OPINION:
In an effort to ease the pathway for data centers by increasing the amount of electrical energy available, President Trump last week publicly encouraged the PJM Interconnection — the folks who are responsible for running the electrical grid in all or parts of 13 states — to change its rules to encourage the building of more power plants.
The Trump administration was joined in this effort by the 13 governors who represent the states that make up the PJM. That anyone could get those 13 governors to agree to anything, even something as anodyne as the importance of electricity, is impressive.
It emphasizes the bipartisan and nationwide understanding of the importance of winning the artificial intelligence race against the communist regime in Beijing. The irreducible reality is this: One nation will dominate AI and thereby hold the commanding economic and national security heights for the next two generations. No American can imagine allowing communist China to be that nation.
There are some questions, though. One of the president’s suggestions to PJM, a private entity rather than an agency of the federal government, is to allow companies that build and operate power plants to bid for and receive a stream of income over 15 years.
No doubt that would be helpful in developing generation. Yet there was no telling whether such companies would be required to have firm commitments about the natural gas needed to power such facilities. Nor was it immediately obvious how or by whom these 15-year contracts would be funded.
Mr. Trump’s suggestions follow instructions to the Federal Energy Regulatory Commission to expand that agency’s efforts to plug large customers into the grid. Leaving aside the question of whether FERC has jurisdiction over these customers, the commission is currently engaged in a rulemaking process that will inevitably result in litigation.
If you’re in a hurry to get something done, involving more bureaucrats and lawyers in the process does not seem like the most productive way to go.
The impulse to help is understandable. Sometimes, though, the best answer is to let people and systems work out their own challenges. It is not at all clear whether the recent requests for 15-year contracts in PJM are supposed to interact (if at all) with the rulemaking on large customers or with the administration’s efforts to keep coal-fired power plants operating on an emergency basis.
Before we wind up in the middle of more efforts to help, it would be helpful for everyone to agree on some fundamental elements of the situation.
First, at least at the moment, there is no crisis with respect to power generation. To my knowledge, no data center has been delayed or, worse yet, not built at all because of a lack of power. We may indeed get to that point, but we are not there yet.
Second, 15-year contracts for electricity are a good idea that will help power plant builders and operators avoid the need to scramble for financing every few years. At the same time, such a mechanism exposes the deficiencies of PJM; maybe it is time to address some of those deficiencies directly.
Third, data center developers have been pretty methodical, announcing developments in states that have more power generation than they can productively use. It seems reasonable to assume that when the data center crews have soaked up all the extra generation, they will start announcing developments along the path of current or planned natural gas pipelines.
Finally, it is important to note and remember that there is already widespread and uniform sentiment among market participants that data centers should not affect or impair other ratepayers. Although that may be aspirational, it is now the assumption from which pretty much everyone starts.
That said, the idea that we are going to build dozens of power plants and not connect them to the existing grid makes no sense and is therefore unlikely to happen. Being connected to the grid is an insurance policy against the likelihood that, at some point, one of the power plants on which you rely will stop running. Blackouts happen; being part of a robust grid minimizes their risk and duration.
The bottom line? People need to trust the process by which we plan for, build and operate power plants in the United States.
Moreover, the real constraint with data centers is not physical limitations, lack of electricity or government policies (at least not right now). The real constraint is (or is about to be) the political resistance being generated by the usual suspects. Those in and around government need to be thinking about how to address that constraint.
• Michael McKenna is a contributing editor at The Washington Times.
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