RPA on New Jersey’s Electricity Rate Emergency

Kyle Mason (Associate Planner) and Robert Freudenberg (VP, Energy & Environment Program) from the Regional Plan Association break down why New Jersey electricity rates spiked 17-20% in June 2024. They explore how outdated grid infrastructure, AI-driven energy demand, and stalled renewable projects are creating a perfect storm for ratepayers.

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Allen Hall: Kyle and Rob, welcome to the podcast. Thank you for having us. 

Robert Freudenberg: Yeah, thanks. Great to be here. 

Allen Hall: Uh, so I was doing a lot of homework online a couple of days ago and looking into, uh, some statements with an administration about the electricity rates in New Jersey, and I thought, well, I need, I need to do my homework because some of this is new to me and throughout all my research and spent several hours on it.

Your organization is the only one that had any real data. So I’m glad you’re joining us today. So, Kyle, I would like to start with you first, and, and. There’s a fundamental challenge that’s happening, uh, in New Jersey. Can you just paint a picture of what around New Jersey rate payers are facing with their electricity bills?

Kyle Mason: Yeah, absolutely. So starting [00:01:00] June of this year, uh, electricity rates in New Jersey went up between 17 to 20%, depending on your utility company. Uh, that is a cause of a larger problem with the regional grid operator. PJM. Uh, PJM is the grid operator for New Jersey and 12 other states. It covers over 60 million people in a wide geographic area.

Uh, they run a annual capacity auction, which secures power for when the grid is at peak load or when most power is being used on the grid. And that capacity market saw record high prices, which trickled down to. Increased electricity rates for New Jersey rate payers. 

Allen Hall: Rob, from a policy perspective, how did we get here?

Robert Freudenberg: Yeah, I mean, there are, there are so many ways we got here and that’s part of the issue. Um, you know, I think what we’ve seen in, in the aftermath [00:02:00] of these rate hikes is everybody trying to point to one thing. Uh, and there is no one thing here. This is, this is a series of changes over time. Um, you know, we’re.

We’re, we’re looking at, um, the way we bring energy onto a system on an old grid. We have a very old grid. And we’re trying to update it in real time. And the process to put things on the grid is, uh, taking a lot longer than it used to. And we’re putting new and more, uh, various types of, of energy sources onto the grid.

So, um, as we’re, it’s like trying to, to build the plane while you’re flying it, and we’re trying to update our grid. As we need the energy and as demand is increasing. So, um, you know, as we add these new and various sources, uh, to the grid, they’re going through a process that used to take a few years, and now it takes many years.

And we’re also in a, in a phase where we’re adding a lot of renewables, which are, you know, not big behemoth like power plants. Um, you know, they’re [00:03:00] smaller, more distributed. So the process that’s set up to bring new energy, new infrastructure online is outdated. And, um, you know, I think what we’re, what we’re finding is as we go and more energy is demanded that the system is not keeping up, uh, with the demand.

And so we’re falling behind and projects are getting stuck in the queue. And the, the federal government, which is overseeing this, is trying to update it, um, and trying to make changes, but the grid operators are trying to react to that and, and find the realistic balance. So at the end of the day, you have, uh, new systems that want to come online with an old system that’s not letting them come online as, as quickly as they need to.

Joel Saxum: And, and there’s a compounding factor here too, right? Rob and Kyle, correct me if I’m wrong, but we have new types of generation on an old grid. But then we also have new types of demand on that grid, right? So with, you know, the buzzword around energy, of course, AI, [00:04:00] data centers, all these things. But we’re really looking at a change.

And Kyle, when we talked a bit kind of offline and planning this, and you, you noted to, to us that. This, this 1% of like annual load growth now is looking at like 5% in the future, and we haven’t had that kind of growth since. Was the air conditioning was invented? Is that what you said? 

Kyle Mason: Yeah, absolutely. We are seeing in our lifetimes unprecedented load growth.

I mean, we have not seen the amount of year over year percentage low growth since. Air conditionings were invented and they started going up in places like New York City and Detroit and Chicago and other big cities throughout the us. And what we’re seeing right now is a massive, massive expansion of data centers.

Not just small data centers that we saw expand during the, uh, years leading up to the.com bubble, but rather these massive, uh, hundred plus megawatt data [00:05:00] centers that are. Very, uh, tightly geographically located. So there’s clusters of these in Northern Virginia, in New Jersey and Pennsylvania and Ohio, and they’re using massive amounts of electricity and they largely were not, uh, predicting 10 years ago they were not predicting AI to, uh, develop as it has and for data centers to expand as they have.

