Big Tech’s Data Center Expansion Threatens U.S. Power Grid Stability

Surge in Demand Creates New Challenges for Operators / Reuters

The rapid growth of data centers, driven by Big Tech companies like Microsoft, Google, and Amazon, is placing unprecedented strain on the United States' electrical grid, raising concerns among federal regulators and utility executives about potential widespread power outages. A striking example of this vulnerability unfolded last summer in Data Center Alley, a 30-square-mile hub outside Washington, D.C., where over 200 data centers process roughly 70% of global internet traffic. On July 10, a failed surge protector on Dominion Energy’s Ox-Possum 230-kilovolt line near Fairfax, Virginia, triggered a chain reaction: 60 data centers simultaneously disconnected from the grid and switched to on-site generators to protect sensitive equipment from voltage fluctuations. This mass disconnection created a sudden surplus of electricity, forcing grid operator PJM and Dominion Energy to reduce power plant output to prevent damage to infrastructure and avert cascading blackouts across the region. This near-miss event, detailed here for the first time, has exposed a critical weakness in America’s power grid as data center energy consumption skyrockets.

The incident highlights a growing challenge for grid operators accustomed to managing the unexpected loss of large power plants, not the abrupt disconnection of massive energy consumers like data centers. These facilities, increasingly vital for artificial intelligence processing, cryptocurrency mining, and cloud computing, are transforming the energy landscape. The North American Electric Reliability Corporation (NERC), the federal body overseeing grid reliability, noted in a January report that the grid is not equipped to handle the sudden loss of facilities consuming 1,500 megawatts or more. John Moura, NERC’s Director of Reliability Assessment and System Analysis, emphasized to Reuters that as data centers grow larger and more energy-intensive, additional grid resources are essential to maintain stability. Without upgrades, experts warn, the risk of regional power outages could become a recurring threat, especially as data center power usage has tripled over the past decade and is projected to triple again by 2028, according to a Lawrence Berkeley National Laboratory study commissioned by the Department of Energy.

This vulnerability is not isolated to Data Center Alley. Across the U.S., near-miss events linked to data centers and crypto mining operations have surged in frequency over the past five years. In Texas, the Electric Reliability Council of Texas (ERCOT) documented over 30 such incidents since 2020. A notable case occurred in December 2022, when a transformer failure in west Texas prompted nearly 400 crypto miners, data centers, and oil and gas facilities to unplug from the grid without warning, generating an oversupply of 1,700 megawatts, approximately 5% of the grid’s total demand. ERCOT had to shut down 112 megawatts of generation capacity to rebalance the system. These events underscore a troubling trend: as data center energy demands increase, their sensitivity to grid fluctuations can destabilize entire regions. NERC’s December forecast warns that nearly all of the U.S. faces heightened risks of energy shortfalls over the next five to ten years unless significant changes are made, urging utilities to revise federal reliability standards for these high-energy users.

The crux of the issue lies in how data centers are designed to operate. Many facilities, engineered by operators like Amazon, Google, and Meta, are programmed to switch to backup generators at the slightest sign of grid instability, such as minor voltage dips, to safeguard expensive computer chips and cooling systems. While this protects their operations, it creates unpredictable challenges for grid operators tasked with balancing electricity supply and demand in real time. Some regulators and utilities have proposed mandating that data centers “ride through” routine voltage fluctuations without disconnecting, a solution that could reduce sudden imbalances. However, this idea has met fierce resistance from the data center industry. The Data Center Coalition, representing tech giants like Amazon and Google, argues that exposure to fluctuating voltage could degrade hardware performance, shorten equipment lifespan, or cause irreparable damage, driving up costs for operators. In 2023, ERCOT abandoned a similar ride-through proposal after pushback from the coalition, which emphasized the need for power supply stability to protect sensitive electronics.

Despite the standoff, the stakes are rising. The scale of data center disconnection events is poised to grow as larger facilities connect to grids nationwide, particularly in tech hubs like Texas and Virginia. Patrick Gravois, an ERCOT operations engineer, told NERC’s Large Load Task Force in December that pinpointing the exact triggers for these mass disconnections remains a work in progress, leaving grid operators vulnerable to surprises. Meanwhile, the Data Center Coalition insists it wants to collaborate with utilities, with Vice President of Energy Aaron Tinjum stating the group is committed to being an active partner in addressing these challenges. Yet, experts like Ari Peskoe of Harvard Law School’s Electricity Law Initiative caution that imposing stricter regulations could push Big Tech to relocate data centers to states with looser rules, complicating national efforts to bolster grid reliability.

The clash between data center expansion and grid stability reveals a broader need for innovation and cooperation. Jim Simonelli, chief technology officer for Schneider Electric’s secure power division, noted that the industry lacks a framework for being “grid-friendly,” a gap that became glaringly apparent after the Fairfax incident. As Big Tech continues to fuel the data center boom, driven by insatiable demand for AI, crypto, and digital services, the pressure on America’s aging power infrastructure intensifies. Utility companies, regulators, and data center operators face a daunting task: adapting to this new reality without compromising the reliability that millions of homes and businesses depend on. The events in Data Center Alley serve as a wake-up call, signaling that without proactive measures, from grid upgrades to revised standards, the U.S. risks more near-misses and potentially catastrophic outages in the years ahead.