Virginia’s recently proposed legislation to significantly increase energy storage requirements coincides with unprecedented electricity demand growth in the state, largely driven by data centres.
The proposed mandates for utilities to add a total of 20.78GW of storage capacity highlight broader issues facing the PJM regional grid, where increasing power demand and reliability concerns have led state and federal officials to call for emergency procurement measures.
Virginia proposes 20.78GW energy storage mandate
A Virginia state delegate has introduced legislation to promote new energy storage investments by the US state’s two main utilities.
HB895, introduced by Richard C. ‘Rip’ Sullivan, Jr, looks to “increase the targets for energy storage capacity that [utilities] Appalachian Power and Dominion Energy Virginia are required to petition the State Corporation Commission (the Commission) for approval to construct, acquire, or procure and extends the time frame by which such capacity must be met.”
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Under the bill, Appalachian Power would add 780MW of short-duration energy storage capacity by 2040 and 520MW of long-duration energy storage (LDES) capacity by 2045.
Dominion Energy would add a staggering 16,000MW of short-duration energy storage capacity and 3,480MW of LDES capacity by 2045.
HB895 is nearly identical to HB2537, introduced by Sullivan, Jr., in January 2025. There are notable changes, one of which is Dominion Energy’s increased minimum short-duration energy storage capacity procurement from 5,220MW to 16,000MW, within the same time frame.
HB2537 was vetoed in May of that year by former Virginia Governor Glenn Youngkin. In his veto explanation, Youngkin stated:
“The Virginia Clean Economy Act (VCEA) is failing Virginians. Adding in requirements for the petitioning of additional storage technologies will not change the fact that the law is misguided and does not work.”
“Long-duration energy storage (LDES) is an expensive technology and if utilities believed it to be the best technology to meet demand, they would be actively seeking permission to build them.”
One reason for the new bill’s introduction is undoubtedly the recent inauguration of Abigail Spanberger as Virginia’s new governor, a Democrat who has already taken several notable actions to change policies introduced by Republican Youngkin.
There does exist, though, another major element to this bill and its contents, rooted in apparent issues with PJM’s procurement process for energy-related projects.
On 13 January, non-profit advocacy group Mid-Atlantic Renewable Energy Coalition (MAREC Action) noted the need for solar siting and energy storage reform legislation in Virginia, noting that both Rip Sullivan’s energy storage bill and solar legislation, introduced this year by Senator Schuyler VanValkenburg and House Majority Leader Charniele Herring to create standards for local solar ordinances have been endorsed by state’s Committee on Electric Utility Regulation (CEUR).
Virginia was among the first 10 US states to introduce an energy storage mandate target of any kind, when in February 2020 it enacted the Virginia Clean Economy Act. This ordered utilities in Virginia to procure 3.1GW of energy storage by 2030 in support of a 100% clean electricity grid by 2050.
Trump administration orders emergency auction in PJM
Virginia is located within the PJM service area of the US grid. The state’s energy demands are rising, largely due to a growing number of data centres.
A 2023 JLARC study on Virginia data centres said: “The state’s energy demand was essentially flat from 2006 to 2020 because, even though population increased, it was offset by energy efficiency improvements. However, an independent forecast commissioned by JLARC shows that unconstrained demand for power in Virginia would double within the next 10 years, with the data centre industry being the main driver.”
It added, “An independent model of the energy grid commissioned by JLARC staff found that a substantial amount of new power generation and transmission infrastructure will be needed in Virginia to meet unconstrained energy demand or even half of unconstrained demand.”
Virginia is known for the so-called ‘Data Centre Alley.’ According to a report by PJM Interconnection’s independent market monitor, Northern Virginia’s ‘Data Centre Alley’ is the world’s largest cluster of data centres.
PJM, meanwhile, is the largest Regional Transmission Organisation (RTO) in the country, encompassing all or parts of 13 US states and the District of Columbia, including Washington, DC. Data centre development is widely agreed to be the biggest driver of rising electricity demand in PJM; however, views on how to address the impacts on energy supply and electricity costs diverge.
PJM is already making efforts to address what advocacy group Environment America said in a statement is one of the slowest grid interconnection processes in the country. The RTO recently awarded interconnection agreements (IAs) to resources, including 2.2GW of hybrid and standalone battery storage in the first stage of clearing a 46GW backlog of applications in its queue from across a range of technologies.
A PJM auction for new generation resources, which concluded in December, failed to secure enough supply to meet energy demand for the June 2027 – May 2028 timeframe it targeted, by an estimated 5.2%. Another advocacy group, National Resources Defence Council (NRDC), noted that summer 2027 will be the first time in PJM’s history that it expects to not be able to guarantee reliability.
