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America’s Largest Power Grid Struggles to Meet Surging AI and Data Center Demand

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America’s largest power grid, managed by PJM Interconnection and covering 13 states from Illinois to Tennessee, is facing significant strain as data centers and AI chatbots rapidly increase electricity consumption—outpacing the grid’s ability to build new power plants. This has led to sharp electricity price increases, with bills projected to rise over 20% this summer in some areas.

The rising costs stem from an 800% jump in prices at PJM’s annual capacity auction last year, which sets rates to ensure electricity availability during extreme weather. These price hikes trickle down to consumers and have sparked political and organizational upheaval: Pennsylvania’s governor has threatened to pull the state from PJM, the grid’s CEO announced he will step down, and key board members have been replaced.

The auction is scheduled again soon, with expectations of further price rises, driven by a growing mismatch between supply and demand. Aging power plants are retiring faster than new ones come online, and PJM has delayed auctions and paused accepting applications for new power plants—actions that experts say exacerbate the shortage.

Pennsylvania Governor Josh Shapiro emphasized the need for transparency, speed, and cost control from PJM. The grid operator attributes the supply crunch partly to external factors, such as state policies that closed fossil fuel plants prematurely and soaring demand from data centers, especially in “Data Center Alley” in Northern Virginia.

Although PJM has cleared about 46 gigawatts of new power projects in recent years—enough for 40 million homes—many face delays due to local opposition, supply chain issues, and financing problems. PJM lost more than 5.6 gigawatts of power capacity in the last decade and added only about 5 gigawatts in 2024, less than smaller grids in California and Texas.

Demand from data centers alone is expected to increase by 32 gigawatts by 2030, with AI-related workloads significantly contributing to the surge.

The power crunch intensified after PJM paused processing new power plant applications in 2022, overwhelmed by renewable project requests, and after AI chatbots like ChatGPT gained popularity in 2023, boosting data center energy use. Consumer groups have called for a redo of the 2024 capacity auction, citing unfairly high prices.

In response, PJM implemented reforms including price caps and biannual auctions, and expedited the connection of 51 power projects, but many will not be operational until 2030 or later. For example, the Three Mile Island nuclear plant restart, contracted by Microsoft, won’t come online before 2027.

Experts warn that PJM must improve its processing of new power plant applications to effectively address the supply-demand imbalance and prevent blackouts.

U.S. Grid Faces Strain Amid Surge in AI Data Center Growth

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The rapid expansion of AI data centers is raising concerns about the resilience of the U.S. electrical grid, with experts warning that the surge in energy demand could overwhelm the nation’s aging infrastructure. The rapid build-out of massive data centers, which can consume as much power as a mid-sized U.S. city at a single site, is driving electricity consumption to record highs. Government projections estimate that data center demand will triple in the next three years, accounting for 12% of the entire U.S. power supply.

“We are witnessing unprecedented growth, and the challenges the grid is facing are becoming more pronounced,” said Samir Vora, a senior executive at Mitsubishi Power Americas, during an interview at the CERAWeek conference in Houston.

As the demand for electricity rises, traditional fossil fuel-powered generators are being retired, and new generation and power lines are often delayed in interconnection queues, exacerbating the delicate balance required to avoid blackouts.

Mark Christie, who leads the Federal Energy Regulatory Commission (FERC), highlighted the issue at the conference, stressing that the situation has become particularly critical in the PJM Interconnection grid, which serves 13 states and the District of Columbia. This area, home to the world’s largest concentration of data centers, is also crucial for internet traffic, with Virginia alone routing 70% of global internet traffic.

In its latest capacity auction, PJM reported that prices had surged by more than 800% compared to the previous year, citing rising demand and shrinking supply. Manu Asthana, CEO of PJM, expressed cautious optimism, acknowledging that the problem is solvable, though not trivial.

PJM’s peak demand is expected to rise from 152 gigawatts to 184 gigawatts by 2030, with nearly all of the growth driven by data centers. Without substantial investments in new power supply, experts warn that these supply-demand imbalances could spread to other regions across the country, making the situation even more dire.

“It’s going to become more pronounced in other multi-state regions as well,” warned FERC’s Mark Christie, signaling growing concerns about the stability of the grid.