BOSTON, Massachusetts: A routine safety mechanism at data centers nearly triggered a regional power crisis last summer, highlighting a growing risk to the U.S. electrical grid as demand for artificial intelligence and cloud computing surges.

In July, 60 data centers in "Data Center Alley," a tech hub outside Washington D.C., abruptly disconnected from the grid and switched to on-site generators. The move, meant to protect delicate computing equipment from voltage fluctuations, sent a massive surge of excess electricity into the system, forcing grid operator PJM and Dominion Energy (D.N) to rapidly scale back power generation to prevent cascading blackouts.

"As these data centers get bigger and consume more energy, the grid is not designed to withstand the loss of 1,500-megawatt data centers," said John Moura, Director of Reliability Assessment and System Analysis for NERC, the federal agency overseeing grid stability. "At some level, it becomes too large to withstand unless more grid resources are added."

The incident, which had not been previously reported in detail, prompted regulators to recognize an emerging challenge: uncoordinated, large-scale disconnections by energy-hungry data centers.

Traditionally, grid operators have planned for disruptions from power plants suddenly going offline. However, the rise of massive data centers, driven by AI and crypto mining, has introduced a new variable that complicates efforts to balance electricity supply and demand.

"What it tells us is that the behavior of data centers has the potential to cause cascading power outages for an entire region," said Alison Silverstein, a former senior adviser to the U.S. Federal Energy Regulatory Commission.

The July 10 event took place near Fairfax, Virginia, in an area known as Data Center Alley. This area processes roughly 70 percent of the world's internet traffic and serves tech giants like Microsoft, Google, and Amazon. Following the incident, NERC formed a task force to study the issue.

A Reuters review of regulatory filings found that similar incidents have become more frequent. The Electric Reliability Council of Texas (ERCOT), the state's primary grid operator, reported more than 30 near-miss events since 2020, often caused by large-scale disconnections from data centers and crypto mining operations.

In December 2022, a failed transformer in west Texas prompted nearly 400 industrial users to disconnect from the grid, creating an oversupply of 1,700 megawatts—five percent of the state's total electricity demand—and forcing emergency shutdowns at power plants.

With data center electricity consumption projected to triple by 2028, the risk of future disruptions is only increasing. NERC has urged utilities to update federal reliability standards, but potential solutions have sparked controversy.

One proposal would require data centers to "ride through" routine voltage fluctuations instead of immediately disconnecting, reducing sudden stress on the grid. However, data center operators oppose such measures, arguing they could damage expensive computer hardware and cooling systems.

"Data center hardware and power supplies, similar to other electronics, are susceptible to power supply stability," the Data Center Coalition, which represents companies like Amazon, Google, and Meta, said in a January 2024 filing. "Deviating from this range will deteriorate performance, reduce longevity, or damage components beyond repair."

ERCOT had considered a similar rule but withdrew it after pushback from the industry.

Utilities and data centers will need to find a solution, said Jim Simonelli, chief technology officer for Schneider Electric's secure power division.

"One thing that doesn't exist yet for the data center industry is how to be grid-friendly," he said.