On 16 January, the Trump administration, with a bipartisan collection of governors, along with US Secretary of Energy Chris Wright and Secretary of the Interior Doug Burgum, urged PJM to “temporarily overhaul its market rules to strengthen grid reliability and reduce electricity costs for American families and businesses by building more than US$15 billion of reliable baseload power generation.”
The governors were from Indiana, Kentucky, Maryland, Ohio, Pennsylvania, Virginia (during Youngkin’s tenure; Spanberger was sworn in 17 January), West Virginia, Delaware, Illinois, Michigan, New Jersey, Tennessee, and North Carolina.
The initiative urges PJM to hold an emergency procurement auction to tackle rising electricity costs and increasing reliability concerns in the mid-Atlantic region of the US. The US Department of Energy (DOE) said this request comes in response to years of PJM policies, such as the early shutdown of “reliable power generation,” which have “weakened the electric grid”.
Four key points are being recommended for PJM to consider. First, accelerate the development of reliable power generation by offering 15-year revenue guarantees for new plants.
Second, protect ratepayers by capping payments to existing plants in the PJM capacity market. Third, require data centres to pay for new generation built on their behalf, regardless of whether they use the power.
Fourth, implement additional measures to ensure electricity remains “affordable, reliable, and secure”. These proposed actions are temporary and aim to address what the DOE calls past energy market failures, and claim they will prevent future price hikes and reduce blackout risks.
Overall, the administration, the DOE, and the governors claim that this deal will help increase power supply, create jobs, boost economic growth, and ensure that Mid-Atlantic ratepayers won’t have to pay extra.
In a decision released later on 16 January, PJM’s plan did have some overlap with the requests made by the officials. As part of its decision, PJM is initiating a “Reliability Backstop Procurement”.
The decision continued, “Over the longer term, the Board does not view it as desirable for PJM to serve as the procuring authority to long-term commitments resulting from backstop procurement. Accordingly, any such procurement should be viewed as a transitional measure intended to facilitate the timely integration of new supply, while options for a more durable mechanism are evaluated as part of the broader market review directed below.”
It further stated, “The Board recognises that the existing backstop procurement rules are not sufficiently detailed, and that PJM and the stakeholders will need to discuss the design of the procurement. The Board is directing that immediate attention be provided to this matter with process and deadlines to be discussed at the upcoming 22 January Members Committee meeting.”
The ‘Fact Sheet’ from the White House, which notably uses what are clearly opinions and politically charged language, does highlight information from the 2024 State of the Market Report for PJM, stating:
“There are 60,030.1MW of generation that have been, or are planned to be, retired between 2011 and 2028, of which 42,682.8MW (71.1 percent) are coal-fired steam units.”
The White House seems to use this as an example of a state embracing what it referred to as the “Biden administration’s energy subtraction agenda.”
NRDC said in a statement, also published 16 January, that an agreement by PJM’s board that power supply to data centres, not the public, should be switched off in the event of emergencies might prevent short-term risks to energy security, in line with the Protecting Ratepayers Proposal by Maryland Senator Katie Fry Hester, more than 100 state legislators and NRDC.
However, the group’s Claire Lang-Ree, advocate for NRDC’s Sustainable FERC Project, said the proposals would not protect ratepayers from rising electricity bills and solve deeper bottlenecks on the grid. The proposed solutions would also fast-track fossil fuel power plants built for data centres, “allowing them to cut ahead of low-cost clean resources that have been waiting years to connect to the grid,” Lang-Ree said.
“PJM and state leaders need to implement solutions that will actually stop skyrocketing energy bills and protect the public from the risk of blackouts driven by data centres. Critically, PJM must require large loads to pay for their own new power supply or risk getting turned off. PJM also needs to speed up the connection of all new energy, not just those serving data centres,” Lang-Ree said.
Meanwhile, in a letter to the PJM board, another group, Environment America, also said PJM should not be fast-tracking fossil fuels, arguing that PJM’s slow approvals process has “prevented huge amounts of clean energy from being connected to the grid in recent years.”
“Instead of working to fix this, PJM is proposing a fast-track, which in practice would let large fossil fuel generators like gas plants skip the line, causing even further delay to the regular approval process,” Environment America said.
“PJM putting its thumb on the scale for large fossil generators is unacceptable. The 67 million Americans living in the PJM region deserve a grid that is reliable and functional, and that doesn’t put its thumb on the scale for dirty power.”
Additional reporting by Andy Colthorpe.
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