As Winter Storm Fern swept across the United States in late January 2026, leaving over a million people without power, primarily in the Southeast, the strain on the nation’s energy infrastructure became starkly apparent. The event highlighted a growing challenge: balancing grid reliability with the surging power demands of artificial intelligence (AI) data centers.
In an effort to maintain sufficient power supply during the storm, the Energy Secretary authorized PJM, which operates the grid serving much of the mid-Atlantic U.S., and ERCOT, the manager of the Texas power grid, as well as Duke Energy, to request that data centers and other large power consumers activate their backup generators. These industrial diesel generators, capable of producing up to 35 gigawatts of power, were intended to supplement grid capacity and prevent widespread outages.
The increasing energy appetite of data centers is already driving up electricity prices, particularly in areas like Virginia, often referred to as “data center alley.” This trend is expected to accelerate, with estimates suggesting that data centers could consume between 6.7% and 12% of all U.S. Electricity production by 2028, up from 4.4% in 2023. PJM anticipates peak load growth of 32 gigawatts by 2030, largely attributable to new data center construction.
This rapid growth has sparked public backlash, as consumers face rising utility bills. Concerns extend beyond cost, encompassing the environmental impact of data centers powered by natural gas generators, including potential air quality issues and contributions to climate change. Many proposed data center locations are situated in communities already burdened by pollution.
Local ordinances, state utility commission regulations, and proposed federal laws are emerging as attempts to mitigate these concerns. These measures aim to protect ratepayers from price hikes and ensure that data centers contribute to the necessary infrastructure upgrades. However, details of agreements between data centers and local governments or utilities are often not publicly available, hindering transparency.
While uninterrupted power access is crucial for maintaining critical data systems – such as medical records and financial transactions – the industry is beginning to explore more flexible approaches. Google, for example, announced in August 2025 agreements to provide “data center demand response” by shifting non-urgent computing tasks during periods of peak grid stress. Several new companies are also focused on helping AI data centers shift workloads and utilize on-site battery storage to reduce grid reliance during shortages.
One study suggests that widespread adoption of flexible power consumption by data centers could unlock an additional 100 gigawatts of grid capacity without requiring new generation or transmission infrastructure. Investing in offsite generation through virtual power plants – aggregating distributed energy resources like rooftop solar and batteries – offers a potentially faster and more cost-effective solution than building new power plants.
The situation underscores the need for a multifaceted approach to grid resilience. Distributed energy generation and storage, coupled with winterizing power lines and increasing reliance on renewable energy sources, are essential components. The recent outages in Nashville, Tennessee, during Winter Storm Fern, were not solely due to insufficient electricity generation but also to downed power lines, highlighting the importance of infrastructure improvements.
The long-term trajectory of the AI industry remains uncertain, with some analysts cautioning that the current boom may be speculative. However, the immediate challenge is clear: finding sustainable ways to power the growing digital economy without compromising grid reliability or burdening consumers and the environment. While onsite diesel generators offer a temporary solution, a more comprehensive strategy involving demand response, distributed energy resources, and strategic infrastructure investments is crucial for navigating the evolving energy landscape.
