State Legislators Address Energy Concerns about Data Centers

An international real estate investment firm wants to build a massive data center in north Delaware. The proposed campus would cover 6 million square feet across 11 structures, potentially creating what one industry insider described as “significant construction, utility, and technology jobs for the New Castle area, bringing economic diversification to a region historically dominated by refining and manufacturing.”

Yet much of the news about the project seems focused on concerns that it could increase consumers’ electricity bills.

“We need to protect Delawareans. Electricity is going to be in very short supply,” Rep. Frank Burns (D) told Delaware Public Media in late September.

Although states have been offering generous tax breaks and other incentives to try to lure data centers—and the jobs they provide—for years, the facilities have become a focus for state legislators across the country more recently because of the large amount of electricity they use. The United States far and away is home to the most data centers globally, more than 5,400 as of March. The 176 terawatt-hours consumed by the nation’s data centers in 2023 represented 4.4% of all U.S. electricity consumption that year.

“(D)ata centers are very energy-hungry and are spreading fast, which is straining the grid,” wrote Miguel Yañez-Barnuevo, project manager for the Environmental and Energy Study Institute, in April.

State lawmakers have responded with legislation to restrict data centers’ power usage and/or their access to tax exemptions.

In New Jersey, SB 4143, by Sens. Bob Smith (D) and John McKeon (D), and its companion measure AB 5564, by Assemblyman Joe Danielsen (D), would require new artificial intelligence data centers in the state to draw their power from clean energy sources, if other nearby states enact a similar requirement.

In Virginia, which has the largest concentration of data centers in the world, state legislators commissioned a a study in 2023 to document the industry’s impact on the state. It found that while data centers contribute to the local economy and generate tax revenue, they are “forecast to drive” an “immense increase in energy demand,” and “building enough infrastructure” to meet that demand “will be very difficult.”

In 2024, Virginia Del. Richard C. “Rip” Sullivan, Jr. (D) introduced an unsuccessful bill, HB 116, that would have required data centers to meet energy efficiency standards if they wanted tax exemptions.

That same year, Georgia lawmakers approved HB 1192 by Reps. John Carson (R), Chuck Martin (R) and Shaw Blackmon (R) to pause sales tax exemptions for data centers for two years. The Peach State’s governor, Brian Kemp (R), vetoed the bill, saying it would undercut investments companies had already planned for the state.

This year, Georgia Sen. Chuck Hufstetler (R) and 20 of his colleagues introduced SB 34 to bar the state’s Public Service Commission from approving electricity rate hikes due to data centers’ power demands. The bill didn’t pass, but the power regulator approved similar protections itself, which require data centers to cover the associated costs.

Delaware lawmakers now want to take a similar approach. In September, Rep. Burns joined his colleagues, Sens. Stephanie Hansen (D) and Nicole Poore (D) and Reps. Debra Heffernan (D), Larry Lambert (D) and Eric Morrison (D), in sponsoring the newly introduced SB 205, which notably doesn’t refer to “data centers” specifically but would require any business in the state using 30 megawatts of electricity or more to first obtain a certificate to operate from the Delaware Public Service Commission.

Burns has also introduced another bill, HB 233, to codify a special electricity rate for data centers that is in the process of being implemented by the commission. Neither bill can be voted on until next year, but Burns continues to beat the drum about concerns over the proposed data center campus.

“(N)ot only will this data center have harmful impacts on our environment, it will also have severely harmful impacts on our communities,” the representative wrote on Instagram in late September. “We are facing an energy cliff where demand will completely eviscerate our supply, driving up prices and potentially leading to rolling blackouts that will be detrimental for our vulnerable populations.”

Bills Focusing on Data Center Power Consumption Introduced in Third of States

At least 17 states have introduced bills addressing concerns about the growing power demands of data centers, according to the LexisNexis® State Net® legislative tracking system. Five of those states have enacted such measures.

Data Center Legislative Activity in Several States

As Yañez-Barnuevo wrote for the Environmental and Energy Study Institute, “Data centers have become a significant part of our daily lives,” and that’s readily apparent from the number of data center-related bills introduced in state legislatures this year.

According to the LexisNexis® State Net® legislative tracking system, more than 300 bills referring to “data centers” and “electricity” have been introduced. Only about 10% of them deal with energy concerns about such facilities, and many are aimed at providing tax incentives for the facilities instead.

The bills addressing energy concerns, however, include a few enactments:

• In Indiana, SB 431 bars foreign companies from building data centers in the Hoosier Sate unless the Indiana Utility Regulatory Commission and the Indiana Economic Development Corporation conduct a joint study of the center’s expected electricity use and certify that the power used will be self-generated.

• In Maine, SB 402 limits the amount of electricity that a power generator may provide to a data center to no more than 25% of all of the energy sold to its customers in a single year.

• In Minnesota, HB 16 a a, passed in a special session of the Legislature, modifies environmental and energy regulatory requirements for data centers and authorizes public utilities in the state to enter into clean energy and capacity tariff agreements with “very large” users of electricity.

• In New Jersey, AB 5466 directs the state’s Board of Public Utilities to study how data centers impact electricity costs.

• In South Carolina, SB 51, encourages the state’s Public Service Authority to solicit proposals for the utilization of nuclear power, owing in part to “the increasing demand for electricity driven by, among other things, the growth of the role played by data centers in commercial activities.”

A couple of other energy-related data center bills have passed out of their respective legislatures and are awaiting action by the governor:

• In California, SB 57 would authorize the California Public Utilities Commission to assess how data center power use affects other electricity consumers.

• In New Jersey, AB 5548 would require the owner or operator of a data center to submit a water an energy usage report to the Board of Public Utilities.

With the global consulting firm McKinsey & Company projecting that capital expenditures on data center infrastructure will exceed $1.7 trillion globally by 2030 as the facilities become “the backbone of the digital economy,” it’s not a stretch to think data centers will remain a topic of interest for state legislators for years to come.

—By SNCJ Correspondent BRIAN JOSEPH

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