High-voltage power lines power data centers in Loudoun County, Virginia, home to the world's largest concentration of data centers. Lawmakers in Virginia and other states are reconsidering how incentive programs for data centers could impact power grids, clean energy goals and other consumers' utility bills. . (Ted Shafley/Associated Press)
State Sen. Norm Needleman sponsored a 2021 bill aimed at attracting major data centers to Connecticut.
Democratic lawmakers wanted to increase competition with neighboring states, attract growing industries and provide pay for workers tasked with building vast server farms.
But this legislative session, some are questioning whether these tax breaks are appropriate for all data centers, especially those that could disrupt the state's clean energy supply.
He is particularly concerned about plans to build a massive data center on the site of the state's only nuclear power plant. Developers are proposing an arrangement that would give priority access to the electricity produced by the power plant, which would mean less carbon-free electricity for other users.
“It impacts our climate goals,” he said. “We need to replace the additional demand for renewable energy.”
Needleman, co-chair of the Senate Energy and Technology Committee, is currently working on legislation to study the impact of data centers on the state's power grid while reconsidering the details of the state's incentive program. . Making a mistake now could lead to a “real crisis,” he said.
Data centers employ relatively few workers compared to other employers the state competes with, such as auto factories. Still, states are offering huge subsidies to attract data centers, both in the form of large upfront investments and in the name of attracting big tech companies like Apple and Facebook. But as the costs of these subsidy programs balloon and data centers proliferate from coast to coast, lawmakers in some states are reconsidering their stance as they consider how to address growing power demands. There is.
From the outside, a data center resembles a regular warehouse. But inside the windowless structure can house acres of computer servers used to power everything from social media to banking. The center consumes large amounts of energy to keep data moving and water to prevent servers from overheating.
Data centers are the backbone of our increasingly digital world, and domestic electricity consumption is increasing with no signs of slowing down. Global consultancy McKinsey & Company estimates that these projects will double U.S. electricity demand from 17 gigawatts in 2022 to 35 gigawatts by 2030, which will power more than 26 million average homes. We predict that it will be possible.
Some states, such as Maryland and Mississippi, continue to pursue incentives to build new data centers. But in other states, the growth of the power industry has raised concerns about the reliability and affordability of local power grids, forcing utilities to rely more on fossil fuel generation than renewables to meet demand. I am concerned that this may be the case.
In South Carolina, lawmakers are beginning to question whether these large power customers should continue to receive tax breaks and preferential rates.
In Virginia, home to the world's largest concentration of data centers, a legal investigation is underway to take a closer look at how these operations impact electricity reliability and affordability.
And Georgia's state legislature just passed a bill that would suspend state tax incentives for new data centers for two years. Georgia has more than 50 data centers, including those supporting AT&T, Google and UPS, according to the state Department of Commerce.
Republican Sen. John Albers of Georgia, the Senate bill's sponsor, said the state's significant growth in data centers is helping communities and schools by increasing property tax revenue. But he said the state's return on investment is “non-existent” when factors such as water and electricity use are taken into account, and that “early findings do not support confidence from the state level.”
Nationwide, data center subsidies cost 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. was. Kasia Tarczynska, the group's senior research analyst and author of the report, said that number has steadily increased in recent years.
The Georgia bill is currently on the desk of Republican Gov. Brian Kemp, whose office did not respond to requests for comment.
The Data Center Alliance, an industry group representing tech giants such as Amazon, Google, and Meta, is calling for a veto.
Josh Levi, president of the group, said data center companies are investing billions of dollars in new data centers in Georgia, making metro Atlanta one of the nation's largest industrial hubs.
Levi noted that 2022 lawmakers extended the state's tax credit program through 2031.
“I think the sudden suspension of incentives that were not only scheduled but extended two years ago is indicative of uncertainty not just in the data center industry but more broadly,” he said.
Levi said the data center industry is at the forefront of the clean energy push. As of last year, two-thirds of U.S. wind and solar power contracts were with data center providers and customers, according to an S&P Global Market Intelligence report.
“Fundamentally, data is now the lifeblood of the modern economy,” he said. “Everything we do in our personal and professional lives traces back to the generation, processing, and storage of data.”
