States across the U.S. are confronting a surge in data center development, leading to a growing wave of local opposition and state-level actions, including moratoriums and pauses on new grid connections. New York and Texas have recently implemented temporary halts on hyperscale data center projects, with at least 14 other states considering similar measures.
This trend mirrors historical hesitations, such as communities' past reluctance to embrace canals and railroads, which could lead to them being bypassed by economic opportunities, according to Garret Graves, co-chair of the AI Infrastructure Coalition. While compute power can be accessed remotely, communities that facilitate the necessary physical infrastructure like data centers stand to attract capital, expand their tax bases, and create jobs.
The primary concern driving local opposition is the potential for data centers to increase local power prices due to their high energy consumption. However, studies, such as one by Lawrence Livermore National Laboratory exploring electricity price increases from 2019-2024, have not identified data centers as a cause. Despite this, concerns about grid strain and consumer impact are acknowledged.
Policymakers and data center providers are taking steps to mitigate these risks. Utilities in 19 states have introduced "large load tariffs," requiring significant power consumers to fund new generation and transmission infrastructure. Additionally, in late July, the White House announced that major tech companies, including Amazon, Google, Meta, Microsoft, and OpenAI, have committed to covering 100% of the power infrastructure required for their data centers.
Beyond power concerns, issues like noise and traffic are considered local matters, as are the potential benefits such as tax revenue and construction jobs. Proponents of local control argue that these issues can be addressed through negotiation between communities and data center developers, citing the Coase Theorem. Examples of successful negotiations include Lancaster, Pennsylvania, securing commitments for noise and water usage limits, along with $20 million for economic development. Cedar Rapids, Iowa, has established job and wage guarantees with Google and QTS. In Richland Parish, Louisiana, local sales tax revenue from a data center construction project resulted in bonus checks of up to $51,000 for teachers.
State-level restrictions are sometimes viewed as an imposition of preferences by those not directly affected, while struggling communities might welcome the opportunity to negotiate with data center operators. The AI Infrastructure Coalition suggests that states should not enact blanket bans nor force projects on unwilling localities. Transparency regarding any tax benefits or incentives offered to hyperscalers is also emphasized.
As artificial intelligence continues to grow as an economic force, striking a balance between embracing its opportunities and mitigating potential harms is crucial. The perspective is that this balance is best achieved through local decision-making by the communities that will host the data centers.