Why protesters want to slow America's data center boom

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Camilla Naschert:

Welcome to Energy Evolution, an S&P Global Energy podcast explaining the dynamics and challenges of the energy transition.

I'm correspondent Camilla Naschert. Today we'll be looking at the growth of AI data center capacity in the US. It is one of the major drivers of power demand growth, and electric utilities and grid operators are already grappling with questions over how quickly new capacity can be deployed to serve this industry. At the same time, a protest movement against data center construction has been slowing the pace of construction in several key states.

In this episode, we'll hear from policy experts and the data center industry on how the protest movement could slow down data center construction, impacts on power grids, and best practice as new projects seek permission.

We'll start with the fundamentals. So how much demand is coming from the data center industry? Where is the energy going to come from? And to get answers on that, I spoke with John Murray, principal analyst at S&P Global Energy. I asked John to set the stage with his team's latest outlook on the power implications of new data centers.

John Murray:

Data center growth in America is having a big impact on power demand outlooks. My colleagues in S&P Global Energy, Sara, the North American power team, they have come out with a new outlook for this year where they see that grid-based data center low demand has risen from 337 gigawatts hours in 2026 to 701 gigawatt hours by 2030. And that represents 108% increase in power demand over the next four to five years. So this vast kind of power demand growth is driving a lot of things that's happening in America in terms of clean energy deployments increases are happening or continuing to grow even in the face of policy obstacles such as the early sunsetting of tax credits for clean energy technology such as solar and wind.

In terms of new energy, we are expecting to see a lot of it being done by gas where we project that 45% of demand will be met by natural gas. 25% will be met by solar, 15% met by battery energy storage systems or BES, and 10% by onshore or offshore wind. And the remaining 5% will be then met by nuclear generation. The main reason behind it is the kind of intermittency kind of problem we have with renewables. Solar can only really work during the day and then you can only have wind working when the wind is blowing. But with natural gas, you can have a powering facility 24 hours a day. But what we see coming into the energy mix a lot more and it's increasing ever more so this year and we continue to see it growing for the next couple of years is battery energy storage systems. But until we have the buildup of the batteries into a place where we can fully rely on clean energy technology, hyperscalers and data center developers are still relying on natural gas to provide that 24-hour reliable power that they need.

Camilla Naschert:

So let's look at the main topic that we are thinking about today, which is the issue of protests and their impact on the rollout of data centers. What did you find there?

John Murray:

Yeah. So through our research, we kind of follow a lot of the data center developments because it's having an impact on clean energy deployments in the US. And one of the kind of trends we're seeing emerging is local opposition to AI data centers and data centers in general. And we started to think if this is starting to grow and it especially became pronounced at the start of this year, what impact could it have on clean energy deployments? And before I could figure out the clean energy deployments impacts, I had to figure out what was happening in America in terms of local opposition.

Audio: Speaker 1:

Tonight, a growing debate over data centers as a number of demonstrations play out across the country from Atlanta to Berkeley, California.

Audio: Speaker 2:

We want to slow down AI data center development. We want to slow down AI in general and stop big tech from infringing on our local communities.

Audio: Speaker 1:

The explosion of data center construction projects, the byproduct of the AI and cloud computing boom, that skyrocketing growth also prompting new scrutiny as communities housing these centers say they're bearing new burdens of heightened water and power usage.

John Murray:

Local opposition like this is estimated to a kind of place around just under 12 gigawatts of data center capacity at risk. Another thing that's happening is several jurisdictions across the US have implemented formal moratoriums on data center development, and this is in order to assess the cumulative impacts and revise zoning regulations for their districts. At the local or county level in the US, at least 125 data center moratoriums are in place across 24 states with 110 of these moratoriums already in effect and it represents about 10.5 gigawatt of at-risk data center capacity.

Now I mentioned that there is a lot of data centers happening and 10.5 gigawatts is not that much when you think of the entire data center project pipeline in the US. And that's mainly because a lot of the communities or townships or counties are getting ahead of data center developments. So they're putting moratoriums in place even before any projects have even been announced in that region.

The third thing is then that local opposition groups are increasingly employing legal strategies to delay or block data center projects. Over the past 12 months, there's been at least 70 legal challenges to data center development, and these have been tracked across 26 states. And overall it represents 48 gigawatts of at-risk data center capacity. So it seems that legal challenges are having the biggest impacts or could have the biggest impact on data center developments, placing the most at risk capacity here.

