Record 58.5 GW of new power added, but grid faces 'five-alarm fire'

AI data centers introduce new reliability risks

The record influx of 58.5 gigawatts of new resources — including about 30.5 gigawatts of solar, 16 gigawatts of battery storage and 7 gigawatts of natural gas-fired generation — has improved the U.S. power system’s outlook for normal summer conditions, according to NERC. But the estimate assumes typical weather, and forecasters are calling for a hotter-than-usual season.

A heat dome has much of the country in its grip. Temperatures are expected to top 100 degrees in New York, Philadelphia, Baltimore, Washington, D.C., and other cities this week as a dangerous heat wave and high humidity engulf the eastern two-thirds of the U.S.

Peak summer demand has grown by about 11 gigawatts since last year, NERC said, driven by data centers and other large customers. PJM Interconnection, which manages the grid for about 67 million people across the mid-Atlantic and Midwest, received permission through an Energy Department emergency order to curtail power to data centers and other large customers as a last-resort measure, according to the report. That authority applies only if those customers have their own backup generation on site.

The soaring power needs of large customers, primarily AI data centers, are introducing new reliability risks. NERC found that in some instances, clusters of data centers have severed their grid connections and automatically shifted to using their own on-site backup power when a transmission line malfunctioned. A collective exit can destabilize the system and create a scramble to balance power supply and demand, potentially causing power plants to fail and resulting in blackouts.

“What we’re worried about with data centers is that they’ll stop taking power instantaneously because these aren’t spinning machines,” Robb said. “They’re power electronics. So things happen very, very quickly and that could induce all kinds of oscillations and other issues for the rest of the grid.”

In May, NERC issued a rare alert — only the third of its kind — telling utilities to overhaul how they track and plan for huge customers. Grid operators in Texas and elsewhere have been establishing “ride-through” requirements that ensure data centers and other big customers don’t abruptly unplug during a minor glitch, according to the report.

Research and consulting firm Wood Mackenzie has tracked a related challenge: data centers consuming electricity in unpredictable ways. The firm’s sensors, which monitor the electromagnetic fields around transmission lines, captured instances of large data centers swinging power consumption by 50 megawatts or more within minutes — equivalent to the electricity needed to power about 50 Walmart stores.

“Just maintaining a stable, reliable, efficient system within a campus itself is becoming an enormous challenge given the level of volatility of these loads,” said Ben Hertz-Shargel of Wood Mackenzie.

Beyond data center volatility, drought, fires and hurricanes all pose risks of extended power outages and expensive repairs. Record-low snowpack across the West is lowering reservoir levels and could curb production of low-cost hydropower, requiring utilities to cover any power shortages with wholesale purchases and pass on higher costs to customers.

An emerging El Niño weather pattern is expected to reduce hurricane formation, but warmer Atlantic waters can cause the storms that do form to intensify rapidly, according to the Federal Energy Regulatory Commission. Wildfires pose the greatest reliability risk in the Rocky Mountains, where they can disproportionately affect rural cooperatives, NERC said.

The grid is also more susceptible to “wind droughts” — a risk in West Texas, where the Permian Basin oil field has electrified operations and crypto miners and AI data centers have expanded operations. The Electric Reliability Council of Texas said it “will continue to operate the grid conservatively, bringing generating resources online early to mitigate sudden changes in generation or demand.”

Households are expected to bear the financial strain of the summer’s challenges. U.S. households are projected to spend about 10.5% more to cool their homes this summer than last, according to a report from the National Energy Assistance Directors Association and the Center for Energy Poverty and Climate. Summer cooling costs for the typical American household between June and September are projected to average $792, up from $717 last year — an increase of nearly 40% since 2020.

The one component of power bills not expected to rise as much is fuel costs. Benchmark U.S. natural-gas futures are trading about 10% below year-ago levels due to strong domestic production and comfortable spring weather that enabled traders to store fuel in storage caverns. Supplies are especially robust in the West, where inventories are roughly 23% higher than the five-year average, according to the Energy Information Administration. The EIA forecasts that the volume of natural gas burned to generate electricity will be about the same as last summer, with renewable sources such as solar farms meeting the added demand for air conditioning.