Local data center moratoria are costly for the whole country

The most contentious, passionate, and consequential debates around artificial intelligence (AI) are currently playing out before local zoning boards, town councils, and public electric utilities. The growing demand for computing power, both to create frontier AI models and to enable their widespread use, has transformed the storage and processing of data from activities with a physical presence so negligible as to be called the “cloud” to the basis of a construction boom in communities across the country. 

The data center debate poses unique challenges due to a combination of issues and incentives that are intensely local on one hand, but have national and society-wide concerns on the other. Local authorities must weigh highly technical, case-specific data when determining what, if any, data center projects are right for their area. But the hundreds of meetings held by local governments and public utilities for this purpose have also become venues for a burgeoning mass anti-AI movement, making the job communities face when deliberating over data centers much more difficult.

A recent report finds that local opposition has blocked $18 billion in proposed data center projects and slowed the approval of over twice that amount. The momentum and publicity of these “wins” against data centers have now shifted the goal of some opposed to the AI from rejecting specific projects to preemptive moratoria–bans on considering new data center projects for one or more years, ostensibly so officials can gather more information or draft new regulations. Dozens of communities have enacted such moratoria in just the past few months.

Faced with constituencies understandably concerned about the changes brought about by AI, but often misinformed about the basic attributes of data centers, officials in towns and cities see the political appeal in backing these measures. As blocked developments and moratoria increase in number and momentum, however, their costs go beyond lost local economic development and begin to be felt nationwide. Data centers are essential infrastructure for modern society, with virtually all of us using them every day for countless computing tasks. The national movement to convince communities that data centers are a bad deal across the board is slowing down and complicating the important process of AI adoption for everyone.

Local matters

Like any other major commercial development, data centers undergo extensive review processes with local, state, and regional authorities before construction begins. While the details vary considerably by jurisdiction, developers are likely to encounter zoning boards, environmental review of multiple kinds, and public utility commissions. These review processes mean that developers can expect due diligence with communities to take over a year—and often multiple years—to complete. Local deliberation of this kind is essential because whether or not a data center is a good deal for a given community depends on many technical and case-specific facts on the ground.

Data centers bring communities economic benefits that are underappreciated in the current debate. Across the country, they have been a consistent source of tax revenue for local governments, accounting for as much as a third of all incoming revenue in some of the Virginia counties home to large facilities. They have also fueled a construction boom, with medium-sized “co-location” facilities and large “hyperscalers” supporting hundreds and thousands of jobs, respectively. These construction jobs are too often written off as “temporary” in debates about the economic value of data centers. Construction workers and union members often feature prominently in testimony supporting data center projects and opposing moratoria, noting that they keep many workers closer to home instead of on far-flung temporary job sites.

The permanent employment supported by data centers is also underappreciated by many, especially when viewed in proper perspective. While the numbers vary widely, co-location facilities typically support a few dozen high-paying, highly-skilled permanent jobs. This number may be smaller than that of other types of large commercial development, such as a big-box retailer or factory. However, co-location facilities provide these jobs without impacting small businesses or increasing traffic, to name just two factors that communities often worry about when considering more traditional commercial development. Hyperscale data centers, which have become the primary lightning rod in recent debates, support hundreds of permanent, highly skilled jobs, and recent research shows their potential to serve as anchors for additional tech-focused employment and small businesses in the communities where they are built.

Concerns about the local impact of data centers mostly focus on their electricity and water consumption. Data centers require considerably more electricity than traditional types of commercial development, such as retail or factories. Developers prefer to locate them in areas with spare grid capacity, but with skyrocketing demand for computing power, this has become something of a bottleneck in certain parts of the country. Protecting local consumers from electricity price hikes—not to mention protecting power grids from excess demand—must be taken seriously. Recent public outrage often overlooks the fact that local officials and developers are indeed carefully considering these matters. Many states are introducing a special electric rate class for data centers with extra requirements that they fund their own capacity upgrades, while tech companies and developers are investing heavily in innovative approaches to both bring in their own power and flexibly allocate electricity demand across different sites.

Concerns over data centers’ use of water follow a similar pattern, depending greatly on local factors rather than a common set of issues nationwide. The consequences of water consumption by a data center depend not only on the area’s overall water resources but on how much of that water is treated or processed for different uses, the capacity of those systems, and the type of cooling system the data center proposes to use. Once again, rapid innovation is rapidly changing the nature of these questions, with an increasing number of data centers using systems that operate in a closed loop or require no water processed for household or commercial uses at all.

