In December 2024, Uptime Intelligence predicted that data centers would become increasingly subject to political interference during and beyond 2025 (see Data center resource use will raise deep questions — and opposition). This report takes the US as an example of how this is happening.

The US Federal government (the current administration as well as earlier ones) has become increasingly supportive of data centers, as shown by its designation of the sector as crucial national infrastructure (see More scrutiny and obligations as governments back data centers) and its public drive for AI supremacy (see AI supremacy: how will the new US GPU export controls work?). The US Department of Energy has identified 16 of its own sites as potential locations for data centers — locations where power infrastructure already exists or could be swiftly permitted. Many states continue to offer tax and other incentives to encourage the siting of data centers.

However, there is growing opposition to data center development and an increasing trend to tie planning approvals and tax support to a range of conditions. In states with data center clusters — such as Virginia and Maryland — resistance is growing more vocal, with specific projects facing pushback from individuals, advocacy groups and legislators. Critics claim that data centers:

• Overload electricity grids, potentially driving up electricity rates for everyone.
• Consume significant amounts of water, which is also needed for agriculture and other uses.
• Deliver relatively few jobs in return for the tax incentives they receive.

As proponents and opponents of data centers put forward their strategies and arguments, state tax incentives, zoning rules, data center energy and water consumption, and environmental regulations are all under discussion. However, it is the issue of electric power that has galvanized these debates. Opponents of data center development have cited reports from the Electric Power Research Institute and the Lawrence Berkeley National Laboratory, which warn that data centers could strain the electricity grid enough to affect rates and access, and possibly power quality, for other customers.

In response, state legislatures are commissioning their own research and debating or passing laws aimed at protecting consumers from the potential impacts and risks of data center growth. Public utility commissions (or public service commissions) are also proposing settlements to ensure data center operators pay for the infrastructure that they need to support their facilities.

“Data centers can’t vote,” one campaigner for data center restraint told Uptime Intelligence, implying that people could, and should, vote against data center projects. In fact, operators can mobilize votes — if they make good relations with unions, business organizations and communities.

An emerging capacity crisis

During 2024 and early 2025, data center power demand was projected to grow rapidly. In December, the 2024 United States Data Center Energy Usage Report from the Lawrence Berkeley National Laboratory predicted that data center energy usage could double or even triple over the next few years. The report claimed that energy usage could rise from 4.4% of US demand (176 TWh) in 2024 to between 6.7% (350 TWh) and 12% (580 TWh) by 2028, adding up to 132 GW of capacity in the US in that time.

Uptime Intelligence analysis suggests that this projected power demand is exaggerated. Based on proposed hyperscale data center projects, only about half of these proposals are expected to be built, and those that are will likely use just 50% of their projected power capacity (see Hyperscale data center plans at unsustainable levels).

This still amounts to a huge expansion, with data centers globally projected to consume some 0.5% of the world’s power. In the US, this growth will be concentrated in certain data center hubs, placing high stress on local electricity grids.

Case study: Virginia

To inform potential legislation, the US state of Virginia — the world’s leading data center hub — commissioned research on the impact of data center power usage from its Joint Legislative Audit and Review Commission (JLARC). In December 2024, JLARC forecast that unconstrained data center growth in Virginia could increase average monthly consumer electricity bills by $14 to $37, due to the costs of additional transmission infrastructure and imported energy from other states.

However, JLARC also set out the scale of the challenges facing the energy supply industry if data center demand is not constrained. It projected that total power demand could double within 10 years, requiring:

• A doubling of the current rate of solar construction.
• New wind generation projects equal to all currently proposed capacity.
• An unprecedented pace of natural gas plant construction.
• Deployment of energy from “unproven nuclear technologies.”
• Significant investment in transmission infrastructure.
• Imports of energy at premium rates from neighboring states.
• Electricity rate increases of 10% to 25% for commercial and residential customers.

This level of expansion will be extremely challenging and would likely preclude the goals of the Virginia Clean Economy Act (VCEA), which aims for Dominion Energy and Appalachian Energy to provide 100% renewable energy by 2045 and 2050, respectively, with the state having a benchmark of 45% renewable energy in the non-nuclear load by 2030.

JLARC said proposed operators’ countermeasures — including improved efficiency, on-site power generation and demand response programs — would have “only a marginal impact on decreasing data center energy demand.”

These measures can be effective at dampening acute stresses and are likely to be mandated in states such as Texas. However, JLARC’s point is that while such measures may ameliorate short-term stresses, they will not reduce overall demand.

According to the research, consumers would bear much of the costs — including funding new transmission infrastructure, paying higher rates for imported electricity and carrying the risk of stranded power capacity if proposed data center projects fail to materialize or shut down.

