Grid Reliability at a Crossroads: Navigating the Data Center Boom and Infrastructure Challenges

The Growing Strain on U.S. Power Infrastructure

Top energy regulators and grid operators are sounding alarms about the mounting pressures facing America’s electrical infrastructure. At a recent Federal Energy Regulatory Commission conference, industry leaders described a reliability landscape where traditional strengths are being tested by unprecedented demands, particularly from the rapidly expanding data center sector.

The Growing Strain on U.S. Power Infrastructure
Multifaceted Reliability Challenges
The Data Center Demand Surge
Regional Grid Operators Sound Alarms
Cost Concerns and Innovative Solutions
The Path Forward

“The reliability of the power grid remains extremely high, but paradoxically, the risks to reliability continue to mount,” said Jim Robb, president and CEO of the North American Electric Reliability Corp. He characterized the situation as a “five-alarm fire” for grid reliability, pointing to an increasing number of small-scale events and near misses that signal deeper systemic challenges., according to industry news

Multifaceted Reliability Challenges

The grid faces a complex web of interconnected threats that extend beyond simple supply-demand imbalances. According to Robb, these include dwindling resource adequacy with weakening reliability services, extreme weather events, interdependency with natural gas and other sectors (especially telecommunications), and policy constraints affecting resource development.

Compounding these issues are what Robb termed an “escalating toxic soup” of physical and cybersecurity risks, along with significant challenges in siting and permitting critical infrastructure. FERC Commissioner Judy Chang emphasized that uncertainties around future load growth and the necessary generation and transmission build-out are “coming to a head,” creating potential imbalances between electricity supply and demand.

The Data Center Demand Surge

Data center electricity consumption represents one of the most significant and unpredictable variables in grid planning. The U.S. Department of Energy projects that data centers could consume between 6.7% to 12% of all U.S. electricity by 2028, up from just 4.4% in 2023. This dramatic increase reflects the exponential growth of cloud computing, artificial intelligence, and digital services that require massive computational resources.

FERC Chairman David Rosner underscored the urgency: “I see our grid as needing every single megawatt, every single electron and every single molecule we can get to meet demand on those peak days and peak hours. That means we need to make sure that we’re studying faster, we’re giving permits faster and unlocking all different types of energy infrastructure that are needed.”, according to industry reports

Regional Grid Operators Sound Alarms

Jennifer Curran, senior vice president of planning and operations for the Midcontinent Independent System Operator, described current conditions as potentially unsafe due to tight reserve margins. “We are in a situation where we do have new types of resources coming on, and we are going to have to make our best steps to continue to increase reliability,” she said.

Curran emphasized the need for better “shock absorbers” in the grid system, including improved data analysis tools and market products that create the right incentives for reliability. “Getting the transmission built to help provide those connections and provide that optionality within the system is something that’s really important, and it takes a long time,” she noted, additional insights,, highlighting the lengthy timelines for critical infrastructure projects.

Cost Concerns and Innovative Solutions

FERC Commissioner Lindsay See acknowledged that addressing these challenges will inevitably increase costs, noting that “bills are becoming incredibly difficult for people across the country.” However, some states are developing innovative approaches to manage these financial pressures.

In Georgia, large data centers enter into 15-year contracts covering all new generation, transmission, and distribution costs associated with their load. Tricia Pridemore, a commissioner at the Georgia Public Service Commission, explained that this approach can actually help reduce electric rates for other customers. The state recently approved a plan for Georgia Power to add 7.1 GW of capacity, which Pridemore said will reduce residential rates by $2.64 per month.

The Path Forward

Carlos Casablanca, managing director of distribution planning and analysis at American Electric Power, emphasized that proactive planning is essential for managing costs. “We are seeing a lot more costs coming: the build out that needs to occur to accommodate large loads, and also the resources that are required to both address retiring generation but also meet the need from the large loads,” he said.

“Anything we can do in the planning space to prepare for what’s coming and optimize as early as we can, it’ll help. It’ll pay dividends down the road.”

As the industry grapples with these complex challenges, the consensus is clear: the time for comprehensive action is now. The transition requires not just building more infrastructure, but building smarter systems capable of handling unprecedented uncertainty while maintaining the reliability that modern society depends on.