Why your grid isn't North Dakota's

It seems obvious that increased demand for electricity from data centers must raise prices. But electricity prices can move in counter-intuitive ways. We’ve talked before about how electricity price increases largely hadn’t yet been empirically linked to new demand (read: data centers) in most geographies outside the PJM Interconnect (the electricity market that houses data center alley). And in places like North Dakota, increased demand for electricity has been associated with lower electricity prices, since fixed costs of infrastructure could be spread over a larger ratepayer base. Travis Kavulla (incidentally, potentially the next head of the Bonneville Power Administration) explains in American Affairs this week why more places will probably look like PJM - where the grid has little excess juice to squeeze, and new demand mostly does require costly new investment - than like North Dakota as data center demand continues to rise. Additionally, while grid capacity can at least in theory cut both ways, equipment price inflation and higher capital costs really only drive up the cost to serve demand, relative to existing customers. Kavulla explains why bringing on new demand at the same rates as existing customers - whether through typical ratemaking or longer-term take-or-pay agreements - means socializing those higher costs across all utility customers, and argues that treating large loads like other customers doesn’t make sense when they’re potentially driving multiples of existing demand. To avoid the malignancies of the famously strangled generation queue on the load interconnection side, he argues, among other propositions, for an “open season” for large load interconnection to manage grid access, together with strict BYOG (Bring Your Own Generation) requirements that actually match the cost and risk of new supply to new demand.