NERC 2025 Reliability Assessment

 2025 Long-Term Reliability Assessment Overview

The North American Electric Reliability Corporation (NERC) released its 2025 Long-Term Reliability Assessment on January 29, 2026, highlighting significant reliability concerns for the PJM Interconnection. Over the past year, PJM’s risk designation shifted dramatically from "Normal" to "High Risk," primarily due to a staggering 69% projected increase in summer peak demand. This surge is attributed largely to the proliferation of data centers and artificial intelligence workloads. Simultaneously, PJM faces reduced supply reserve margins and expedited retirements of fossil-fueled generators, compounding these reliability risks.

from NERC

Key Drivers of Reliability Risks

Several critical factors contribute to PJM’s challenges:

• Rapidly rising demand from data centers, especially in Northern Virginia, is outpacing available supply.
• Accelerated retirement of baseload power plants—driven by policies like the Virginia Clean Economy Act (VCEA)—has reduced firm generation resources more quickly than reliable replacements can be integrated.
• The region is shifting toward weather-dependent resources, which increases the system’s vulnerability.
• Transmission infrastructure development is lagging, making it difficult to accommodate new loads and generation.

The VCEA, in particular, has been identified as a major contributor to PJM’s "High Risk" designation. This legislation mandates rapid retirement of fossil-fuel generators and promotes intermittent energy sources while failing to anticipate the explosive growth in data center demand. As a result, PJM is struggling to maintain adequate supply and reliability.

Grid Congestion and Economic Bottlenecks

The main cause of grid congestion has shifted in recent years. While previous challenges revolved around integrating geographically dispersed renewables—creating cost pressures in regions like MISO and ERCOT through 2024—the primary driver in 2025 and 2026 is a concentrated demand shock from data centers in PJM’s Northern Virginia corridor. This localized surge is creating immediate reliability and economic bottlenecks.

• From 2025 onward, congestion is most acute due to the unprecedented growth and concentration of new demand in PJM Interconnection. The electricity consumption surge from AI-driven data centers in Northern Virginia, now the world’s largest data center market, is overwhelming existing transmission capacity and resulting in years-long backlogs for new grid connections.
• The crisis in PJM centers around aging infrastructure unable to support overwhelming, localized demand—posing direct threats to both economic development and grid reliability in key load centers.

• Implementing targeted reliability initiatives

PJM Market Outcomes and Regulatory Responses

The results of the PJM Base Residual Auction for the 2027/2028 Planning Year, released December 17, 2025, reflected the region’s challenges. For the first time, the entire 13-state PJM footprint failed to meet its target reliability standards—driven by explosive demand from data centers and regulatory price controls. The auction price was capped due to a legal settlement intended to prevent runaway price spikes that could have severely impacted households and businesses across the region.

In typical markets, higher prices attract new suppliers. However, the extraordinary growth in data center demand has outstripped the energy sector’s ability to respond, especially given the industry’s regulatory structure designed to guarantee reliable service for all. PJM now has a significant backlog of new power projects awaiting construction. Historically, the grid was sized for stable demand and already paid for; new infrastructure increases capital costs for all users, not just new entrants.

Compounding these market pressures, many PJM states began retiring older fossil-fuel generation just as data center demand spiked, resulting in power shortages. The December 2025 auction price cap, again due to a legal settlement, was put in place to shield customers from potentially crippling increases across the entire region.

The cap reflects regulators’ belief that it would be unfair to make consumers pay "scarcity prices" for shortages resulting from policy decisions—such as permitting massive data center developments without adequate planning for power needs or transmission upgrades. State-level “Clean Energy Standard” laws in Virginia, Maryland, and Illinois have accelerated the retirement of dispatchable fossil-fueled power, outpacing the connection of new resources. Administrative delays in permitting and construction have further exacerbated the problem.

