North America’s grid watchdog is slated to issue its highest level of warning Monday about threats to the power system from large data centers, underscoring the challenges facing utilities and grid operators grappling with a surge in electricity demand.
The move signals a new chapter where major technology companies like Amazon and Microsoft may face stricter rules on how they use power. The Level 3 alert from the North American Electric Reliability Corp., the grid’s not-for-profit security monitor, was developed after reports of data centers abruptly going offline in Virginia and Texas, raising concerns about blackouts.
“Computational loads, such as data centers, could increase exponentially in the next four years,” NERC said in a draft of the alert, adding that “significant risks” to the bulk power system “need to be addressed through immediate industry action.”
Lee Shaver, a senior energy analyst at the Union of Concerned Scientists, called NERC’s action a “big deal,” noting it is only the third time in history that the organization has issued a Level 3 alert.
Currently, data centers don’t have to follow the same rules as power plants in informing grid monitors when they are coming online and offline, a factor Shaver and other analysts called a “huge obstacle” to reliability. Operators of data centers running energy-intensive artificial intelligence models also aren’t typically required to share data about sharp power swings that could damage equipment.
A paper from dozens of scientists from Nvidia, Microsoft and OpenAI scientists warned last year that AI power swings can “cause physical damage” to grid infrastructure.
The Level 3 alert — to be sent to transmission owners, grid operators, utilities and other companies running the grid — is set to recommend seven “essential actions” to ease risks to the power system from “large loads” such as data centers and cryptocurrency mining operations. Ultimately, NERC is putting the pieces in place for mandatory reliability standards for data centers. They would require approval from the Federal Energy Regulatory Commission.
NERC’s alert calls for transmission planners to develop a detailed list of “modeling data, settings, and parameters needed from computational loads” and study the grid stability “margin” at least annually in areas with large AI infrastructure, according to the draft. Transmission owners should install and utilize fault recording devices to assess data center performance during grid disturbances, the draft recommendations said.
While the actions are not mandatory, it’s essential to push companies to act now to avoid grid disturbances before stricter regulations are in place, said Shaver. Data centers need to be providing more information on what they plan to do — and not do — on the grid, analysts said.
“It’s really important to put data centers on notice as soon as possible that they are going to be subject to new rules,” said Abe Silverman, an assistant research scholar and electricity expert at Johns Hopkins University.
Part of the challenge is that AI infrastructure is getting larger, with multiple gigawatt-scale complexes planned across the country. A gigawatt is enough to power a city of roughly 750,000 homes. Data centers could use between 9 to 17 percent of U.S. power by the end of the decade, according to the Electric Power Research Institute.
‘Massive impacts’
In prepping the alert, NERC cited “load loss events” since 2022 in the Eastern Interconnection and Texas where data centers unexpectedly disconnected from the grid.
Shaver compared the effect to turning off a large appliance like a garbage disposal quickly, causing kitchen lights to flicker. If that effect is scaled up to a gigawatt, “it’s going to have massive impacts across the grid,” he said. There can be similar grid disturbances if data center power suddenly comes back online, he said.
In one July 2024 incident in Virginia, a piece of grid equipment called a lightning arrester failed at 7:00 p.m., according to a NERC report. While similar equipment failures are typically not a serious threat, the occurrence caused data centers to take more than 1 gigawatt of power off the grid and pivot to backup power.
The facilities are sensitive to voltage disturbances and made the switch partly to protect cooling and other equipment.
“The electric grid has not historically experienced simultaneous load losses of this magnitude in response to a fault on the system,” NERC said.
There was not an outage at the time, but “as the potential for this type of load loss increases, the risk for frequency and voltage issues also increases,” NERC said. The watchdog has similarly warned of a “high impact” risk from the training of AI models that spur extreme power fluctuations.
Earlier this year, NERC released a report on industry responses to the concerns after a lower-level alert, concluding there’s a major gap in oversight. “Many entities … do not have specific procedures to handle the unique challenges associated with large loads,” the report said.
Under the Level 3 alert, grid planners are asked to respond to the suggested essential actions by Aug. 3.
NERC has said it plans to write the reliability standards by the end of the year, which could then kick in in 2027 if FERC approves them. Those are likely to have similar recommendations to the alert, Shaver said.
Last month, NERC also proposed requiring large “computational load entities” like data centers and crypto operations to register and comply with NERC reliability standards.
William Keyser, a partner at the law firm Steptoe, in a LinkedIn post called that move “a major shift in electric reliability regulation.”
States have traditionally had jurisdiction over electricity end users. But JHU’s Silverman said NERC’s stepped-up efforts to address specific data and engineering challenges tied to data centers could give FERC reason to increase oversight. “I absolutely think FERC is going to take notice of that,” he said.
Under a request from Energy Secretary Chris Wright, FERC is separately drafting a proposal that could mean more federal direction for how large data centers are brought onto the power grid.
‘Do not single out one industry’
The Data Center Coalition, which represents the industry, said in a statement that it is critical that any new NERC standards “are balanced, based on complete evidence, recognize the essential role served by data centers, reflect the technical capabilities and limitations of data center equipment, and do not single out one industry or end-use of electricity for disparate treatment.”
Standards also should not disregard “important developments” in states like Virginia, where improved communication between NERC, utilities and data center operators “has greatly reduced — if not altogether eliminated in certain instances — load transfer events in the state,” said Aaron Tinjum, the coalition’s vice president of energy.
The coalition said it is unaware of any load transfer events in Texas caused by data centers. Data centers offer numerous benefits to the grid, he said, including through investments in new technologies.
Earlier this year, the largest technology companies signed a “ratepayer protection pledge,” vowing with backing from the White House that they would provide their own power for AI operations.
The Edison Electric Institute, which represents investor-owned utilities, has previously urged NERC to meet similar standards required of power generators.
EEI supports “efforts to maintain reliable grid operations as large computational loads, including data centers, continue to grow and evolve. EEI and our members are engaged in ongoing efforts with NERC on this topic and look forward to its recommendations,” Jennifer DeCesaro, the group’s senior vice president for industry operations, said in a statement.