Camilla Naschert:

I know you've looked at this at a state level and regional level. Is there anything you can say on trends as to which parts of the US are seeing more opposition and then in turn which regions could be more attractive alternative destinations?

John Murray:

It's kind of common sense that the most of these oppositions are happening in places where the most data center activity is happening. So we see the most legal challenges or local oppositioning happening in Virginia where this is the data center capital basically of the world. So that's understandable, you would have the most opposition there. We're also seeing a lot of opposition in terms of legal challenges in Texas and also in California. Again, these are also hotbeds for data center activity. As this is happening, we also see data center activity expanding into the Midwest where you have a lot happening in Illinois, Indiana, Ohio, and also on the West Coast in Oregon.

Camilla Naschert:

After this overview from John, let's hear about some potential solutions to navigate the apparent conflict between locals and new data centers. To understand the drivers behind the opposition, I spoke with political scientist Darryl West, senior fellow in the Center for Technology Innovation within the governance studies program at Think Tank Brookings. I began by asking him if these protests are similar to what we've seen with other infrastructure or if there's something unique about data centers that's fueling the pushback.

Darrell West:

I think there are a few unique aspects of the data center debate that have fueled public opposition within the United States. One is just data centers are taking so much energy, people are worried about that. Other customers are wondering if their costs are going up due to the data centers, so there's a lot of concern over that. You have the water usage aspect of data centers. But it's not just things that are specific to data centers. In the United States, there's a lot of concern about AI in general, and people understand data centers are the entity that are making AI possible as well as many other aspects of the digital economy. So people's worries about AI are part of their worries about data centers. Public concerns about both AI and data centers have fused into one dimension right now. And I think that helps to explain both the breadth of the opposition as well as some of the intensity behind that opposition.

Camilla Naschert:

I know you've written in a recent report that legislators should resist the urge to stop technology and instead focus on implementing responsible guards rails. Can you say a bit more about how that could look and how you would define that?

Darrell West:

You're exactly right. There is a lot of public concern about AI taking jobs, so that is a part of this whole data center debate that is taking place. I don't think a moratorium is the way to go. We're not going to stop digital innovation. Technology is such a part of all of our lives. We're seeing AI being deployed in virtually every sector, and so the ability to stop it is probably not a viable option. But what we do need to take seriously is the development of responsible guardrails that can address the public concerns, make sure that as we move forward both with AI as well as data centers, that it meets community needs. We've argued in other papers that there should be what we call community benefit agreements that are publicly negotiated contracts between the local community and the data center developers, kind of outlining exactly what the benefits are going to be for the community, what the potential costs are either in terms of energy and/or water usage, and then how the company is going to deal with those issues.

We think if companies are more open and explicit about what the data center needs are going to be, the public will have a better shot of understanding what the issues are and perhaps to become more supportive. And I think the same thing is true with AI in general.

Camilla Naschert:

I know it's really early days in this industry, but is there anywhere in the US and the world that you can see doing the permitting processes with successful buy-in from locals and ideally without major environmental impacts? Can we already see some success stories?

Darrell West:

Actually, we are starting to see communities be more open about their discussions with the tech companies. In Wisconsin, for example, there have been constructive conversations between business interests and data center developers and local communities. Three Mile Island is an example of one approach to dealing with the energy needs. We all know there was a nuclear power plant there. There was an accident several decades ago that caused the stopping of that power plant. It was basically taken offline. There's a plan now paid for by industry to bring that nuclear plant back online and provide energy for a data center that's going to be located right next to that. So I think those are the types of things where if people see the tech companies, which we know have large resources behind them, taking responsibility for developing new sources of energy, paying for the costs of data centers, that will help local communities deal with the public concerns. If people see the tech companies taking their concerns seriously and taking meaningful steps to address them, I think they will become more open to data centers.

Camilla Naschert:

Okay, so we've talked plenty about the data center industry now, so let's bring in a representative for the industry. This was my conversation with Aaron Tinjum from Trade Association Data Center Coalition.

Aaron Tinjum:

So I'm Aaron Tinjum. I'm the executive vice president of the Data Center Coalition, DCC. We're the National Membership Association for the US data center industry. We have about 50 data center owner operators within our membership that own infrastructure, have investments and have teams across the US, and many also have facilities across the world. We are really focused on advocating for policies, regulations, and other solutions that continue to ensure that the US can build and operate data centers here at home.