Reserve Margin and Emergency Measures

The December 2025 Base Residual Auction failed to secure enough "firm" power, such as coal, gas, or nuclear, to achieve the 20% reserve margin. The grid will enter the 2027/2028 year with only a 14.8% margin. To bridge this gap, the Virginia Department of Environmental Quality (DEQ) changed its guidance policy to allow data centers to legally operate their backup generators. This action included suspending certain environmental rules and provisions of the VCEA, permitting the use of Tier II diesel generators to prevent rolling blackouts that could result from the price cap-induced shortages.

Environmental and Public Health Implications

While these measures keep the "lights on" for residents and businesses, they come with significant environmental costs. Northern Virginia has, in effect, become a "de facto diesel power plant" during periods of extreme weather, undermining the core goals of the Virginia Clean Economy Act, which aimed to reduce carbon emissions. This shift has led to a larger regional carbon footprint and increased emissions of harmful air pollutants, such as particulates and nitrogen oxides (NOx), which pose serious public health risks.

The Virginia DEQ acknowledges that it has never performed a cumulative emissions modeling exercise for these clusters of backup generators. Under the latest guidance, if PJM declares a "Grid Stress Event" (such as a 48-hour cold snap), generator zones in Ashburn and Gainesville would become the main power source for data centers. This scenario could result in thousands of diesel engines running simultaneously near schools and homes, potentially releasing up to half of the region’s annual NOx budget within just a few days.

Operational Realities and Community Impact

In the most recent cold snap, PJM did not issue a mandatory Energy Emergency Alert (EEA) 3 that would have forced all participants off the grid. Nevertheless, several data center operators voluntarily switched to their backup generators to alleviate grid stress, ensuring that homes and families had electricity during peak demand.

Local advocacy groups, including the Coalition to Protect Prince William and the Piedmont Environmental Council (PEC), documented "hundreds and perhaps thousands" of diesel generators operating in Loudoun and Prince William Counties during such events. Data centers are not required to notify the state when backup generators are activated, creating a "blind spot" for public agencies, while residents are left to observe, hear, or smell the generators without official oversight.

 

Is the DMV falling from 1st World Status

 The residents of Montgomery and Prince George’s counties were under an urgent essential-water-use-only request from Tuesday, January 27 and remains in effect as continued through the weekend. 

This was due to the high number of water main breaks the system was experiencing threatening water pressure. Usually, WSSC can allow leaks to be left in place without disrupting customer service or overall system operations and get to them when they can. However in the recent cold snap following winter storm Fern, this approach could not work. To maintain system pressure, WSSC Water inspectors had to shut down broken/leaking mains before dispatching repair crews to the break to keep system pressures stable.

WSSC Water reported a sharp increase in water main breaks and leaks in late 2025 and early 2026, largely attributed to extreme cold temperatures affecting the Potomac River and the utility's aging infrastructure. 

from WSSC website

During Fiscal Year 2025, WSSC Water recorded 2,259 breaks and leaks. This was an significant increase (over 33%) from the 1,697 reported in FY 2024.WSSC typically averages nearly 1,800 breaks and leaks annually, making the FY 2025 count well above average.

During the current winter season, since November 1, 2025 until January 31, 2026, crews have responded to 906 breaks and leaks. From January 1-31, 2026, WSSC crews had responded to 360 breaks and leaks. This finally resulted in the  "Essential-Water-Use-Only" request due to the high volume of active breaks and leaks (approximately 48 reported on January 31 alone.

While the spike in breaks is triggered by extreme weather, WSSC Water and system observers point to a combination of aging materials and historic funding gaps as causing the current crisis.   Over 40% of the 5,977 miles of water mains are more than 50 years old. Many consist of brittle cast iron or unlined pipes installed between 1916 and 1976 that are reaching or have exceeded their design lifespan.

The replacement rate, which is currently planned at 33 miles per year is insufficient for a system with 5,977 miles of pipe. That would be a system replacement every 181 years.  While 33 miles was the target replacement rate, WSSC has actually replaced 22-25 miles of water pipe annually since 2018. Bringing the system replacement time span to over 200 years. No set of pipes will last that long. WSSC will experience increasing pipe failure.

