PJM Interconnection, the largest U.S. electrical grid operator, is facing challenges due to the surge in data centers. Following an unsuccessful auction for new generation capacity, PJM has announced plans to curtail power supply to data centers and other significant consumers during periods of electricity scarcity.
This measure comes amid the rapid expansion of data center infrastructure, which is placing immense pressure on grid operators to secure adequate power generation. Projections indicate that data centers' electricity consumption will quadruple by 2035 compared to current levels.
PJM's supply curtailment will commence in June 2027 and will specifically target data centers with a capacity of 50 megawatts or more. The grid operator is currently conducting a subsequent auction to procure additional generating capacity.
In line with established demand response initiatives, which have been in place for decades and often involve major industrial consumers such as manufacturers, affected customers whose power is interrupted will receive compensation. These programs generally provide participants with advance notification, varying from 30 minutes to several days, based on anticipated demand.
This development is expected to encourage numerous new data centers, and potentially some existing facilities, to invest in their own on-site power generation solutions. Those opting not to do so will likely depend on backup generators, which are typically more expensive to operate and often have a greater environmental impact.
Diesel generators are a preferred choice for many data centers due to their widespread fuel availability and on-site storage capabilities. Federal regulations permit the use of these generators for up to 50 hours annually during demand response events, extending to 100 hours per year when factoring in emergencies and maintenance.
This week, Vantage Data Centers faced scrutiny regarding its apparent collaboration with Virginia environmental regulators. The alleged coordination aimed to discredit a report suggesting that diesel backup generators could inflict tens of millions of dollars in annual health damages on residents living in proximity to a 96-megawatt data center in Northern Virginia.
PJM has drawn criticism in recent months concerning its oversight of new generating capacity and the integration of substantial new consumers, particularly data centers. The grid operator's service area spans from Virginia to Illinois, serving 67 million customers. Over the past year, wholesale electricity prices have almost doubled, with PJM's independent market monitor attributing a significant portion of this surge to data centers.
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