that does to capacity, both short term and long term, how does that trickle down into who’s paying for it, who gets the benefit, and we have to make sure it’s not only cost affordable, but [also] we maintain that reliability,” she said.
In a white paper published Sept. 23, Tony Clark, former FERC commissioner and senior adviser at Wilkinson Barker Knauer, and Vincent Duane, principal at Copper Monarch and former senior vice president of law, compliance and external relations at PJM, argue that allowing data centers to co-locate with nuclear generators allows them to avoid lengthy waiting periods while transmission upgrades necessary to accommodate their load are planned and built. But it can also alter power flows to require network upgrades before other networked loads can interconnect. They call for a cost allocation methodology that recognizes the benefits co-located load and generators receive from being part of the grid.
“We would not advocate assigning to the co-locating generator the full cost impact of its withdrawal (as is done under the ‘but for’ test for new interconnections),” they wrote. “Nevertheless, the underlying principle — rooted in cost causation — offers a path to assign to the co-location arrangement its share of these cost impacts, thus restoring them to the position they would be in had they connected in the traditional manner.”
Clark and Duane raise similar concerns about cost allocation for ancillary services and note that nuclear units receive public benefits, such as tax credits, grants and accelerated depreciation from the federal government and states. They argue that makes it especially questionable to allow units to leave RTO markets to serve private load.
“From this perspective, nuclear generation is uniquely imbued with the public interest, making it unsettling if not unseemly for units, once the first data center comes knocking, to pull up stakes and desert customers that for decades have had their back,” they wrote.