Camilla Naschert:

Right. And data centers have been increasingly in the headlines recently, thanks to protestors who have voiced concerns around the construction of new data centers, pointing to pollution, water consumption, maybe noise even, and overall the sense that data centers may have fewer benefits than costs for local people. Are they wrong?

Aaron Tinjum:

Yeah, and I really appreciate you raising that question. I will start my response by stating all of these issues are extremely important, whether we are talking about energy use, whether we're talking about water use, whether we're talking about noise or local engagement, all of those things matter important. The data center industry and including our members appreciates all the efforts not only local communities have taken, but also several states that are really focused on ensuring continued responsible development of data centers in their local communities.

I think it's important though to really take a step back and consider what we're talking about. On one front, I would note that data centers are not a monolithic industry. We have many companies, many company sizes, multiple business models, different facility types and sizes, and different computing operations that are occurring within these facilities. So while our headlines and national conversation often use the term data center interchangeably, we could be talking about small legacy facilities that have been operating for decades. We could be talking about retrofitted manufacturing facilities that now host computing operations. We could be talking about artificial intelligence, but often what we're really talking about with the facilities online today are cloud facilities. And I think that's a piece that's often overlooked in our conversation, is there is still an immense amount of data center construction that is a reflection of our collective computing demands, especially coming out of the pandemic.

I have, again, 50 operators within our membership, many of whom are also smaller developers. When we're talking about data centers, it's not simply one type of computing operation. And then with those important caveats noted though, regardless of the company size, regardless of the type of operation being supported within those facilities, these members are committed to engaging with their local communities and being good neighbors in the communities where they operate.

Camilla Naschert:

Right. And I take your point about the established use cases, but I think what has been driving a lot of the new demand projections is this huge growth in need for computing power through artificial intelligence. And now in the last few months, we've seen a series of legal challenges, but also moratoriums in several states. I guess the idea being that lawmakers are trying to take some time to weigh the benefits and drawbacks of letting new projects go ahead. And I wonder whether you think that's a reasonable approach.

Aaron Tinjum:

We really view moratoriums as a slippery slope that impede progress. I think a more responsible and thoughtful approach would be bringing together communities and decision makers and really developing clear and common sense guardrails to move forward. This is something a number of states and communities have done in recent years, so I don't think that it's something that requires additional moratoriums. And I think there's a few different reasons for that. I think number one, there are long planned investments and approvals in place for a number of facilities that our members are hoping can continue to move forward. When they do not move forward, we are talking about a slowing of both economic benefits and the terms of construction jobs. So if those facilities are paused, those construction workers are not working on those jobs, that is delayed employment. We're also talking about a delay of tax revenue. And I know a number of communities across the US in recent years have been identifying ways to replace industries that have been housed there.

Camilla Naschert:

So what does the process to get from concept to data center currently look like in the US? Can you walk us through what it's like for a data center operator maybe trying to secure a grid connection in one of the main US hotspots? What is the process and what are the timings?

Aaron Tinjum:

I will take Virginia for example, which is not only the data center capital of the US in many regards when we're thinking about computing capacity that's online, but it is the data center capital of the world. And in that market, our members historically had been able to build and power a data center roughly between 18 to 24 months. A few years ago, that timeframe began to slide, so it went from about 18 to 24 months, and then the timeline became two to four years. From there, the timeline became four to seven years. The latest we have heard that within Northern Virginia, it's around seven years plus in many instances for these facilities to receive power. And if you read between the lines, we may be talking about a decade to power.

Those delays and a lot of it is attributed to a transmission constraint at Loudoun, Virginia. I think a lot of the delay in Virginia could be attributed to under forecasting of demand from data centers. So our members will put in a load request with the local utility, really estimate their highest demand for that facility. And in the US, Virginia is part of the PJM Interconnection, which is the regional grid operator that oversees about 13 states and Washington, DC.

It's a lengthy forecasting process, but effectively the utilities in each market will produce a forecast that will eventually roll up to PJM, and PJM will create a regional forecast. We do not always have clarity as to the thresholds for being included in those forecasts. So what we have been doing as an industry is advocating for what we call commercial readiness verification. We want to ensure that the projects that are in interconnection queues within PJM and elsewhere have made progress on permitting, that there are financial commitments behind these load requests. Regulators are going to review these requests. And what large customers can do at this moment is provide a little bit more clarity, a little more transparency to ensure that there's legitimacy to these projects.

