Policymakers Propose Cutting Data Centers During Power Emergencies as AI Demand Strains Grids

Policymakers and grid operators are considering rules that would allow utilities to disconnect large data centers during power emergencies as the rapid expansion of computing facilities and demand for artificial intelligence strain regional electricity systems.

The measure, first enacted in Texas this year, would authorize utilities to curtail or cut service to the biggest electricity users during short but severe system stress, a move proponents say could prevent broader blackouts without forcing the construction of large numbers of new power plants. Supporters point to the deadly February 2021 winter blackout in Texas as a warning of the consequences when supply and demand fall out of balance.

The push has accelerated since the late 2022 debut of OpenAI’s ChatGPT and other generative AI tools, which require large amounts of computing power both to train models and to serve users. Grid operators and analysts warn that data-center load is outpacing the speed at which new generation and transmission capacity can be planned, permitted and built.

"Data center flexibility will be expected, required, encouraged, mandated, whatever it is," said Michael Weber, an engineering professor at the University of Texas who studies energy systems. Grid operators have produced projections showing electricity demand spikes in coming years largely driven by new data-center projects, especially in hotspots such as northern Virginia, Ohio and parts of Pennsylvania.

PJM Interconnection, the operator that serves about 65 million people across 13 states and the District of Columbia, has included a similar concept in a recent proposal that would not guarantee power to proposed data centers during system emergencies. The idea has prompted sharp debate among utilities, state officials, power plant owners and technology companies.

Critics question whether a grid operator can legally deprioritize or disconnect customers in a way that could undermine investor confidence in data-center development. "This is particularly concerning given that states within PJM’s footprint actively compete with other U.S. regions for data center and digital infrastructure investment," the Digital Power Network, a coalition of Bitcoin miners and data-center developers, said in comments filed with PJM.

Data center operators and Big Tech companies say reliable power is essential to their business models. Many have invested in energy efficiency and on-site backup generation—typically diesel-fueled generators—to remain online during outages. The Data Center Coalition, which represents technology companies and developers, has urged regulators to adopt flexible standards and to pair any mandatory curtailment regime with financial incentives for facilities that voluntarily reduce load.

"The grid operator also should balance that system with financial rewards for data centers that voluntarily shut down during emergencies," said Dan Diorio of the Data Center Coalition. Some companies have pursued voluntary arrangements. In Indiana, for example, Google filed a contract with regulators for a proposed $2 billion data center in Fort Wayne that would reduce electricity consumption during periods of grid stress by delaying nonurgent computing tasks.

Consumer and ratepayer advocates say more transparency is needed to judge the value of such deals. "If key details are being kept from the public, it is unclear how valuable the arrangement really is, if at all," said Ben Inskeep of the Citizens Action Coalition, referring to the Google agreement.

Some public officials have pushed for alternative approaches. The governors of Pennsylvania, New Jersey, Illinois and Maryland expressed concerns that PJM’s proposal could create legal and market uncertainty and urged that any requirement be accompanied by incentives for data centers to add on-site generation or to otherwise contribute to grid resilience. Other advocates urged requirement that large facilities "bring their own generation" to reduce reliance on the shared system.

Independent market monitor Joe Bowring warned that unchecked data-center growth could overwhelm the grid. "Data center load has the potential to overwhelm the grid, and I think it is on its way to doing that," he said, citing analyses showing rapid, concentrated increases in demand.

Abe Silverman, an energy researcher at Johns Hopkins University, said temporary disconnections for a few critical hours each year could be a cheaper alternative to building multiple large power plants purely to serve occasional peak loads. "Is it worth it for society to build those 10 new power plants just to serve the data centers for five hours a year? Or is there a better way to do it?" he asked.

Grid operators beyond PJM are already signaling that some form of expanded demand-reduction program is unavoidable. The CEO of the Southwest Power Pool, which serves about 18 million people in the Great Plains, has said the operator likely will expand programs that target the largest users of electricity to meet growing demand.

The debate unfolds as U.S. residential electricity bills have risen at twice the rate of inflation, and as some analysts say ordinary customers may be shouldering a portion of the costs of accommodating large tech loads. Opponents of disconnection policies argue that they will not lower rates and could deter investment.

Regulators in Texas are drafting rules to implement the new law that orders standards for when utilities may disconnect big electric users. Data-center operators have said they rely on backup power not to support the grid, and are watching closely as utilities and regulators define terms such as which facilities would be subject to mandatory curtailment and how compensation or penalties would be applied.

The debate represents a crossroads for U.S. energy policy and industrial strategy, balancing the economic development and national competitiveness associated with artificial intelligence and cloud computing against the need to maintain reliable, affordable electricity for consumers. As more data centers come online, the choices made by states, grid operators and regulators will shape whether curtailment becomes an accepted tool of grid management or a flashpoint in a broader fight over the future of electricity use.