So it’s really been a. Tricky, tricky planning situation with grid operators, the federal government and state governments. 

Joel Saxum: Yeah, I think that’s something that the general public doesn’t really see or understand right now is like when you’re playing around on CH GPT making a, a funny picture of your friend picking up a house or whatever the thing is, you know, the amount of energy that, that those resources are taking up.

Is massive and the growth is there. The things are happening behind the scenes. You don’t see the issue now as a rate payer, as a normal citizen because the lights are still on in your house. Everything’s cruising lock you. You see [00:06:00] this little blurb, like you said last June, like in June, like, oh, my electricity price just went up.

Well, that’s gonna continue to keep happening here. And then you have this, this, this perfect storm of. Now we’re, we have an interconnection queue issue within PJM, and then you have like the 1100 megawatt ocean winds project offshore wind that would’ve been connected in New Jersey there that is, has been abandoned for now.

At least. There’s, there’s a lot of things happening. Chess pieces moving on the board. They’re going the wrong way. We don’t wanna see. 

Robert Freudenberg: Yeah. And here’s the real challenge, and this is where policy comes back, is, you know, up until, uh, the last year or couple years, um, we were all rowing towards the same direction that we’re gonna electrify things, we’re gonna electrify our cars, we’re gonna electrify our buildings, we’re gonna be more plugged in, uh, use more data.

And we’re gonna create new renewable energy to feed that hunger, uh, for power. And, and what has just been completely upended is, is [00:07:00] this idea that, okay, we can have more, we can do more, and we’ll have clean energy, uh, to kind of feed that. We’ll get these projects in the queue, we’ll get ’em lined up, and we’ve been spending the better part of the last decade or so.

Planning for new big renewable energy projects to feed that demand, um, and, and feed our electric cars and feed our more electrified buildings. And now all of a sudden the plug has been pulled on that, and we’re still moving towards the direction of having electric cars and having electric buildings and having data centers.

But now without the renewable energy, that was really just on the verge of coming online. And, and that’s the, the kind of conundrum we’re in right now is that we are, we are hungry for more. We have set things on track to kind of move towards a more electrified, more plugged in world. And now we’re unplugging the, the renewable energy sources.

I could have said that. 

Allen Hall: And New Jersey’s really at risk because it’s its own energy island, so to speak. It uses more energy [00:08:00] than they produce. But they’re also tied to all this data center. So the larger PJM, uh, grid, I’ll call it, is what? Pennsylvania, Virginia, New Jersey, and a number other big power hungry states.

They’re all interconnected. New Jersey was trying to help forge a path to bring more energy online, but obviously that has stopped from what we have seen. There was supposed to be about around five gigawatts of offshore wind. To be able to supply New Jersey and that has all stopped. But at the same time, uh, Kyle, I think you mentioned there’s over 200 gigawatts of interconnect queue.

That is vast majority is renewable, just waiting to be connected. 

Kyle Mason: Yeah. Yeah. As of about. April of last year, there were over 200 gigawatts of projects in the internet connection queue waiting to be studied. And around 98% of them were solar, wind, both onshore and offshore, and [00:09:00] storage. Now a project being in the queue and completing the study doesn’t necessarily mean that it’s going to come online, but even if 50% of those projects came online, uh, it would’ve.

Uh, markedly improved the rate situation, and those are clean energy, uh, systems that can be deployed in small, already geographically constrained areas like New Jersey, for example, is a, the most densely populated state in the country and is fairly geographically constrained. A lot of the open land will.

Uh, municipalities would rather use it for housing or open space than large energy projects. And solar, uh, and storage can fill those gaps. And then offshore wind for New Jersey is the ideal solution for a large scale generator. And having those projects stuck in the queue only, uh, decreases supply [00:10:00] or limits the supply supply that will go onto the grid.

And at the same time, we’re seeing generator deactivations either from policy or reliability concerns, uh, particularly with coal and oil and gas plants. Uh, there’s a lot of reliability concerns during extreme weather events, extreme cold events. And, uh, PJM recently changed their market rules to, uh, make the reliability rules stricter, which, uh.

Which made a lot of those fossil fuel plants ineligible to even enter their capacity market. 

Allen Hall: Yeah. That buffer dropped from about 16 gigawatts of, of supposedly reliable, uh, energy sources to about 500 megawatts when the reliability requirements were issued. That’s. Amazing because I think the normal assumption is that, well, your, your base load is always gonna be covered by gas fired generation [00:11:00] or coal fired generation.

What could possibly go wrong with that? But when they had to do the reliability review, they realized. They’re not really set up for extreme cold weather events or some of these other situations, and so they’ve removed them from the, the reliability factor that even tightens the news, so to speak. On New Jersey and PJM, what are they about to do here?

