New York recently imposed a one-year moratorium on new hyperscale data centers, citing concerns that include their demands on the electric grid and the cost of serving them. New Jersey should choose a different course. Our state wants to lead in artificial intelligence and other emerging technologies, and it should focus on creating a responsible path for that investment rather than putting it on hold. That will require protecting ratepayers while ensuring New Jersey has the reliable, affordable electricity needed to support continued innovation.
A ban on data center construction will not solve New Jersey’s energy supply needs. The better path is to ensure large energy users pay their fair share while allowing competitive power suppliers to invest in the new generation needed to meet growing demand. That approach can protect families and businesses from higher costs while supporting economic growth.
The state has already taken an important step by enacting legislation creating a new customer class and rate structure intended to ensure large data centers pay for their energy use and associated grid infrastructure. The state must now address the supply side by removing barriers that delay competitive investment in the new generation needed to meet growing demand.
As policymakers search for ways to increase supply, New Jersey should not abandon the competitive-market structure that places development risk on private investors. Returning generation ownership to regulated utilities would allow project costs to be recovered through customer rates rather than requiring developers to compete and bear the consequences of cost overruns or failed investments.
South Carolina’s failed V.C. Summer nuclear expansion offers a cautionary example. The project was abandoned after more than $9 billion had been spent without producing electricity, leaving customers responsible for the costs.
Competitive markets place that risk on private investors. In the PJM Interconnection, which serves New Jersey and 12 other states, independent power producers risk their own capital and compete to meet demand. That structure rewards projects that can be financed and operated efficiently rather than guaranteeing cost recovery regardless of the outcome.
Such a model protects Garden State consumers, but state policies and market interference are preventing the state from unlocking competition’s full benefits. New Jersey remains exposed to a widening regional gap between electricity supply and demand as projected demand rises faster than new supply comes online. This is due, in part, to state policies that have led to the premature retirement of baseload power generation and that prevent new baseload generation from being built.
That challenge will grow as artificial intelligence and other emerging industries require more dependable power. Solar and wind are important resources, but they cannot meet every hour of demand on their own. New Jersey needs an all-of-the-above strategy that allows natural gas, nuclear, storage, demand-management technologies and other reliable resources to compete based on the value they provide to the grid.
This is also an economic competitiveness issue. New Jersey has invested in artificial intelligence, while the state’s technology community is working to grow fintech, blockchain, digital assets, and other emerging sectors. Those industries depend on data centers, cloud-computing capacity, and a grid capable of serving them reliably.
Without enough generation, New Jersey will struggle to attract the jobs, investment, educational partnerships and community benefits associated with these projects. Technology companies will look to states that can support their growth.
New Jersey does not need to choose between affordability and innovation. Competitive markets can support both by placing investment risk on developers, encouraging new supply and allowing the state to grow its technology economy without putting the cost of failed or over-budget power projects on families and businesses.
Carlos Iván Merino is executive director of the New Jersey Innovation & Technology Alliance
