First in an occasional series on PJM, the Eastern power market.
In the tiny community of Orchard Beach on the western entrance to Baltimore Harbor, the dominant feature isn’t the modern townhouses and modest bungalows or the cattails and bulrushes lining the creeks.
Looming over everything is a cluster of exhaust stacks at two large coal-fired electric power stations just to the north. “They’re just ugly,” said Zachary Guy, a resident of the neighborhood who took a break from working on his mother’s vehicle to comment on the power units, the oldest of which has been operating for 40 years.
If federal regulators approve, utility customers in the greater Baltimore area will have to pay a surcharge of more than $700 million to keep the plants owned by Houston-based Talen Energy cranking out more than a combined 1,500 megawatts for another four years. Brandon Shores and the smaller H.A. Wagner stations were scheduled to retire this year, adding more closures to the 15-year-long exodus from coal by U.S. power producers opting for cleaner and cheaper alternatives.
Without the plants, however, the region’s shrinking power reserves would enter a dangerous place. The risk would be cascading multistate power outages, according to officials of the PJM Interconnection, which operates the grid serving Maryland and a dozen other states and the District of Columbia.
“You don’t want to get anywhere near there,” said Joseph Bowring, president of Monitoring Analytics, PJM’s independent market monitor.
The surcharge payments will continue until 2028 or 2029 at least, when PJM hopes to complete installation of new and upgraded high-voltage transmission lines to deliver enough imported power to replace the plants. The transmission cost: an estimated $1.5 billion, more than two-thirds of it also landing on Maryland utility customers, according to state officials.
Without approval of the payments plan, now pending at the Federal Energy Regulatory Commission, Talen Energy had said it would close the plants, clean up the sites and build a waterfront development. Under its almost inscrutable operating rules, PJM is powerless to keep the plants in business.
Maryland’s Office of People’s Counsel, in a filing at FERC, put it more simply: Talen Energy was able to “extract a high level of compensation under threat of shutting down the power plants.”
If the PJM settlement with Talen goes through, Maryland’s consumer advocate initially estimated residential electricity bills would go up by $247 a year for three or four years, with an average annual hike of $2,685 for commercial customers. While those figures will be cut down by other parts of the proposed settlement, the cost of the transmission projects will be part of customer bills for many years, said Deputy People’s Counsel William Fields.
Those are all economic decisions made by powerful organizations and companies. An expanded version of that confronts President Donald Trump and his administration as they promise to bring back coal and expedite natural gas generation to power a build-out of data centers and win the race against China for artificial intelligence supremacy.
Doug Burgum, speaking as the Interior secretary and chair of Trump’s new White House energy council, told Bloomberg Television that U.S. demand for more electricity through 2030 requires keeping coal plants running for longer — and could mean resurrecting coal generation that has already shut down. Most of those coal units closed because they were decades old, polluting, and less profitable than natural gas generation or bringing more wind and solar power onto the electric grids.
“Under the national energy emergency, which President Trump has declared, we’ve got to keep every coal plant open,” Burgum said.
U.S. power producers haven’t opened a large coal-fired power plant since 2013, and there have been no major plans to add more coal capacity in the future. Burgum has downplayed even the idea that companies and U.S. policies are invested in a transition to energy technology that pollutes less and emits fewer greenhouse gas emissions.
“That is one of the big lies of the climate extremists,” Burgum said during the interview earlier this month at an oil and gas conference in Houston. “We’re in a period of energy addition.”
Trump, in announcing a national energy emergency in January, could invoke wartime authority to order any U.S. power plant to keep operating, possibly for indefinite periods, legal scholars point out. Trump has also asserted all major actions by independent agencies that regulate the economy, including FERC, to be under the president’s control. That could pull consequential decisions over wholesale power prices into the Trump White House — and potentially lead to a pricing scheme that pays premiums to the energy companies and private investors that own America’s remaining coal plants.
The pending decision on a big payment to Talen Energy to keep the Baltimore plants running signals a costly return to coal, whether to ensure the lights stay on or to satisfy political promises. If Trump directs energy markets to pay for coal generation — at whatever the price — it would weigh heavily against Trump’s pledge to drive down energy costs for voters.
‘A very dangerous place’
Today, old fossil fuel plants are retiring faster than their power can be replaced with new generation of any kind, with the problem most severe in PJM and the Midcontinent Independent System Operator (MISO) in the central U.S., according to the 2024 Long Term Reliability Assessment by the grid’s monitor, the North American Electric Reliability Corp. (NERC). And this is happening amid an unexpected surge in power demand to run new data centers with enormous energy appetites.
“We are heading toward a very dangerous place in terms of our reliability,” FERC Chair Mark Christie said in an earlier interview.
“Our infrastructure is not being built fast enough to keep up with the rising demand,” John Moura, NERC director of reliability assessments and performance analysis, said in releasing the long-term assessment. Within 10 years, the amounts of surplus power available to meet peak electricity needs will fall below safety levels in nearly every part of the United States, NERC concluded.
“You have a significant number of states…where it’s harder and harder, or nearly impossible, to build the infrastructure necessary to produce electricity,” said Kent Chandler, former chair of the Kentucky Public Service Commission and former president of the Organization of PJM States.
Grid operators weren’t expecting the sudden power growth projections from data centers and new power plants that emerged in the past two years, says Scott Niemann, managing director of ESAI Energy, Massachusetts-based grid analysts. “So the need really shifted from building renewables to meet [state] mandates to getting electricity from any source you can get it from, whether it’s renewable or gas fired, to meet the demand growth.”