What is, is, is there a current. Plan or market dynamics in, in place to put some structure back in to get us out of this hole? 

Kyle Mason: Yeah, to an extent. Uh, PJM has worked with, uh, ferc, which is the Federal Energy Regulatory Commission to improve their interconnection Q process. So starting back in 2021 and 2022, uh, PJM worked with the federal government to create a new cluster study prop.

Process. So their previous interconnection study process was first come, first [00:12:00] serve, and that was a serial basis. And it didn’t matter if the project would take one year to build or 10 years, if it went into the queue earlier than another project, it would be studied earlier. They have since changed it to reviewing, uh, projects in clusters and on a, uh, first.

Ready for serve basis. So a project that will only take one year to build will get a precedent over a project that will take 10 years to build. And they’ve started to implement it on a staggered basis, starting in 2023. And they have made significant progress. They’ve, uh, looked at, they studied over 40 gigawatts of energy already, and that’s starting to get built.

Um, but it is a very slow process and. Uh, there, there is the question of whether that can, uh, outpace the rising demand. 

Allen Hall: What is the consistency or, or what is that [00:13:00] new generation comprised of? Is it gas fired? Is it solar, is it wind or a combination of all of those? 

Kyle Mason: Yeah, from my understanding it’s mostly solar and storage, um, when there is some wind, but with, uh, federal policy around offshore wind that has been stagnated.

Um, and there’s also a significant amount of up rates to gas plants. Up rates are increasing the, uh, nameplate capacity of a plant. So basically, uh. Categorical improvements to improve efficiency and the amount of generation these plants can have. 

Robert Freudenberg: This process has been, um, good. Right. This is, this kind of sets us on a better path, um, especially because we were going to bring, you know, a lot more renewables on.

I think what’s interesting to think now is as, as there’s a federal shift away from, from offshore wind and there’s, there’s actually a push, uh, for fossil [00:14:00]fuels. Um, I think it’ll be interesting to see how this process plays out now for those projects, right? Because we’re gonna need energy and, and there’s a lot working against renewable energy.

And now this speedier better process might favor, uh, and work for, uh, kind of the, the, the fossil generated things. I think we’re, we’re gonna hit a problem with is, is we’re back to supply chain issues, uh, where we’re years away from getting new, um, fossil, you know, fired, uh, turbines, right? We’re. We’re years away from, uh, the nuclear dream, uh, that, that so many people seem to have.

Um, and, and we had these renewable projects coming along and we’re gonna hit right when we needed it. So. It will be interesting to see how, what’s in the queue now, um, you know, keeps moving forward. And then what comes next in the queue. What, what shifts, uh, is, is it, you know, policy is driving us, uh, away from renewables right now.

Uh, it will be interesting to see how, how that actually plays out in [00:15:00]reality. 

Allen Hall: Yeah. Because speed is part of the answer in trying to get more generation online. That’s why I think solar is a big part of that, right. Is just because you can deploy very quickly. With gas and other petroleum based systems, they’re slow.

It’s gonna take, you may not even be able to get a gas turbine for 20 30, 20 31 if you, if you put your order in today and at, at that point when we get to 2030, I think you’re projecting what, 10%, 12% of the electricity demand on PJM is just from data centers, which is crazy. That’s a huge amount of energy.

With the, uh, uh, the federal administration at the moment, uh, pushing wind off the table, so to speak. How do you fill that demand quickly? Or, or do we just not do it and get to 2030 and hope that we have some gas generation? Is is that where policy is headed? Because 

Robert Freudenberg: PJM. [00:16:00] The territory is so large, uh, and it includes so many states.

You know, I think, you know New Jersey. As a state, uh, we might be looking at importing even more energy, uh, from places and it’ll be importing it from states that didn’t necessarily have, uh, renewable energy goals or, or climate goals. Right there. There are states that make up, uh, the PJM territory. That kind of never left that track or didn’t leave that track as much, and that might start to fill, uh, the demand, um, or that, that we have, uh, again, Kyle, correct me if I’m wrong on that.

Kyle Mason: No, you’re, you’re absolutely right. And then if it gets even, and if it gets to a certain point, PJM as a whole may have to start purchasing power from outside authorities, whether it’s states on its border like Miso or Southern states, um, or even Canada. Uh, we’re seeing that in New York with, uh, the Chippy line.

Uh, New York is purchasing power directly from [00:17:00] Canada, uh, di uh, plugging in directly to New York City, which is great. It’s clean, hydroelectric energy, but they are relying on, uh. Energy from outside of our borders. 

