AI Power-Hungry Monsters Run Amok: Largest Grid Operator Proposes 'Power Cut Priority' as AI Data Centers Face Risk of Blackouts

PJM Interconnection (PJM), the largest regional grid operator in the United States, has announced it will submit two major reform proposals to the Federal Energy Regulatory Commission (FERC) to address the massive electricity demand driven by the rapid expansion of AI data centers and the growing mismatch between electricity supply and demand.

PJM stated that in recent years, the large-scale construction of data centers has placed unprecedented stress on the power grid. Without new management measures, the power supply gap will continue to widen over the next few years, increasing the risk of regional blackouts. Therefore, in addition to planning a new power procurement mechanism, PJM is also proposing to establish a large electricity user registration system and even suggests that during extreme power shortages, power supply to certain data centers could be temporarily suspended to prevent broader rotating outages.

AI data centers have become the largest source of new electricity demand in PJM’s service area. PJM is the largest regional transmission system and wholesale electricity market operator in the U.S., serving 13 states across the Mid-Atlantic and Midwest regions, covering approximately one-fifth of the U.S. population. It is responsible for maintaining regional power supply stability and managing electricity market operations.

PJM emphasized that the biggest challenge facing the grid is no longer just traditional population or industrial growth, but the rapid increase in large-scale data centers driven by the AI boom. Due to the continuous expansion of generative AI, high-performance computing (HPC), and cloud services, the power demand from newly built data centers far exceeds that of traditional commercial facilities, causing regional electricity consumption to surge rapidly.

According to PJM’s estimates, by 2038, new large-scale, high-energy-consuming users will add approximately 70 gigawatts (GW) of electricity demand, with the vast majority coming from data centers. For comparison, one GW of generation capacity can power about 750,000 households. Therefore, 70 GW of additional demand is equivalent to the electricity consumption of tens of millions of households, highlighting the immense pressure AI infrastructure is placing on the U.S. power grid.

The first of the two proposals to be submitted to FERC is the establishment of a one-time procurement mechanism called 'Reliability Backstop Procurement.' The primary goal of this system is to fill the power supply gap that remains after the latest annual capacity market auction, particularly addressing the electricity demand of data centers that have not secured long-term power purchase agreements, ensuring that supply capacity keeps pace with rapidly increasing load.

According to PJM’s published plan, this one-time procurement will launch on September 30 and close on October 21, with results to be announced in December. PJM noted that this mechanism is not intended to replace the existing capacity market but to supplement it by identifying additional generation resources that can come online to reduce the risk of future power shortages.

The recent annual capacity market auction conducted by PJM already reflects the worsening imbalance between electricity supply and demand. The auction reached the price cap of $325 per megawatt per day ($325/MW-day), indicating that the market is willing to pay higher prices to secure future power supply, hoping that high prices will incentivize more power plant investments and market entry.

However, even with prices hitting the cap, PJM still failed to meet its estimated reliability requirements. According to PJM data, the auction still fell short by about 6.8 GW of reliable power capacity—more than the previous auction—indicating that existing generation capacity remains insufficient to meet future demand.

PJM warned that if power supply capacity continues to fall short, the grid will face greater stress during peak demand periods such as summer heatwaves or winter cold snaps, increasing the risk of large-scale blackouts.

In addition to increasing power supply capacity, PJM’s board has also requested its working team to propose a second reform: establishing a large electricity user registration system. The new system will require data centers and other ultra-large power-consuming facilities to register detailed information such as location, power consumption scale, and related electricity usage data.

PJM believes that while data center construction is proceeding at an extremely rapid pace, the grid currently has limited visibility into the locations and actual power consumption of these large new loads. Establishing a comprehensive database will help plan transmission infrastructure, generation deployment, and future grid investments in advance, preventing localized power bottlenecks caused by the concentration of data centers in specific areas.

In the second proposal, PJM also introduced a highly watched new concept. For data centers that do not have their own power generation equipment and rely entirely on the public grid, PJM suggested that during extreme grid stress—such as extreme heat, cold waves, or other power crises—temporary power cuts could be considered to reduce overall grid load and avoid the need for widespread rotating outages affecting the general public and businesses.

However, PJM emphasized that it currently lacks the legal authority to directly cut power to data centers. Implementing such a measure would require cooperation from state governments, with state authorities and power companies jointly executing the action. Therefore, even if the proposal is approved by FERC, actual implementation would require coordination with states on regulations and execution mechanisms.