Data Center Legislation Impacting Clean Energy in States
State Sen. Norm Needleman championed the 2021 legislation designed to lure major data centers to Connecticut. The Democratic lawmaker hoped to better compete with nearby states, bring in a growing industry, and provide paychecks for workers tasked with building the sprawling server farms.
But this legislative session, he’s wondering if those tax breaks are appropriate for all data centers, especially those with the potential to disrupt the state’s clean energy supply. Particularly concerning to him are plans for a mega data center on the site of the state’s only nuclear power plant. The developer is proposing an arrangement that would give it priority access to electricity generated at the plant, which would mean less carbon-free power for other users.
“That affects our climate goals,” he said. “It’s additional demand of renewable energy that we would have to replace.” Needleman, co-chair of the Senate Energy and Technology Committee, is now reconsidering details of the state incentive program as he works on legislation to study the impact of data centers on the state’s electric grid. Mistakes now, he said, could lead to “a real crisis.”
Compared with other employers that states compete for, such as automotive plants, data centers hire relatively few workers. Still, states have offered massive subsidies to lure data centers — both for their enormous up-front capital investment and the cachet of bringing in big tech names such as Apple and Facebook. But as the cost of these subsidy programs balloons and data centers proliferate coast to coast, lawmakers in several states are rethinking their posture as they consider how to cope with the growing electricity demand.
From the outside, data centers can resemble ordinary warehouses. But inside, the windowless structures can house acres of computer servers used to power everything from social media to banking. The centers suck up massive amounts of energy to keep data moving and water to keep servers from overheating.
Data centers are the backbone of the increasingly digital world, and they consume a growing share of the nation’s electricity, with no signs of slowing down. The global consultancy McKinsey & Company predicts these operations will double their U.S. electric demands from 17 gigawatts in 2022 to 35 gigawatts by 2030 — enough electricity to power more than 26 million average homes.
Some states, including Maryland and Mississippi, continue to pursue incentives to land new data centers. But in other states, the growth of the industry is raising alarms over the reliability and affordability of local electric grids, and fears that utilities will meet the demand by leaning more heavily on fossil fuel generation rather than renewables.
In South Carolina, lawmakers have started to question whether these massive power users should continue to receive tax breaks and preferential electric rates. In Virginia, home to the world’s largest concentration of data centers, a legislative study is underway to learn more about how those operations are affecting electric reliability and affordability. And Georgia lawmakers just passed legislation that would halt the state’s tax incentives for new data centers for two years.
Georgia Republican state Sen. John Albers, a sponsor of the Senate bill, said the significant growth of data centers in his state has helped communities and schools by boosting property tax revenues. But, considering factors such as water and electric use, he said the return on the state’s investment “is not there” and that “initial findings do not support credits from the state level.”
Nationwide, data center subsidies were costing state and local governments about $2 million per job created, according to a 2016 study by Good Jobs First, a nonprofit watchdog group that tracks economic development incentives. That figure has certainly ballooned in recent years, said Kasia Tarczynska, the organization’s senior research analyst, who authored the report.
The Georgia bill now sits on the desk of Republican Gov. Brian Kemp, whose office did not respond to a request for comment. The Data Center Coalition, a trade group representing tech giants including Amazon, Google and Meta, is urging a veto.
Josh Levi, president of the organization, said data center companies are investing billions in new Georgia data centers, making metro Atlanta one of the nation’s biggest industry hubs. Levi noted that lawmakers in 2022 extended the state’s tax credit program through 2031.
“The abrupt suspension of an incentive that not only has been on the books, but that was extended two years ago, I think signals tremendous uncertainty, not just for the data center industry, but more broadly,” he said.
Levi said the data center industry has been at the forefront of pushing clean energy. As of last year, data center providers and customers accounted for two-thirds of American wind and solar contracts, according to an S&P Global Market Intelligence report.
“Fundamentally, data is now the lifeblood of our modern economy,” he said. “Everything that we do in our personal and professional lives really points back to data generation, processing, and storage.”
In fast-growing South Carolina, lawmakers have pointed to data centers as a major factor in rising electricity demand. As part of a broader energy bill, the legislature considered a measure that would prevent data centers from receiving discounted power rates.
Republican state Rep. Jay West said inducements such as reduced power rates are appropriate for major, transformational endeavors. He pointed to the BMW factory in Spartanburg, which employs 11,000 people, draws in major suppliers, and pumps millions into the state economy. While data centers boost local property taxes receipts, they don’t do much for the state, he said, and shouldn’t receive preferential rates. And they are being built faster than new energy generation can be added.
“I do not speak for my caucus or the [legislative] body in saying this,” he said, “but I don’t think South Carolina can handle more data centers.”
The House provision on data center utility rates was quickly struck in a Senate committee, the South Carolina Daily Gazette reported. Lynn Teague, vice president of the League of Women Voters of South Carolina, said that change was made with no public discussion. Teague, who lobbies the legislature, said South Carolinians, including more than 700,000 people living in poverty, shouldn’t have to pick up the tab for tax or utility breaks for major data center firms.
State Sen. Norm Needleman played a pivotal role in advocating for legislation aimed at attracting major data centers to Connecticut in 2021. However, as the legislative session progresses, he’s expressing concerns about providing tax breaks to data centers that could potentially disrupt the state’s clean energy supply. The proposal for a mega data center at the site of the state’s only nuclear power plant, with priority access to electricity generated there, has raised alarms about its impact on the state’s climate goals. Needleman is now reevaluating the state incentive program as he works on legislation to study data centers’ impact on the state’s electric grid. This highlights a broader national concern about the rapid growth of data centers and the strain they put on electricity grids and clean energy goals.
States Rethink Data Centers as Electricity Hogs Strain the Grid
As data centers continue to consume massive amounts of electricity, states like Georgia and Atlanta are rethinking their approach to these facilities. The strain on the grid caused by data centers has prompted officials to consider new regulations and incentives to encourage energy efficiency in these facilities.
Data centers play a crucial role in modern society, supporting the growing demand for online services and storage. However, their energy consumption is a major concern, particularly as states work to reduce their carbon footprint and minimize strain on the electrical grid.
Atlanta, as a major hub for data centers in the Southeast, is also looking at ways to promote greater efficiency and reduce overall energy consumption in these facilities. As the demand for data continues to grow, states are under pressure to find solutions that balance the need for digital infrastructure with the need to reduce energy consumption. By rethinking their approach to data centers, Georgia and Atlanta hope to address this challenge and create a more sustainable future for their communities.