Powering AI - United States: PJM and Interconnected Challenges

Equities The challenge ofgrid bottlenecks United States ◆As a rule,grid bottlenecks can be managedin the US; weseerising capacitythat is enough to meet demand Meike Becker*Senior Global Utilities & Renewables AnalystHSBC Bank plcmeike.becker@hsbc.com ◆The exception:PJM,the USpowerregion withthemost datacentre applications,takeseightyears to connectnew capacity Charles Swabey*Global Utilities & Renewables AnalystHSBC Bank plccharles.swabey@hsbc.com ◆WeoutlinePJM’schallenge and summarise solutions Samantha Hoh, CFASenior Analyst, Clean TechHSBC Securities (USA) Inc.samantha.hoh@us.hsbc.com+1 212 525 8783 In previous reports, we wrote about anew era of load growth in the USand the roleofdata centres,beneficiaries of that growth in the power value chain,as well aschallengessuch asaffordability.In this note,we address whether long connection Lilyanna Yang, CFAAnalyst, LatAm Oil & Gas, Utilities,PetrochemsHSBC Securities (USA) Inc.lilyanna.yang@us.hsbc.com+1 212 525 0990 As a rule, gridbottlenecks can be managed in the US Rising interconnection times,for new demand as well assupply,are featuresthatface a constrained grid, and areof abundantinterest. Load growth expectations havenever been higherthanin thepast 25years,andnew generation applications areequallyabundant.Utilities have many ways to managethe situationincludingsortingout speculative applications via upfront cost,usingmodern technology, streamlining Evan Li*Head, Asia Energy Transition ResearchThe Hongkong and Shanghai Banking Corporation Limitedevan.m.h.li@hsbc.com.hk Daniel Yang*Analyst, Asia Energy TransitionThe Hongkong and Shanghai Banking Corporation Limiteddaniel.h.yang@hsbc.com.hk Sean McLoughlin*Senior Global Industrials AnalystHSBC Bank plcsean.mcloughlin@hsbcib.com PJM’schallengesshould be addressable PJM,a regional transmission organisation (RTO),accounts forc40% ofUSdatacentre applications,and loadgrowth expectations have risen sharplyinrecentyears,yet capacity additions have stagnated. At fault are lengthy capacity connection Helen Fang*Head of Industrials Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limitedhelen.c.fang@hsbc.com.hk timelines of eight years (up from 2-4 years previously) due to complex connectionstudies, lengthy case-by-case grid upgrades,andcancelledprojects when facedwithhigh cost. Solutions include (i)modern software and increased resources to * Employed by a non-USaffiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations speed upthe interconnection study process;(ii)connectinggenerators on an‘asavailable’ basis to avoid costly and lengthy grid upgrades; (iii) introducingexpedited HSBC Global Investment Summit 14 to 16 April 2026 This is our latest report on the Energy Transition theme. If you want tosubscribe to any of our nine big themes,click here. Find out more Issuer of report:HSBC Bank plc Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBCGlobal Investment Research at:https://www.research.hsbc.com Powering AI–US: PJM and ◆As a rule,grid bottlenecks canbe managed in the US; we see risingcapacity that is enough to meet demand ◆The exception: PJM takes eight years to connect new capacity and ◆Solutions to speed up interconnectionsinclude modern technology, In previous reports, we wrote about anew era of load growth in the USand the roleofdatacentres,beneficiaries of that growth in the power value chain,as well as challengessuch asaffordability. In this note,we address whether long connection leadtimes hinder AI and datacentregrowth and deep dive into PJM’sconnectionchallenges. PJM is the US power region with the largest amount of data centre connections applicationsand has been in the headlines in 2024-26 for rising capacityprices. These have often beenlinked to long interconnection timelines for new generation capacity that are too slow to meet As a rule, grid bottlenecks can be managed in the US Do long connection leadtimes hinder AI and generation capacity growth across the US?Ingeneral terms, rising interconnection times are a feature of abundant applications that face aconstrained grid.Load growth expectations have never been higher in thepast 25 years; yet,growth could be overstated due to overapplication.We forecast 2-3% annual load growthversus the utility aggregate at >5% annual growth for the next five years. As pointed out inprevious notes(new era of load growth in the US),datacentre applications could be overstatedby a factor of 5-10x.At the sametime, theUS grid interconnectionqueue has never been largerwith close to 2,000GW of connection applications(versus 60-70GW of additions in 2024/25 As outlined inour noteIt’s a sellers’ market–Power value chain benefits,forthe US as a wholewe forecast renewables and gas generation additions to risetoc100GWper annumby 2030from6