US Grid Warns Large Data Centers Could Face Power Cuts by 2027

The rapid expansion of data centers across the United States is putting unprecedented pressure on the country’s largest electricity grid. To reduce the risk of widespread blackouts during periods of high demand, PJM Interconnection has announced that it will temporarily cut power to some of the biggest energy users, including large-scale data centers, starting in June 2027.

The decision comes after PJM, the operator of the nation’s largest electrical grid, failed to secure enough new power generation through a recent capacity auction. As a result, the organization is introducing a demand response measure aimed at keeping the grid stable when electricity supplies become strained.

The new policy will only affect data centers with power demands of 50 megawatts or more. These facilities, which consume enormous amounts of electricity to run servers and cooling systems, have become a growing challenge for grid operators as the artificial intelligence boom and cloud computing continue to fuel new construction.

Industry forecasts suggest that by 2035, data centers will consume four times more electricity than they use today. That surge in demand has forced utilities and grid operators to rethink how they manage power supplies while ensuring reliable service for homes and businesses.

PJM’s approach is similar to long-standing demand response programs that already involve large industrial customers such as manufacturing plants. Under these programs, participants agree to temporarily reduce or stop their electricity usage during periods of peak demand in exchange for financial compensation.

Data centers participating in the program will also receive payments when their electricity is curtailed. Depending on expected demand and grid conditions, operators may receive advance notice ranging from 30 minutes to several days, giving them time to prepare for temporary power interruptions.

The announcement is expected to encourage developers of new data centers—and possibly operators of existing facilities—to invest in their own on-site power generation. Those that do not add dedicated power sources will likely depend on backup generators to keep operations running during outages.

Diesel generators remain the preferred backup solution for many data centers because diesel fuel is widely available and can be stored on-site. However, these generators are more expensive to operate and generally produce higher levels of pollution than standard grid electricity.

Current federal regulations allow diesel backup generators to operate for up to 50 hours per year during demand response events. They can also be used for up to 100 hours annually for emergency situations and maintenance activities.

The environmental impact of diesel-powered backup systems has recently drawn increased attention. Earlier this week, Vantage Data Centers faced criticism over its reported coordination with Virginia environmental regulators regarding a report that concluded diesel backup generators at a proposed 96-megawatt data center in Northern Virginia could contribute to tens of millions of dollars in annual health-related damages for nearby communities.

Meanwhile, PJM itself has faced growing criticism over how it has handled both the connection of new generating resources and the rapid influx of electricity-hungry customers, particularly data centers. The organization manages the power grid across a large region stretching from Virginia to Illinois, supplying electricity to approximately 67 million customers.

Pressure on the grid has already had financial consequences. Over the past year, wholesale electricity prices within PJM’s market have nearly doubled. According to the grid operator’s independent market monitor, the sharp increase has been driven in large part by the soaring electricity demand from newly built data centers.

As AI infrastructure and cloud computing continue to expand, balancing reliable electricity supplies with rising power consumption is becoming one of the biggest challenges facing the U.S. energy sector. PJM’s planned demand response program reflects the growing need for new strategies to maintain grid stability while supporting the country’s rapidly expanding digital infrastructure.

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