The largest grid operator in the United States, PJM Interconnection, has issued a formal warning that the artificial intelligence boom is pushing the electricity network to a critical point, potentially forcing data centers to face mandatory power cuts.
According to a report, PJM Interconnection LLC sent a letter to stakeholders on July 28, announcing that data centers which fail to secure sufficient power generation on their own could be temporarily disconnected from the grid during peak demand periods, with the earliest possible implementation in mid-2027.
Understanding the power supply challenge
PJM has also announced it will launch an emergency power auction in September to address a forecasted electricity shortfall of approximately seven gigawatts starting in June 2028. This move comes after a separate auction held earlier this month failed due to insufficient supply.
PJM board chair Paula Conboy stated bluntly in the letter that the current trajectory of rapid load growth, tightening supply, and rising capacity costs is unsustainable. He emphasized that existing consumers should not bear higher capacity costs for large new loads that fail to bring or procure the necessary new supply on their own.
This stance signals that the electricity costs of AI infrastructure expansion will increasingly be shouldered by data center operators themselves, rather than being passed on to ordinary residential users.
Compensation for cooperation in power cut plans
Under PJM's proposal, data centers would not face sudden blackouts without warning. The plan includes an early warning system that will issue curtailment notices to data centers before the grid enters a true emergency state, giving operators a response window.
To mitigate the impact of mandatory power cuts on data center operators, PJM has indicated that operators agreeing to curtailment could receive compensation to offset their inconvenience and extra costs. This arrangement effectively integrates data centers into the demand response system, shifting them from passive recipients to active participants in grid regulation.
Additionally, PJM will promote a bilateral matching process to help data centers connect directly with power generators, seeking supply-demand balance at the market level. The operator projects that data center electricity demand will increase by about 70 gigawatts by 2038.
Earlier this month, PJM grid demand surged to 168 gigawatts, breaking a twenty-year historical record, driven by a combination of extreme heat and the construction of new AI facilities. Meanwhile, since 2022, about 15 gigawatts of generation capacity have been retired within PJM's coverage area. The dual pressure of surging demand and shrinking supply has significantly strained grid resource adequacy.
PJM stated in its letter that the board believes this reliability threat requires decisive action. To this end, PJM will launch a "Reliability Backstop Procurement" emergency auction in September, aiming to fill a gap of about seven gigawatts for the supply period starting in June 2028. Under this plan, the costs of the emergency procurement will be borne by data centers.
These measures from PJM send a clear signal to the market that the costs of AI-driven electricity demand expansion will increasingly be absorbed by data center operators, rather than being shared by existing users. For technology companies with large-scale deployments within PJM's territory, this means a dual increase in both the cost and uncertainty of electricity access.
PJM is the largest grid operator in the US, covering areas including the "Data Center Alley" in Northern Virginia.
Political pressure and reform calls intensify
Furthermore, PJM has recently faced pressure not only from the market but also from the political sphere. Multiple state governors, utility companies, consumer advocacy groups, and even the White House have criticized the operator, with some voices even calling for its breakup and restructuring.
In January, President Donald Trump, along with bipartisan state governors, proposed a plan for PJM to hold a one-time power auction, where technology companies could effectively fund new power plants by bidding on 15-year contracts. To improve the accuracy of future demand forecasts, PJM also announced it will establish a new data center registration system to track the identity and electricity demand of each data center, enabling more precise grid resource planning.
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