Grid Reliability Crisis Looms as Electricity Demand Surges

The Federal Energy Regulatory Commission (FERC) has declared a grid reliability crisis, following the failure of PJM Interconnection’s recent capacity auction to meet the required reserve margin. Outgoing FERC Chairman Mark Christie emphasized the urgent need to accelerate the development of new generation capacity to prevent further instability.
Electricity demand is soaring, driven by the rapid expansion of artificial intelligence (AI), data centers, and electrification. PJM forecasts an 8.2% increase in U.S. electricity demand over the next five years, with solar and wind power contributing significantly to growth. However, the reliance on inverter-based resources (IBRs) like solar and wind has raised concerns about grid stability. FERC has approved new standards requiring IBRs to remain connected during grid disturbances, aiming to enhance reliability as renewable sources grow.
Despite these measures, the cost of upgrading utility infrastructure is driving up electricity prices. The average rate in June 2025 was 6.7% higher than the same month in 2024, outpacing overall inflation. Utilities are seeking to shift infrastructure costs onto tech companies, particularly data centers, which are increasingly reliant on grid power. However, tech firms are resisting, arguing they should only pay their fair share.
Analysts warn that data centers’ electricity consumption could double or triple by 2028, with AI applications accounting for a significant portion of the growth. McKinsey & Company projects global demand for data center power to reach 171–219 GW by 2030, while the International Energy Agency estimates U.S. data centers could account for nearly half of the growth in electricity demand by the end of the decade.
The grid reliability crisis underscores the need for swift action to modernize infrastructure and expand low-cost generation, ensuring a stable and affordable energy future.

Published: 8/11/2025