“Electric Pig”
In the fast-growing state of South Carolina, lawmakers are pointing to data centers as a key driver of increased power demand.
As part of a broader energy bill, Congress considered a measure that would prevent data centers from receiving discounts on electricity rates.
Republican state Rep. Jay West said incentives such as lower electricity rates are appropriate for major change efforts. He pointed to the BMW plant in Spartanburg, which employs 11,000 people, attracts major suppliers and injects millions of dollars into the state's economy.
He said data centers generate more local property tax revenue but are of little use to the state and should not receive preferential tax rates. And they're being built faster than new energy generation can be added.
“I do not speak on behalf of the caucus or the caucus. [legislative] “But I don't think South Carolina can handle any more data centers,” he said.
According to a report in the South Carolina Daily Gazette, the House provision regarding data center utility charges was quickly passed by a Senate committee.
Lynn Teague, vice president of the League of Women Voters of South Carolina, said the change was made without any public discussion.
Teague, who has lobbied Congress, said South Carolinians, including the more than 700,000 people living in poverty, should not receive tax and utility tax breaks from large data center companies.
“Companies like Google, with over $300 billion in annual revenue, are putting a lot of pressure on water as well as energy, and at the same time they want these companies to subsidize their profit margins,” she said. said.
When lawmakers approved data center incentives in 2012, they were considering data centers as a potential replacement for South Carolina's declining textile industry, the state newspaper reported at the time. One Republican sponsor of the bill, then-state Rep. Phyllis Henderson, also cited the success of North Carolina's data center incentives, saying South Carolina was “just losing projects to them left and right.” Stated.
But on the Senate floor earlier this month, Republican Senate Majority Leader Shane Massey described data centers as “consumers of electricity that don't actually provide many jobs.”
“Ripple effect”
Virginia has been a hub for data centers for decades, touting its proximity to the nation's capital, cheap energy, robust fiber networks, and low risk of natural disasters. Now, Virginia lawmakers are taking a tougher stance on the industry.
Republican Del. Ian Lovejoy, who represents Northern Virginia, said part of the reason is that data centers have moved into traditional residential areas.
He sponsored two bills this year impacting data center land use issues. Data centers could also be moved closer to parks, schools, and neighborhoods. Another would change land-use disclosure rules for developers.
“There is no way to power the inventory of data centers that are being proposed and will likely be built without significantly increasing power infrastructure and power generation,” he said. “And that will have ripple effects far away from where the data centers are located.”
Aaron Ruby, a spokesman for Dominion Energy, Virginia's main electric utility, said data centers pay the same costs of generating and transmitting electricity as any other customer base.
He said the company expects consumer monthly bills to grow by less than 3% annually over the next 15 years. He said the increase was due to the company's significant investments in renewable energy projects. Although Dominion is “fully committed” to renewable energy, Ruby said he does not expect the company to be able to meet the increased demand with renewable energy alone.
“It's physically impossible,” he said.
Dominion points to data center growth as a major factor in the increase in power demand. The company said in a state filing that its Virginia data center will have a peak load of nearly 2.8 gigawatts in 2022. This is 1.5 times the capacity of the company's North Anna nuclear power plant, which provides power to approximately 450,000 homes.
“It's just amazing, the scale at which these things are growing and what they're sucking up,” said Kendall Kobberwig, advocacy and communications director for Clean Virginia, a well-funded advocacy group that promotes renewable energy. “It's amazing, considering the amount of electricity it generates.” Campaign finance reform and increased oversight of public services.
He said the state needs to address how data centers are failing to meet clean energy goals and how the industry is impacting the utility costs of households and small businesses.
Over the past two years, Clean Virginia has tracked more than 40 bills related to data centers.
Most of those efforts stalled this legislative session, as some lawmakers chose to wait for the findings of the state's Joint Legislative Audit and Review Committee, released in December.
The lack of action frustrated many councilors and residents.
“What does this study tell us that we don't know yet? I don't know exactly.” Eligible for favorable state sales tax exemption.
“I think we already know that data centers consume a lot of power and pose a lot of challenges to the power grid.”
This article was produced by Stateline, an affiliate of States Newsroom.
The article “State rethinks data centers as power consumers strain power grid” was first published in Kansas Reflector.