PJM could see a capacity shortage as soon as the mid-2026 delivery year, said Mark Takahashi, chair of PJM’s Board of Managers.
Born nearly a century ago by utilities in Pennsylvania, New Jersey and Maryland who wanted to pool power supplies, PJM today is the largest of the seven U.S. regional power organizations. Its control room operators must maintain a moment-to-moment matching of power supply with demand in its 13-state region of 65 million people from the mid-Atlantic beaches to Chicago.
The two Baltimore plants, Brandon Shores and H.A. Wagner, are the most important power source in central Maryland. They can serve more than 1 million households. For most of their lives, the plants have also been the state’s largest source of global-warming CO2 emissions, and in Brandon Shores’ case, a persistent source of health-threatening sulfur dioxide exhaust from its two coal-fired steam plants.
The owner of the plants, Talen Energy, which went through a bankruptcy reorganization in 2022, has no “duty to serve” Maryland customers. The Maryland plants are part of its asset portfolio affected by profit-seeking options that include pursuing data center contracts and repurchasing its stock shares to boost their value.
Facing a lawsuit by the Sierra Club over the two plants’ emissions, and emissions regulations, Talen announced in 2023 it would close the plants this year. Given a glacial decision-making process at PJM, with its more than 1,000 members, that much power was not replaced, forcing PJM to pay Talen to keep running until new power could be substituted.
“Brandon Shore’s pending retirement was foreshadowed long before” the 2023 announcement, Maryland People’s Counsel argued. Yet until the announcement, “PJM does not appear to have done any pro-active review” of options for replacing the lost power, the office added.
Today, PJM has a comfortable security margin of spare capacity across its system. Its 1,408 generators of all kinds can produce a peak of 183,000 MW of power, well above the top demand forecast for this summer of 154,000 MW, PJM says. (For comparison, the 94 U.S. commercial reactors produce 97,000 MW of peak power.)
By 2030, however, PJM predicts maximum demand could rocket up to more than 180,000 MW if a predicted surge in data center demand occurs. Today’s generation capacity of 183,000 MW will drop by 40,000 MW if all the plants that say they plan to retire actually do so by 2030, PJM says. New power plants to replace the retired ones have not materialized.
Clean energy and lost opportunity
A flood of proposed power plant projects has stacked up at PJM, the vast majority of which are small solar plants. That gives PJM an opportunity to create a balance of carbon-free renewable energy, storage, nuclear power and gas-fired generation.
PJM failed to seize that opportunity, critics say.
Corporate power buyers with clean energy goals sought out solar power deals in PJM, but developers faced a costly, drawn-out process for approval to connect to the transmission grid. They waited four years or more for a go-ahead, analysts have documented.
By then, financing commitments had aged out, momentum had faded and stalled, according to analysis by the Lawrence Berkeley National Laboratory and other reviews.
PJM denied a request to interview its top executive. The regional grid, which dispatches generation and manages electric reliability, reports it had approved 37,000 MW of new projects, mostly solar, as of the end of 2023. As of last September, none had been built.
PJM has tried to catch up with the problem of the long queue of proposed generation projects. “Frankly, one of the top jobs that PJM had was running the queue,” Chandler said. “That’s certainly been a failure on their part.”
Natural gas projects now must deal with backlogged order books at gas turbine manufacturers and threats of shortages of imported grid components targeted by Trump’s tariffs. New gas generating plants are key to Trump’s plans, but they require building more gas pipelines, typically against local opposition.
On top of that is the damage to investor confidence stemming from the head-spinning vertigo between 2021 and now. Former President Joe Biden made a major policy drive at moving away from coal for good and making big investments in advancing this century’s energy technology. Trump has spent almost every day of his new term cutting funding for clean energy and talking up oil, gas and coal.
“It is absolutely true that uncertainty is keeping new generation from being built,” Chandler said.
PJM’s annual “capacity auction” — the strategy it uses to line up commitments for future supplies from power plant owners — has not enticed much new generation.
PJM solicits bids from generators to supply power at the generators’ chosen price, and PJM chooses the least expensive ones, with the payments ultimately passed on to power customers. Plant owners selected in the auction commit to provide power in an upcoming “delivery” year, along with the payments they receive, also face a heavy fine if they don’t deliver power when called on by PJM.
The average incentive price for the 2024-2025 year was $29 per megawatt per day in most of PJM, for a total cost to customers of $2.2 billion, a price too low to prompt owners to build new plants or maintain old ones, analysts said.
Then came the data center demand eruption. With a power shortage looming, the price in last year’s auction, for the 2025-2026 delivery year shot up 900 percent to nearly $270 per MW per day in most of PJM, bringing the charge to customers to $14.7 billion. Maryland customers, cornered in the easternmost part of PJM with the fewest power supply options, were stuck with an even higher price, $466 per MW per day.
The next auction, scheduled this July, would be under a new set of rules continuing the churn of policy changes PJM has rolled out in recent years to get the results it wants and needs, Chandler said. These changes, like the payments to Talen Energy for the Baltimore plants, require FERC approval.
For the upcoming auction Pennsylvania Gov. Josh Shapiro demanded and got PJM to agree to lower the maximum permitted bid from $500 per MW per day to about $325 per MW per day, and also set a minimum “floor” price. “We believe that not moving forward with this settlement would have left us in an untenable situation,” said Stu Bresler, PJM executive vice president for market services and strategy.
“Supply and demand are not only getting tighter, but the situation is almost accelerating in that direction,” Bresler said.
The dilemma is unfolding. “Everybody wants capacity, but nobody’s happy to bear the costs of funding those investments, and so nothing has happened, which leaves us kind of where we are today,” Niemann said.