 WSSC Water faces high levels of debt service (roughly 33% of total expenses) and water consumption that has remained "flat" for decades, which limits revenue. To address this, the utility proposed a $4.8 billion six-year Capital Improvements Program (CIP) for FY 2026–2031. In the Strategic Plan (FY 2025–2027)  WSSC stated that they plan to prioritize asset replacement based on maintenance history, soil conditions, and pipe material rather than age alone. They have also begun using zinc-coated ductile iron pipe, which is designed to last 100 years.

The FY 2026 budget will be impacted by the costs allocated to WSSC from repair and remediation from the collapsed section of the Potomac Interceptor, sanitary sewer line that collapsed on January 19 and overflowed into the Potomac River for 10 days releasing 400-600 million gallons of raw sewage into the Potomac River. DC Water reports that at the end of January that  the collapse site now isolated from the river using a section of the C&O Canal and work has begun to clearing the blockage in the damaged pipe section to allow the repairs to begin. As work progresses at the site, the environmental assessment and cleanup must also begin. DC Water is performing water quality sampling and surveying the areas impacted by the overflow into the Potomac, working in coordination with federal, state, and local partners to evaluate environmental effects and determine appropriate remediation measures.

The full cost of cleanup and remediation is still being determined. DC Water will share the expenses with their wholesale sewage customers—WSSC Water, Loudoun County, and Fairfax County—in proportion to their allocated pipe capacity for their sewage that is treated at Blue Plains.

In 2025, the "WSSC Planning and Reporting Act of 2025" was signed into law aimed to improve asset management standards and restore service reliability. The law mandates several critical milestones intended to reform the utility's management and oversight:

• Independent Review: WSSC Water must coordinate with the Department of Legislative Services to hire a third-party consultant to evaluate the utility's efficiency, sustainability, and budgeting processes.
• Reporting (October 1, 2027): The Office of Program Evaluation and Government Accountability must report its findings and recommendations to the General Assembly by this date.

Final Review (October 1, 2028): The Department of Legislative Services will issue a final report on the findings to the General Assembly.

Global Water Bankruptcy the New Reality

 In January 20, 2026, the United Nations University's Institute for Water, Environment and Health (UNU-INWEH) released a report titled "Global Water Bankruptcy." The report warns that some regions of the world have surpassed temporary water stress  and crisis and entered a state of irreversible water bankruptcy—a condition in which they cannot return to previous water levels. The world is using up its water savings (groundwater, lakes, ecosystems and glaciers) and can not survive on the annual precipitation. Below I have excerpted some of the content and summarized the major points.

Loss of Wetlands and Transformation of Water Systems

Over the past fifty years, the world has lost approximately 410 million hectares of natural wetlands. Groundwater now supplies about half of all domestic water and more than 40% of water used for irrigation, directly tying both drinking water security and food production to rapidly depleting aquifers. Around 70% of the world’s major aquifers are experiencing long-term decline, and excessive groundwater extraction has caused significant land subsidence spanning over 6 million square kilometers. In these areas—including over 200,000 square kilometers of urban and densely populated areas where close to 2 billion people live—land is sinking by up to 25 centimeters per year, permanently reducing groundwater storage and increasing flood risk. 

The rate of decline in water reserves is only accelerating. The authors report that since 1990 more than half of the earth's major lakes have declined. Mankind has drastically exceeded the planet's capacity to provide clean fresh water. Using technology and mining groundwater created the illusion that the planet's abundance of fresh water was greater than it actually was. 

 Human intervention over the past century has drastically altered the global water cycle. Construction of dams, diversions, drainage works, and canals has transformed river systems. Changes in land use, elimination of forests, irrigation, and groundwater pumping have shifted evapotranspiration and recharge patterns. Greenhouse gas emissions have warmed the atmosphere and oceans, changing precipitation, snowpack, glacier mass balance, and the intensity of weather extremes. Population growth, urbanization, and economic development have escalated water demand for agriculture, industry, energy, and cities.

