A new kind of storm is brewing in the heart of America’s manufacturing landscape. But this one, located in the PJM Interconnection region, doesn’t involve a catastrophic weather event, but rather a growing imbalance between electricity supply and demand that threatens the lifeblood of the manufacturing industry.
The PJM Region Special Report – Navigating the Manufacturing Power Crisis examines the conflicting forces underlying energy challenges in the region, a critical area serving 65 million people across 13 states, including Ohio, Illinois, Pennsylvania, and New Jersey.
With many manufacturing companies making the PJM region their home, the report highlights factors driving the energy gap and downtime risks, while also providing important information on outage resilience, power quality, and other key factors to help manufacturers successfully navigate energy solutions for manufacturing.
Various Factors Underlie Energy Gaps
Surging power needs, an aging U.S. utility grid badly in need of expansion, along with the retirement of coal and gas facilities, have produced an escalating mismatch between electricity demand and supply in the PJM region and nationwide. While utility providers are working to expand the grid, manufacturing energy demand is rising much faster than their construction timelines. For the PJM Region, this means a projected resource adequacy shortfall of nearly 4 GW by 2029. That difference could translate into financial pressure for manufacturers and other customers as reflected in recent PJM capacity auctions, where costs escalated from $2.2 billion to $14.7 billion, a 570% increase.
Extreme weather is also putting the region’s power at risk. During Winter Storm Elliott in 2022, 24% of PJM’s generating fleet failed unexpectedly, with gas-fired plants accounting for 70% of unplanned outages. The incident demonstrates the increasing demand for reliable, around-the-clock power, particularly in manufacturing, where outages can disrupt production, delay shipments, and escalate costs.
Downtime in Manufacturing Carries a High Price Tag
Downtime carries a price, and in manufacturing, that price adds up fast. Known as the Value of Lost Load (VoLL), this metric quantifies the economic impact of power interruptions, estimating how much a customer would pay to avoid an outage. Based on various industry factors, including lost production hours or product, fixed costs during downtime, and the impact on supply chains, VoLL demonstrates the fundamental financial importance of uptime and outage resilience and varies across industries. For example, while industrial customers typically see an average VoLL of $10 to $20 per kilowatt, the cost of manufacturing downtime can be significantly higher; studies estimate it ranges from $12,000 to $25,000 per megawatt-hour (MWh).
For manufacturers, this metric represents a powerful tool for guiding energy decisions, from investing in backup power systems to securing better terms with utility providers.
When Unstable Power Disrupts Production
Power quality is a critical, often overlooked, aspect of manufacturing challenges. In fact, poor power quality can have devastating effects on manufacturing operations, particularly in highly automated environments. Harmonics, caused by non-linear loads, voltage variations, and other quality issues, can lead to overheating and premature failure of transformers, motors, and other equipment, along with disrupted automated assembly lines, equipment malfunctions, and damage to sensitive electronics.
For U.S. industries, the cost is steep – a staggering $145 billion annually, with manufacturing sectors bearing a significant burden. Implementing power quality solutions, such as harmonic filters, voltage regulators, and power conditioners, is essential to protect equipment, enhance maintenance efficiency, and ensure the longevity of manufacturing operations.
Why Manufacturers Are Investing in Their Own Energy
As grid constraints grow and manufacturers navigate the complexities of these power challenges, an increasing number are prioritizing access to power through onsite power solutions. Onsite power, also referred to as decentralized or distributed power, generates electricity directly at the location where it will be used rather than relying solely on the grid. It can work alongside grid power or operate independently in islanded mode. Common onsite power technologies include solar panels, small gas turbines, fuel cells, and diesel generators.
Onsite power is gaining popularity for numerous reasons, including fast lead times, reliable power, and stand-alone power capabilities.
Case in Point: Manufacturing Leaders Achieve Deployment Speed and Reliability with Bloom Fuel Cells
Major manufacturers Quanta Computer Inc. (TWSE: 2382.TW), a leading Taiwanese electronics manufacturer specializing in high-powered AI servers, and a global semiconductor manufacturer located in the U.S., both faced time-to-power delays for critical expansion plans because their respective utilities could not provide power within the requested timelines.