Joel Saxum: Yeah. So what do you start comp? You’re compounding the issue, or not you, sorry, not you, but we are compounding this or issue more here.

Right? So if you start relying on energy from Canada, now you’re running into energy security, which is national security issues, right? And then the other side of this thing, at the same time, we would love to see more renewable energies come from. Uh, environments regeneration is easy, right? So we’re talking about like the mid, the middle of the country, the all the wind states.

It would be fantastic to be plumbing that, uh, that power back to the east coast, to the PGM, to different, uh, operators through like high voltage transmission lines. However. Now those are under attack. We saw this with the, the grain belt express coming across from the middle of the [00:18:00] country heading east.

That’s been, you know, the d the DOE loan guarantee was pulled from that, so now they’re looking at private funding and whatnot. But so like, there’s just so many things happening here that, like I said earlier, we’re kind of in this perfect storm where what you’re gonna end up having is extreme rates possible blackouts, brownouts, and, and.

Also, and this is the thing that nobody wants to see, is, in my opinion, job loss. Because energy intensive industries are gonna have to leave the East Coast because they’re not gonna be able to afford energy. You’re gonna see more of them, what you’re seeing now actually from around the country, like heading to Ercot, heading to Texas, where power’s cheaper.

Because at the end of the day, if that’s, that’s a consumable for a manufacturing operation. And if you’re looking at rates that are, I think like in Austin, outside of Austin, I’m paying like 9 cents a kilowatt hour. Uh, your, that, that can’t compete with something that is in, you know, 2, 3, 5, 6, 8 times that in the future, as these rates start to keep increasing, jobs are [00:19:00] gonna leave as well.

Leave that pla that area as well. And so there’s this, this issue that’s compounding, compounding, compounding. And it’s great to hear that the permitting, uh, issues have been. Addressed that there’s, if there’s a plan working for there in the PJM. But the big thing here is to me, generation, you got to stop taking generation off the off the table.

And that is in the form of offshore wind because. N there’s no other resource over there, right? Nuclear dream nuclear could be great for the energy grid. However, when are you gonna get a new pet built? 10, 12 years? Same thing with gas right now. You’re not gonna get ’em online till 20 30, 20 32. So the generation, and we wanna be this AI Super house AI powerhouse.

We need power Now. Why are we shooting ourselves in the foot at the generation that we need? Is there? It’s ready to go. Shovel ready. We’re ready to collect, connect the electrons to the grid. Um, but we’re, uh. We seem to be going backwards on that. 

Kyle Mason: Yeah, absolutely. And I do wanna just touch on one thing you said.

Uh, so PJM still hasn’t [00:20:00] figured out the permitting issue. They figured out they’re working on the studying issue. The permitting issue is a, a federal, state, and local process, and PJM doesn’t really have much say over that. Um, and there is still a lot of reform that could be done. And it’s been, there’s been a lot of talk, especially in the last two, three years around permitting reform, and a lot of states are working on solutions.

There’s. Legislation within state governments to try and figure out permitting for energy systems, um, and transmission wires in particular. Transmission wires is a, a big, uh, issue right now. ’cause the average amount of time to build a high voltage transmission wire is 10 years. So you have the issue of it taking years and years just to get the materials to build.

Power plants and then 10 years with permitting costs and supply chain issues and, uh, permitting timelines to build the transmission wires that will bring that power to the load centers. 

Allen Hall: Isn’t that where offshore wind was gonna solve that problem? Because instead of [00:21:00] drawing power a thousand miles away, you’re gonna draw from about 20 miles offshore.

And is there a scenario where offshore wind. Plays a factor in New Jersey electricity rates to help bring them down, or is it completely off the table? We are not even planning to see any offshore wind because of what’s happening with the current administration. 

Robert Freudenberg: That’s the question, um, is what’s going on with federal policy, federal aggression, honestly, towards offshore wind?

Is this a pause or is it. A death blow. Right. And, and I think, you know, probably the answer to somewhere in between there, but we’re certainly losing time. Um, we’re losing kind of the opportunities. We have an offshore wind farm working right now off of the South Fork on Long Island. And if you look at the data from that, that is performing very well, it’s reliable.

Uh, the folks who pay, uh, the rates on that, you know, they get a a dollar [00:22:00] and a half more on their bill. Um, but it’s not gonna go up because they negotiated that rate, um, you know, years ago. And that’s set. It’s not gonna fluctuate. Like, uh, other rates do, uh, put a thousand people to work. Uh, we have the proof that these projects work and they deliver on what they said they were going to do.