Camilla Naschert:

Right. I mean, there's been other regulators who've tried to grapple with this issue of, I guess you could call it speculative project. So in the UK, a grid regulator of JAM is planning to introduce fees for data center operators who are waiting for grid connections to avoid speculation and maybe unclog the queue for grid requests. What do you make of that kind of approach?

Aaron Tinjum:

Yeah, I think our industry's fully committed to making financial commitments if that will help address the issue of, let's say, speculative load requests or duplicative load requests across projects or across regions.

One thing I would point out though, I think often there's a lot of concern around these issues that are called speculation or duplicative load requests, but I think a couple points to recognize is just because a large customer may be requesting a project in multiple jurisdictions does not mean that they do not intend to move forward with that project. And admittedly, there are a number of, let's say, developers, speculators that may have no intent to ultimately own and operate a data center. They may just be looking to get a site set up with power and then flip it to an ultimate owner of that site. But the data center coalition, we are really focused on representing those companies that own and operate facilities.

Camilla Naschert:

Right. Let's get to the energy aspects then. Research here at S&P Global Energy has shown that the majority of new data centers in the US use natural gas. In part, that's because of the intermittency issues we have with renewables. And at the same time, many, if not most of your members, have net-zero commitments in place, often around 2040 or even earlier. So should we think of gas as a transition solution on the path to net-zero or could the industry's goals there be at risk?

Aaron Tinjum:

Yeah, I really appreciate the question, and a few different thoughts come to mind. I believe S&P Global has also estimated that approximately half of all corporate renewable energy procurement has been driven by technology companies with data centers. And so I highlight that point to really emphasize that this industry's sustainability commitments are not falling by the wayside at this critical juncture. There have been countless announcements now around small modular reactors. There have been projects announced to advance enhanced geothermal technologies, other long duration storage technologies. So this is an industry that will continue to advocate and procure, let's say, traditional renewables, solar and wind, but it is also leaning in both with commitments and investments in clean electricity technologies that are not only carbon-free, but get us to that firmer future that really align with the load shape of data center facilities, which are generally speaking, large and relatively predictable.

Now, your question around natural gas is an important one. And I think any interest in, let's say, natural gas generation, whether it be onsite, behind the meter, is really a reflection of where the US grid is at. We do not have sufficient capacity in key data center markets at this moment. And again, I think that partially comes back to under forecasting of data center demand and other growth drivers, whether we're talking about the onshoring and manufacturing or electrification.

Camilla Naschert:

Now, the DCC has been lobbying or advocating on behalf of the industry for years now, even before the AI boom really put data centers on the map. And I wonder whether you find that the attitude from local stakeholders has shifted recently, and if so, why you think that is?

Aaron Tinjum:

You're absolutely right. The data center coalition was founded in 2019, so we predate much of the conversation around artificial intelligence. Certainly there is no shortage of local concern. I think the media does an excellent job of covering that concern. I think at the end of the day, our industry needs to provide greater education of this industry, what these facilities are supporting within our economy. If it's located within your community or near your community, do we have a clear understanding of the benefits of that project in hosting that, whether it be tax revenue or jobs? And then I think zooming out a little bit further, what are the national security implications associated with this moment? Whether we are talking about the artificial intelligence race globally, where we know the US's adversaries are also very quickly working to develop data center infrastructure and AI models, or if we're talking about ultimately where the US's data is held.

Camilla Naschert:

All right, listeners, that was it for this week. I really enjoyed diving into this issue with you. I find it a good reminder about the social and political context in which you allocate energy resources, and it's something our reporters at S&P Global Energy will, of course, continue to cover.

My thanks to Aaron, Darryl, and John for their thoughtful comments on this, and thank you for your interest in our discussions on energy evolution. We'll be back in your ears next week.

As always, thank you to the rest of our Energy Evolution podcast team, including Eklavya Gupte, Karen Willenbrecht, Drew Engblom, and Dan Testa, as well as our producer, Donovan Menard from the 199, and the S&P Global Energy Digital Content Team. Don't forget to subscribe to Energy Evolution on your favorite podcast platform. And if you've got an idea for future topics or guests, please email us at energyevolution@spglobal.com.

Thank you for listening.