Alteration of River Systems and Wetland Loss

About one-third of global river basins now experience significant changes in flow, whether from human modification or climate shifts. In some of the world’s most densely populated river basins—including the Colorado, Indus, Yellow, Tigris–Euphrates, Murray-Darling, and São Francisco—environmental flows are routinely reduced or eliminated entirely, weakening ecosystems’ ability to recover. In many cases, the "normal" baseline to which crisis managers once hoped to return has effectively disappeared.

Wetlands, which act as the "shock absorbers" of the water cycle, are disappearing even faster than forests. Since 1970, about 35% of natural wetlands have been lost, with wetlands vanishing three times more quickly than forests. As wetlands disappear, their water-storage and drought-buffering functions are lost as well.

The drying of river corridors and wetlands interacts with heat and drought, intensifying wildfire risk. Reduced soil and vegetation moisture, drained peatlands, and decreased surface water buffer contribute to more frequent and severe wildfires, which in turn affect air quality, carbon emissions, and watershed function.

In Summary:

Global Water Bankruptcy Overview

• The world is experiencing a state of Global Water Bankruptcy, where water use over the long term exceeds renewable resources and safe depletion thresholds.
• This condition causes irreversible damage to water systems, affecting billions of people and threatening global stability.
• Water bankruptcy occurs when both renewable and non-renewable water resources are depleted beyond safe limits.
• Persistent water shortages have turned once-episodic droughts into permanent conditions in many regions.

Importance of Water for Development

• Water is fundamental to life. Growing populations and economic development drive increasing demand for water, impacting food security, public health, and environmental resilience.
• Water insecurity is a systemic risk that impedes progress toward the 2030 Agenda for Sustainable Development.

Consequences of Water Bankruptcy

• 2.2 Billion people lack access to safe drinking water and sanitation, with over 4 billion experiencing severe water scarcity each year.
• Major rivers and lakes are shrinking, wetlands are disappearing, and widespread groundwater depletion leads to land subsidence.

Global Water Crisis and Its Misconceptions

• The narrative of a global water crisis has dominated discussions for decades, focusing on shortages and competition for resources.
• Calling the situation a crisis suggests that improved management can restore past conditions, but many systems are already degraded beyond recovery.
• Human activities are reshaping the global water cycle and causing significant environmental changes.
• Major rivers are drying up, lakes are shrinking, and aquifers are being depleted, leading to chronic water shortages and declining water quality as demand continues to increase.

Shrinking Water Bodies Groundwater and Ecosystem Loss

• Over half of the world’s large lakes have declined since the early 1990s, affecting water security for nearly a quarter of the global population.
• Wetlands are disappearing at three times the rate of forests, causing significant biodiversity loss and economic costs.
• Mankind is using up the groundwater. Groundwater supplies about 50% of domestic water and more than 40% of irrigation globally, but many aquifers are being depleted faster than they can recharge.
• Land subsidence and salinization are direct results of unsustainable groundwater extraction, threatening infrastructure and increasing flood risks.

Lake Corpus Cristi in 2012 and 2025

Threats to Food Systems and Livelihoods

• Agriculture accounts for more than 70% of global freshwater withdrawals, with 3 billion people living in areas facing declining water storage.
• Water shortages result in food insecurity and economic shocks in many locations, especially in low- and middle-income countries where agriculture is the main source of income.

Global Water Bankruptcy: A New Reality

• The world is now confronting Global Water Bankruptcy, where long-term water use exceeds renewable inflows and safe depletion thresholds.
• Many human-water systems can no longer return to previous baselines, indicating a shift from crisis to a persistent state of failure.

Importance of International Cooperation

• The upcoming UN Water Conferences in 2026 and 2028 provide opportunities to recognize Global Water Bankruptcy and realign international priorities accordingly.
• Develop diagnostics to distinguish between water stress, crisis, and bankruptcy.
• Support vulnerable communities through fair transitions and equitable reforms. However, sharing is not an international strong suit. Governments are more likely to see their water resources as necessary for their citizens.