PJM to Cut Power to Large Data Centers During Grid Shortages

{ "title": "PJM to Cut Power to Large Data Centers During Grid Shortages Starting June 2027", "body": "PJM Interconnection, the largest electrical grid operator in the United States, will begin cutting power to large data centers during grid shortages starting in June 2027, after a capacity auction fell short of demand. The policy applies only to data centers of 50 megawatts or more, a threshold that will affect a growing number of facilities across the operator’s territory, which runs from Virginia to Illinois and covers 67 million customers.\n\nThe move comes as PJM struggles to cope with an onslaught of data centers that are driving up electricity demand. Over the last year, wholesale electricity prices have nearly doubled, and PJM’s independent market monitor has blamed data centers for much of the increase. The grid operator is running another auction for new generating capacity, but the curtailment policy is a direct response to the shortfall.\n\n## How the Curtailment Program Works\n\nThe curtailment program is a form of demand response, a concept that has existed for decades and typically includes large users like manufacturers. Customers whose power is cut will be compensated, and such programs usually give advance notice of 30 minutes to a few days. PJM’s version is specifically aimed at data centers, which have become a major strain on the grid.\n\nThe policy will likely spur many new data centers to set up on-site power, and existing data centers may also do the same. Those without on-site power will probably rely on backup generators, which tend to be costlier and more polluting. Many data centers favor diesel generators because fuel is widely available and can be stored on-site. Federal regulations allow diesel generators to be used up to 50 hours per year for demand response events, and up to 100 hours per year for emergencies and maintenance. The cost of running such generators can be steep, with diesel fuel prices averaging around $330 per barrel in recent months, adding to operational expenses.\n\n## Health and Environmental Concerns\n\nThe reliance on diesel generators has already sparked controversy. Vantage Data Centers came under fire for apparent coordination with Virginia environmental regulators to cast doubt on a report that said diesel backup generators could contribute to tens of millions of dollars in annual health damages for people living near a 96-megawatt data center in Northern Virginia. The report highlighted the potential health costs of running generators during grid emergencies, a scenario that could become more common under PJM’s new policy. The estimated health damages from a single data center could exceed $100 per megawatt-hour of generator use, according to the report, raising concerns about cumulative impacts across PJM’s territory.\n\nData centers are expected to use four times more electricity by 2035 than they do today, according to projections. That growth is putting immense pressure on grid operators like PJM, which has come under fire in recent months for managing new generating capacity and large new users. The combination of rising demand and limited supply has driven up costs for all customers.\n\n## Industry and Regulatory Reactions\n\nTim De Chant, senior climate reporter at TechCrunch, noted that the curtailment policy represents a significant shift for the data center industry. “PJM’s decision to cut power to large data centers during shortages is a clear signal that the grid can no longer accommodate their unchecked growth,” he said. “This will force data centers to invest in on-site power, which could be more expensive and more polluting than grid electricity.”\n\nThe policy has also drawn criticism from some quarters. Critics argue that PJM has not done enough to add new generating capacity or to manage the influx of large users. The independent market monitor’s finding that data centers are responsible for much of the price increase has added to the pressure on the grid operator. The capacity auction shortfall that triggered the policy occurred in 2018, when PJM first began warning about the strain from large electricity users.\n\n## What Comes Next\n\nPJM’s curtailment program will take effect in June 2027, giving data centers about three years to prepare. In the meantime, the grid operator is working to add new capacity through another auction. But the pace of data center growth is outstripping the grid’s ability to keep up, and the curtailment policy may be just the first of many such measures.\n\nThe health and environmental impacts of increased diesel generator use are likely to become a major issue. The controversy over Vantage Data Centers’ handling of the health report suggests that regulators and communities will be watching closely. As data centers continue to multiply, the tension between their power needs and the grid’s capacity is only expected to grow.\n\n## Related on Neura Market\n\n- PJM Interconnection capacity market updates\n- Data center energy demand and grid strain\n- Diesel generator regulations and health impacts" }