The colossal winter storm that swept across 34 states left hundreds of thousands of people without electricity. Bitterly cold temperatures lingering after Winter Storm Fern are still testing power grids, already under stress from a rush of new AI data centers.
Over the weekend, wholesale electricity prices soared in Virginia, the state with the most data centers. And while that’s not surprising during a spike in energy demand for heating, it could add to the growing discontent over rising utility bills that has fueled opposition to data centers across the US. Utilities and grid operators were already hard-pressed to meet the increasing power needs of AI, which can make it even harder to prepare ahead of a weather disaster.
“It’s certainly causing more pricing volatility,” says Nikhil Kumar, program director at energy consulting firm GridLab.
“It’s certainly causing more pricing volatility”
Kumar is quick to add that it’s still too early to say exactly what impact data centers have had on power grids during this week’s cold snap, and that the effects can vary from place to place. But this week’s stress test will be important to watch amid the challenges power grids face ahead as the US copes with a shifting energy landscape and a changing climate.
In Virginia, wholesale electricity prices climbed above $1,800 on Sunday compared to around $200 the day prior, CNBC reports. Utility Dominion Energy, the biggest energy provider, didn’t immediately respond to questions from The Verge about factors influencing rising wholesale costs, and how much that would affect residential customers’ bills. The company announced on Monday that it had restored power to 85 percent of 48,000 customers impacted by the storm in Virginia.
Keep in mind that many different issues drive up energy costs. Electricity demand is rising more steeply than it has in more than a decade because of AI data centers, as well as domestic manufacturing and the electrification of homes and buildings. Utilities are also having to spend a lot of money upgrading old infrastructure, as well as repairing damage from intensifying climate-related disasters like storms that have contributed to longer power outages in the US.
With electricity grids nearing a century old and a growing need to expand transmission lines to connect new power sources and customers, “we’re working with our grandfather’s Buick,” says George Gross, professor emeritus of electrical and computer engineering at the University of Illinois’ Grainger College of Engineering.
When one local utility experiences an emergency, it can usually draw extra resources from others. Officials were more worried about this winter storm limiting that kind of aid, given how large of an area it affected. “So many of them are caught in exactly the same trouble that you can’t get necessarily help from your neighbors,” Gross says.
Extreme weather raises prices because of the spike in demand for heating or cooling and congestion along power lines. Supply scarcity can also make energy more expensive and raise the risk of outages if cold spells freeze up the production of natural gas, the primary energy source for electricity and heating in the US. Ice accumulating on power lines and tree branches — the biggest threat to power grids this week — can lead to outages.
We saw all of these factors come into play during Winter Storm Fern. They also led to more devastating outages in Texas in 2021 when millions of residents lost power and at least 246 people lost their lives as a result of Winter Storm Uri.
Fortunately, this week’s cold snap hasn’t been as devastating, thanks in part to preparations by utilities and power grid operators. Texas in particular has deployed more batteries for energy storage since 2021, which helped this week.
The Department of Energy also issued orders over the past several days to grid operators overseeing Texas and much of the East Coast authorizing them to deploy backup generators at data centers and other major industrial facilities “regardless of limits established by environmental permits or state law.”
And yet we don’t know how much those measures can help reduce a supply crunch because it’s unclear how that would work logistically and what authority the federal government even has in these cases, experts tell The Verge. That order hasn’t applied to generators in Texas so far because the state didn’t reach a high enough energy alert level, according to Joshua Rhodes, a research scientist at The University of Texas at Austin.
“If this is going to be a tool that we’re going to use, we need to figure this out well in advance, before staring down a winter storm,” he says. “Making policy during emergency situations, usually it doesn’t yield the best policy.”
High power prices could eventually incentivize AI data center operators to voluntarily curb their electricity consumption during demand spikes. They can even earn money doing this through what are called demand response programs. Similarly energy-hungry data centers used as crypto mines have earned millions in recent years doing just that. But Rhodes doesn’t expect tech companies obsessed with AI following suit very soon.
“Right now, there’s just so much hype,” Rhodes says. “They almost don’t care what the price of electricity is, that’s de minimis when it comes to their generating of AI value.”
More than 489,000 customers across the US are still without power as of writing on Tuesday. And until the cold lets up, the risk of ice accumulating on critical infrastructure doesn’t either.