The JLARC report also challenged Virginia’s regulators and operators, suggesting that:

• Counties could alter zoning laws to classify data center operators as a distinct customer class, subject to tighter restrictions.
• Virginia could reconsider current data center tax exemptions, which extend to 2035, by either adding new conditions or allowing them to expire.

State-by-state action

Power provision typically lags behind the actions proposed in US states that might constrain data centers. Most of these measures remain proposals rather than enacted laws (see Table 1).

Several states have proposed energy plans or reports — similar to Virginia’s JLARC document — that investigate the demands of power-using sectors, including data centers, and their impact on the grid.

In some cases, rules have been proposed to prevent utilities from passing infrastructure costs (or risks) incurred by data centers’ capacity and distribution demands on to customers. These rules or settlements are usually introduced by public utility commissions (PUCs) or public service commissions (PSCs). In states where such commissions are seen as insufficiently strict, state legislatures have proposed more exacting rules.

Tax exemptions are up for discussion in several states, especially in places, such as Virginia, where existing exemptions are due to expire within the planning horizon of data center operators. In Georgia, a complete halt on these exemptions was proposed, while California and Virginia have considered making them conditional on meeting energy efficiency and reporting requirements.

In both Virginia and Georgia, recent bills aimed at examining or restricting data centers were vetoed by the governors. However, such vetoes may be temporary or reversed following future elections.

Table 1 Current legislation and proposals by US states

In California, a proposed bill would require data centers to prepay for expected energy consumption and align their operations with the state’s renewable energy goals. A tax credit is proposed for facilities that use at least 70% carbon-free energy — including 50% behind the meter — as long as they do not use diesel fuel.

Proposals in Georgia would make data centers over 100 MW pay transmission and distribution costs.

Indiana’s anti-subsidy rules require large energy users (above 70 MW) to pay for necessary electricity grid upgrades, ensuring that costs are not passed on to other customers.

In Michigan, the utility Consumers Energy has asked the state public service commissions for permission to require data centers larger than 100 MW to sign 15-year contracts and pay for 80% of the contracted power, regardless of usage, along with a $100,000 administrative charge.

The public utilities commission of Ohio has proposed that data centers larger than 25 MW should pay for at least 85% of their normal monthly energy needs, even if they use less in a given month, and pay an “exit fee” if their project is canceled.

Oregon’s House Bill 3546 would require data center operators to sign 10-year contracts and cover transmission costs.

In South Carolina, customers using state-owned utility Santee Cooper for 50 MW must sign a 15-year contract, ramp up to their full contracted load within three years, and pay a surcharge during periods of high demand.

In Texas, Senate Bill 6 (SB6) proposes that facilities with on-site power be required to pay a transmission cost based on their peak demand, disclose information including on-site backup power, and switch to on-site standby power when directed by the transmission provider. These measures are intended to help stabilize the grid in response to events such as the winter storm of 2021, which caused extensive blackouts across the state.

Under a Utah law, if utilities cannot meet a request for 100 MW or more without significant infrastructure investments, the project is allowed to generate its own on-site power, as long as it makes enough for its needs and is prepared to sell any excess to the grid.

Virginia’s House Bill 1610, which was vetoed by the governor, would have required data center operators to file quarterly public reports on energy and water use. At the county level, proposed changes to zoning rules would classify data centers as “industrial development” and reduce the areas where they can be built “by right.”

Operators respond

Vocal opposition and legislation — if enacted — are likely to increase costs for data center operators, requiring them to build and present a case at public hearings, gather data to answer questions about resource use and, where necessary, respond to legal challenges.

In response, operators are becoming more proactive by investing in public relations and creating new community engagement roles, whose remit will be to engage with both grassroots concerns and the emerging demands of legislation.

Some states may begin to question whether the data center sector still merits the tax benefits it was granted in previous years. If operators show a willingness to engage in a realistic evaluation of the costs and benefits, they may have a role in shaping future state legislation by contributing a balanced view on whether the sector is a solution or a problem.

A cross-industry approach is possible: data center advocacy group the Data Center Coalition has expanded its headcount (from five to 14 in the past year) and now publicly responds to proposed legislation across several states, engages with lawmakers and provides testimony at hearings.

The Coalition has also allied with other sectors, such as manufacturing and trade unions, in presenting its case. Since power is a key flashpoint, the Coalition has partnered with utilities to demonstrate more flexibility when responding to any capacity crisis, which is also a useful strategy.

Other related reports published by Uptime Institute include:
Data center resource use will raise deep questions — and opposition 
More scrutiny and obligations as governments back data centers 
AI supremacy: how will the new US GPU export controls work? 
Deconstructing NIMBY: how to avoid planning conflicts