Because so many of these questions depend critically on local conditions and infrastructure, they are best answered by residents and governments in the areas where data centers are being built. But the backlash against AI and data centers, national in scope and motivation, has begun distorting many of the basic facts on the ground in ways that make it more difficult for local authorities to get them right. 

National backlash

The ability of citizens to protest or resist unwanted commercial development in their communities is an important part of the American political system. At its best, this tradition has enabled communities to fight back against industrial polluters and neighborhood-flattening highways, creating David-versus-Goliath stories seared into Americans’ political consciousness. At its worst, this tradition has yielded NIMBY (not in my backyard) movements that have held back housing construction across the country, leading to shortages and high prices at the center of a current affordability crisis. Opposing local development through protests on the ground and especially by showing up at town hall meetings is a type of activism Americans understand.

In the past few years, Americans have often heard overheated rhetoric about the massive changes AI will soon bring to their lives, not to mention overblown fears fueled by media hype. In this environment, the anti-data center movement seemingly presents a familiar way for people to make their voices heard. This has caused a disproportionate amount of public concern about AI to be superimposed onto local data center debates, leading to misunderstanding and misinformation that gains momentum.

Combined with such intense public engagement, the highly technical and case-specific nature of the issues makes misinformation very difficult to combat. National data on both electricity and water is easily manipulated to yield eye-popping numbers that are irrelevant or misleading when applied to the concrete impacts of a specific data center in a specific location. In early June, for example, Senator Elizabeth Warren tweeted a statistic that households living near data centers saw their electricity bills increase by “as much as 267 percent in the last five years.” That figure, from a 2025 Bloomberg article, referred to wholesale electricity rates rather than the retail rates paid by consumers, and did not separate the impact of data centers from other causes of rising rates, such as aging infrastructure, wildfires, and other climate impacts. When controlling for these factors, researchers find that new data centers built during the period resulted in slightly lower retail rates by encouraging new investments in grid capacity and infrastructure. The authors do, however, caution that future development in areas with strained grid capacity could result in rate increases, underscoring the need for a detailed local-level review of projects.

Once people believe that data centers are bound to cause electricity rate hikes, it becomes difficult to explain the complexities of local grid capacity, the impacts of numerous other factors on prices, or the recent innovations that enable data centers to bring their own power or consume power flexibly across multiple locations. Once people believe that data centers “use up” water supplies, it becomes difficult to explain the many different cooling systems they employ and the differences between water processed for different uses in different areas. This mismatch between national and local questions can generate highly problematic incentives for local government officials. 

The trouble with moratoria

Moratoria pose a particular challenge in the current environment. Instead of deliberating over the specifics of how a proposed project will interact with energy and water infrastructure in a particular community, these temporary bans force officials to consider data centers in the abstract, where those opposed to AI can most easily distort the facts. This is a difficult environment for good governance to take hold. The political incentives that local leaders face to support moratoria, given the ongoing national backlash, are undeniable.

The most important benefits of data centers are not the jobs and tax revenue they bring to local communities, significant though those may be. They are essential infrastructure for virtually every computing task each of us now performs on a daily basis. Preemptively crossing hundreds of communities off the list for potential development, often without any local justification, will make the development and use of AI, not to mention other types of computing, more expensive.

A telling moment occurred in April when Maine Gov. Janet Mills vetoed a statewide moratorium bill, saying that while she believed it was “warranted” in theory, it failed to make an exception for a specific $550 million project in the state slated to begin construction. Mills was able to cite the economic benefits and safeguards in place for that project, and why it would clearly benefit the community where it was being built. This wider view of the issue in statehouses is likely why of the 14 state moratorium bills brought this year, none have become law, and only two (Maine and New York) have passed their legislatures.

Supporters of data centers must continue to fight the intense backlash, primarily through education and debate, despite the current difficulties. The authority and ability of local governments and citizens to make the right choices for their own communities must be respected. The best way to do so is through rigorous deliberation of the facts on the ground for specific projects, not preemptive bans.

The post Local data center moratoria are costly for the whole country appeared first on Reason Foundation.

Source: https://reason.org/commentary/local-data-center-moratoria-are-costly-for-the-whole-country/