Um, and we’re, we’re actively citing against us. We’re not, but the federal government is. Um, so I think what. You know, offshore wind developers, uh, around the, the world are asking themselves right now is, you know, are we just leading, uh, to see what the US ends up doing with offshore wind? Or is this damaging enough that we just go away?

I, I think the way we think of it is the ingredients here are so good for offshore wind. Everything you just said. Uh, the proximity, the, the wind speeds. Um, all we have to do is build those things and connect them into our grid and we’ve got a lot of power. Um, and I think that [00:23:00] opportunity doesn’t go away.

It’s just what are the, what is the damage we’re doing to the industry now? How, how many years are we setting ourselves back? Um, if you look in New Jersey. You know, there was a plan to build this pre-built infrastructure, PPI, um, where they were going to connect, you know, build the infrastructure in ducts so that when offshore wind farms come online, they have nice, one nice duct to put a few projects in, uh, minimizes disruption on communities.

And, um, it really just allows a place for multiple farms to plug in. And, you know, the state is in a, in a, a limb in limbo right now because, um, they don’t see offshore wind coming anytime soon. So why should they go ahead and build this and put the resources and time into it? New York did something similar.

They had a, you know, plan for building transmission infrastructure for the future offshore wind farms. And, and now those projects are on ice. Um, in [00:24:00] some cases not even, not even moving forward. So how far are we setting ourselves back? Our hope is that offshore wind comes back quickly. We would like to see states continue to make these investments in transmission, uh, but we also understand that it’s, it’s tricky, um, to get the timing right, but, uh, you know, it’s, it’s a real challenge.

Allen Hall: Well, what is the message then for New Jersey policy makers, uh, about offshore wind renewables going forward? I 

Robert Freudenberg: think it’s, um, you know, as much as a state can, uh, because there are limits to what a state can do without federal approval, I think states need to keep the charge on for offshore wind. They need to keep the fire burning for it.

Um, I think they need to, you know, recognize that this, this likely is a pause. Uh, work closely with developers, work closely with communities to prepare them, uh, but know that we have, uh, some, some time and space here where, where it’s not gonna move forward, but have all the plans ready to go. [00:25:00] Um, want the minute?

Kind of this federal policy changes. Um, I have to think that with everything going for offshore wind, with the demand that’s gonna come with the prices that are gonna come, there’s gonna be an outcry, uh, for more energy. And we have the lease areas, we even have projects on paper, right? We can, we can get these things going again.

And I think, uh, states, uh, should be doing everything they can to prepare for that. And I do think that includes, you know, getting the transmission and infrastructure ready so that. As soon as we can build them, we can plug ’em in versus having to start from scratch and leap for them to be built and leap to go through the process.

We can get some of this done that’s in the state’s, uh, power right now to, to move on the transmission infrastructure, uh, to the degree it doesn’t need federal approvals. 

Kyle Mason: Yeah. And uh, and along that line, uh, the state recently has announced some major steps forward to building transmission infrastructure, not necessarily for offshore wind, but general.

Grid modification. They [00:26:00] recently announced their Garden State Energy Storage program, which, uh, aims to get, uh, over two gigawatts of energy storage onto New Jersey’s grid in the next few years. And they, uh, release their first set of grid modification rules, which really are more statutory, but they require.

All of the utility companies to conform to a, um, modern standard in New Jersey. But they’re hoping to release another set of rules later about actual technical grant modification standards that they would like utilities to follow, and that that workup can really improve efficiency, bring down costs for rate payers, and prepare the grid for, uh, renewable energy like offshore 

Allen Hall: wind.

There’s so much that’s gonna happen over the next. Six months to a year, to two years in New Jersey and PJM, uh, it’s gonna be amazing to watch. And if you want to learn more about what’s about to happen, you need to visit Regional [00:27:00] Plant Association. And guys, your report has. Was fantastic. And if you haven’t visited their website, you should, it’s rpa.org.

And I assume, are you gonna have any new information coming out or any new reports coming out? Uh, talking about more electricity prices in the region? 

Kyle Mason: Yeah, we will be having three more lab posts. Uh. Featuring a, a state of the grid for each of our three states in the region. So that’s New Jersey, New York, and Connecticut.

Oh, wow. Okay. That’s terrific. I’ll, I’ll look forward to 

Allen Hall: that. Well, Kyle and Rob, thank you so much for being on the podcast. We’d love to have you back. As those reports get issued, we’d learn to learn more about what’s about to happen on electricity rate. So thank you so much for joining us. 

Kyle Mason: Yeah, thank you both.

It was great to speak with you. Yeah, great conversation. 

Robert Freudenberg: Appreciate what you’re. Talking [00:28:00] about.