Both companies found their solution through Bloom Energy, a global leader in solid oxide fuel cell technology. Bloom helped both quickly deploy a scalable, reliable onsite energy solution that operates with or without the utility grid.
For the manufacturers, Bloom’s solution eliminated concerns over grid connection backlogs, operating independently from the power grid when needed. In addition, the companies valued Bloom’s cleaner power on a rapid deployment timeline.
With solid oxide fuel cells (SOFCs), the Bloom Energy Server® uses an electrochemical process to generate clean, reliable, and highly efficient power while significantly reducing carbon emissions – a significant plus for the heavily regulated manufacturing industry.
At the global semiconductor manufacturer in the U.S., which was looking to expand production with two new facilities, Bloom delivered 11.8 MW of advanced microgrid fuel cells across three sites in New Jersey and Pennsylvania.
Quanta’s partnership with Bloom helped meet client deadlines and accelerate AI infrastructure delivery at its expanding Fremont, CA, site.
“Leaders in the AI industry like Quanta simply do not enjoy the luxury of being able to wait for traditional grid infrastructure, because the marketplace won’t wait for them,” said Aman Joshi, Bloom Energy’s global Chief Commercial Officer. “Bloom’s SOFC microgrids provide AI customers with a flexible, pay-as-you-grow solution that is ready to scale and avoids additional transmission or distribution upgrades. This effectively shortens interconnection permitting associated with traditional infrastructures.”
Quanta’s Bloom solution uses a fully islanded microgrid, which will power their operations around the clock, 24/7, 365 days a year. By leveraging Bloom’s modular microgrid solution, Quanta is circumventing the lengthy delays and conditions associated with traditional utility constraints to maintain its competitive edge in the fast-paced Silicon Valley market.
After announcing the partnership in April 2024, Quanta expanded the Bloom agreement later that year, increasing the power capacity of Quanta’s existing Bloom SOFC installation by more than 150 percent to meet its rapidly expanding production needs.
The partnership adds another significant proof point in Bloom’s capability to meet the ever-increasing time-to-power challenges of the burgeoning AI sector.
Interested in Learning More?
If you’d like to learn more about how Bloom’s sustainable energy solution can ensure ready and reliable power access for your manufacturing business, please visit: https://www.bloomenergy.com/industries/manufacturing-energy/.
FAQs
Q: Why is the PJM Region Facing Power Challenges?
A: In the PJM region and around the country, rising power needs, a backlog of U.S. utility grid expansion projects, along with the retirement of coal and gas facilities, have produced an increasing electricity supply and demand imbalance. While utility providers are working to expand the grid, demand is rising much faster than construction timelines. For the PJM Region, this means a projected resource shortfall of nearly 4 gigawatts by 2029. Manufacturers and other customers may also face financial pressures due to recent PJM capacity auctions, where energy costs increased from $2.2 billion to $14.7 billion—a 570% rise.
Q: What is Manufacturing Downtime?
A: Manufacturing downtime refers to periods when production stops due to equipment failures, maintenance, or external issues like manufacturing outages caused by unstable grid conditions. It disrupts operations and reduces output, often resulting in financial losses. Ensuring continuous power access is critical to minimizing these disruptions and maintaining consistent production.
Q: What Options Are Manufacturers Exploring to Address Power Issues?
A: A growing number of manufacturers are ensuring reliable access to power through onsite power solutions. Onsite power, also referred to as decentralized or distributed power, refers to generating electricity directly at the location where it will be used rather than relying solely on the grid. It can work alongside grid power or operate independently in islanded mode. Common onsite power technologies include solar panels, small gas turbines, fuel cells, and diesel generators. Among these, Bloom Energy’s solid oxide fuel cell technology is gaining traction due to its always-on, quick-to-deploy, and clean energy capabilities.
