PJM to Cut Data Centers During Power Shortages: Grid Strain

PJM Grid Operator to Curtail Data Centers During Power Shortages

The largest electrical grid in the United States, PJM Interconnection, has announced it will cut off power to data centers and other large consumers during supply shortages. This decision comes after a capacity auction failed to secure enough new generating capacity to meet soaring demand. By 2035, data centers are expected to use four times more electricity than today, placing unprecedented strain on the grid.

What the Curtailment Means for Data Centers

PJM will begin curtailing supply in June 2027, applying only to data centers with loads of 50 megawatts or larger. Affected customers will receive advance notice — typically 30 minutes to a few days — and will be compensated for participating in the demand response program. Similar programs have existed for decades and often include industrial users like manufacturers.

Compensation and Advance Warning

Customers who agree to have their power cut are paid for their participation. This incentive is designed to reduce strain on the grid during peak demand periods without forcing widespread blackouts.

Data Center Growth Driving Energy Demand and Costs

PJM's territory spans from Virginia to Illinois, covering 67 million customers. Over the past year, wholesale electricity prices have nearly doubled. The grid operator’s independent market monitor attributes much of that increase to data center expansion. Another auction for new generating capacity is already scheduled.

On-Site Power Solutions and Backup Generators

The curtailment will likely push many new and existing data centers to install their own on-site power generation. Those that do not will rely on backup diesel generators, which are costlier and more polluting. Federal regulations permit diesel generators to run up to 50 hours per year for demand response events and up to 100 hours per year for emergencies or maintenance.

Environmental and Health Concerns

Diesel backup generators have drawn criticism, particularly in Northern Virginia. Vantage Data Centers faced backlash for coordinating with state regulators to downplay a report estimating that a 96-megawatt data center’s diesel generators could cause tens of millions of dollars in annual health damages for nearby residents.

PJM Under Fire for Capacity Management and Rising Prices

PJM has been criticized for its handling of new generating capacity and large users like data centers. The grid operator’s decisions have driven up wholesale electricity rates, prompting concerns from consumers and regulators alike.

The Broader Impact on the Electrical Grid

As data center construction accelerates, grid operators nationwide are scrambling to keep pace. PJM’s move signals a shift toward more aggressive demand management. Future auctions and policy changes will determine whether the grid can accommodate the explosive growth of AI, cloud computing, and other data-intensive industries.

What Comes Next

Data center operators must now weigh the costs of on-site generation against the risk of curtailment. Those investing in cleaner backup power — such as battery storage or hydrogen fuel cells — may gain a competitive advantage as environmental scrutiny intensifies.