After an initial reform effort failed to produce results, PJM Interconnection is launching a second attempt to create a functional pathway for new generation using surplus interconnection capacity at existing power facilities. Since 2023, PJM has received eight surplus interconnection service applications but approved only two, according to a late November presentation cited in a report by Utility Dive. The grid operator's struggle contrasts sharply with other regional markets, where surplus interconnection has enabled dozens of projects to come online faster and cheaper than traditional pathways.
The numbers show PJM lagging far behind its peers. The Midcontinent Independent System Operator was studying 14.8 GW of surplus interconnection requests as of June 30, while the Southwest Power Pool had 14.3 GW under review, Western utilities examined 6 GW, and Southeastern utilities looked at 1 GW, according to an analysis by Surplus Interconnection, an advisory firm. PacifiCorp alone was reviewing 33 projects across five Western states totaling 5.2 GW as of Aug. 13, and filed five surplus interconnection agreements for federal approval in the prior 60 days. Meanwhile, 44 surplus interconnection projects have started operating in MISO's territory and 22 in SPP's footprint, with MISO projects averaging one year to come online since 2024 and SPP projects taking nearly two years. A working paper from University of California, Berkeley researchers released in August 2025 found that thermal and renewable facilities in PJM have surplus capacity that could support roughly 150 GW of solar, wind, and storage, though the loss of federal tax credits has reduced that potential.
"MISO and SPP built surplus interconnection processes that actually work operationally, for example allowing for parallel operation of an existing and surplus generator at the same point of interconnection, which is critical for surplus projects to pencil out," Gavin Ahern, co-founder of Surplus Interconnection, said in the report. Grant Glazer, senior manager for regulatory and market affairs at MN8 Energy, a renewable energy and storage developer, told Utility Dive that PJM's current rules don't allow a workable way for surplus additions to access the capacity interconnection rights tied to an existing generator. Under existing regulations, a battery system added to a solar farm faces two flawed options: the co-located model blocks access to capacity interconnection rights needed for the capacity market, while the hybrid model forces the entire resource to use one market participation ID, making it impossible to separate which resource is participating in energy and ancillary services markets.
The push for reform comes as PJM faces mounting capacity shortfalls, missing its reserve margin targets in the last two capacity auctions with deficits growing to about 6.8 GW for the 2028/29 delivery year from 6.5 GW for 2027/28. Surplus interconnection offers the fastest route to add new capacity by tapping existing capacity interconnection rights at facilities that already have grid access, avoiding costly network upgrades and lengthy standard interconnection studies. Many solar projects in PJM have capacity interconnection rights covering just 40% to 60% of their nameplate capacity, leaving spare interconnection room, while battery costs have dropped and demand for capacity resources has surged due to large loads. Earlier this month, PJM staff proposed allowing hybrid resources to participate in the capacity market as a single resource while participating in energy and ancillary services markets as separate, independent resources, addressing the core barrier developers face.
The proposal has drawn support from industry players who see it as a critical step toward closing PJM's capacity gap. Jon Gordon, senior director at Advanced Energy United, a clean energy trade group, said the fixes are relatively straightforward and expressed optimism they'll move forward quickly given PJM's urgent need for new resources, though more complicated reforms around capacity interconnection rights could follow later. Indiana and Virginia passed laws this year directing utilities to study surplus interconnection potential on their systems, while utilities themselves may turn to the pathway for adding capacity at their plants as they field requests from large loads and face their own capacity shortfalls. With PJM's capacity deficit widening and other regional markets demonstrating that surplus interconnection can work, the grid operator's second attempt at reform could determine whether it can tap the 150 GW of potential sitting idle at existing facilities.