Powering the Future: How States Are Responding to Data Center Energy Demands

Increased Demand and Load Growth

After decades of flat or declining load across our electric power system, states across the country have begun reassessing their approach to increased energy demand on the grid. The rapidly growing need for data center capacity to support cloud computing and artificial intelligence (AI) is at the forefront today — and for perhaps the next decade — but other key drivers include the “reshoring” of domestic manufacturing and multisector electrification.

In 2023, according to the U.S. Department of Energy, data centers consumed 4.4% of the total electricity generated in the U.S. By 2028, they are expected to consume 6.7% to 12%.

Data center owners and operators are pouring hundreds of billions of dollars into developing new capacity to meet their demand forecasts for both enterprise and consumer AI products — and states are racing to make sure they aren’t left behind.

States, along with their utilities, power producers, and energy and infrastructure developers are feverishly working alongside the data center industry, state utility commissions, legislators, regional transmission and system operators to develop solutions to accommodate the growth. In 2025 alone, state legislatures addressed a number of key issues to help pave a way, or develop guardrails, for data center development.

In addition to the legislative activity, regulators and state utility commissions across the country continue to address how to improve resource planning, adopt innovative rates and large customer tariffs, while continuing to address reliability concerns and the need for grid- and system-level upgrades and resource adequacy.

In the States: Meeting the Challenge or Solving the Problem

States and localities are using both legislative and regulatory tools to manage the challenges and opportunities presented by data centers and other large customers, which include increased energy demand and transmission constraints, customer costs, environmental concerns and land use conflicts. Some states are offering tax incentives or developing innovative regulatory solutions with customers and utility partners to attract new generation and technologies, while others are imposing new hurdles, or barriers, to address the economics of increased energy demand, customer impacts, and volatile energy prices.

While much of this year’s legislative and regulatory actions have directly addressed data centers, some will impact growth and development opportunities for other industrial sectors, state electrification efforts, large energy customers and other energy-intensive industries. These legislative and regulatory policies have addressed and impacted a number of issues, including access to reliable and affordable electricity, improved transmission to serve new load centers, and the development of new or enhanced baseload generation resources.

Understanding how these broader energy and market issues impact customers and industries is key to ensuring that the domestic data center and manufacturing sectors continue to thrive. More importantly, it is critical to understand the key policy and political motivators driving states and localities to either limit or expand data center and economic growth in their jurisdictions.

Solutions: Turning Intelligence into Action

Information Gathering: Legislative, Regulatory, and Local Intelligence Monitoring

Stateside monitors legislative and regulatory activity across all fifty states, the District of Columbia, and over 10,000 local jurisdictions. We track gubernatorial priorities, legislative proposals, utility commission proceedings, local zoning, siting, permitting, and land use ordinances to provide you with the most up-to-date and customized intelligence on the issues that matter most to you.

Stateside supports our clients by combining our legislative, local, and regulatory monitoring, with customized research and analysis to develop strategies for policy and regulatory solutions. No other state government affairs firm has a dedicated team of energy professionals, and no other firm combines these efforts in a comprehensive way like Stateside.

Meeting the Moment

Stateside’s dedicated energy team helps you decipher the multitude of data points from our information services and monitoring so that you can focus on turning intelligence into action. Stateside’s comprehensive team can guide your engagement at the state level and help you successfully advocate for your issues with state regulators, policy -and decision-makers, and other market participants. Our consultative services help you meet the moment by putting you in the right place at the right time to ensure that your message, brand, and priorities are heard.

Customized Solutions

Stateside can help you advance your legislative, regulatory, and advocacy needs through bespoke research and issue intelligence, monitoring, and key insights. We can create tailored reports, customized weekly legislative or regulatory digests, or state-specific policy issue and stakeholder mapping projects.

We can deliver a policy snapshot on priority issues in key states, to an in-depth policy and political review covering opportunities, challenges, and how to engage on legislative, regulatory, and politically sensitive topics.

Schedule time with our team to learn more about how we can help you gain actionable market intelligence and provide you with an advantage over your competitors.

Policy Snapshot: State Legislative Actions

TAX INCENTIVES

28 states have introduced over 60 bills that establish, expand, or limit tax incentives for data centers.

Legislative Examples:
- Arkansas HB 1444: Revises tax exemptions to accommodate larger data center facilities. Signed by Governor Sarah Huckabee Sanders (R) on April 10.
- Florida SB 1264 Repeals the expiration of the sales tax exemption for certain data centers, which was set to expire on June 30, 2027.
- Indiana HB 1601: Expands data center tax incentives to quantum and advanced computing projects. Signed by Governor Mike Braun (R) on May 1.
- Kansas SB 98: Establishes sales and use tax incentives for data centers that meet certain investment and workforce development criteria. Signed by Governor Laura Kelly (D) on April 24.
- Rhode Island SB 921 Establishes property tax and sales and use tax credits for eligible data center facilities in the state.

In many states that have had these incentives on the books for years, policymakers are confronting a new challenge: meeting the energy demands of these developments.

ENERGY DEMAND & GRID MODERNIZATION

To address energy demand, usage, and other grid issues, 26 states have introduced over 100 bills that regulate or incentivize all facets of energy use and consumption. Generally, legislation has been focused on rate classifications, co-location of energy facilities, back-up generation, and reporting requirements.

While legislators are receptive to data centers due to the potential economic benefits, many express concerns regarding the potential costs shifted to the average person, and other customers.

Legislative Examples:
- California AB 222: Requires the PUC to adopt efficiency standards for data centers.
- Colorado SB 280: Establishes the “Data Center Development and Grid Modernization Program” which provides tax exemptions, workforce requirements, and energy incentives for data centers. Failed upon adjournment.
- Indiana HB 1007: Creates energy planning requirements for large load customers. HB 1007 was signed by Governor Mike Braun (R) on May 6.
- Maryland SB 937/ HB 1035: Creates energy procurement requirements, establishes cost-allocation requirements for commercial/ industrial customers, and establishes a nuclear procurement program. Signed by Governor Wes Moore (D) on May 20.
- Missouri SB 4: Allows utilities to include construction work in progress in their rate base. Signed by Governor Mike Kehoe (R) on April 9.
- Ohio HB 15/SB 2: Restructures the electricity market, modifies energy taxation, provides co-location requirements, and modifies ratemaking requirements. HB15 was signed by Governor Mike DeWine (R) on May 15.
- Texas HB 14: Establishes the “Advanced Nuclear Energy Office” to provide funding for advanced nuclear reactors.
- Utah SB132: Creates energy planning requirements for large load customers and cost allocation for energy infrastructure. Signed by Governor Spencer Cox (R) on March 25.

Without sufficient energy generation to alleviate already strained electrical grids and increasing residential energy costs, we may see a repeat of Georgia in 2024 when the legislature, driven by concerns from public utilities, passed a bill pausing their nation-leading data center incentives to evaluate their return on investment The bill was eventually vetoed by Governor Brian Kemp, and there was no attempt to revive it this session—a sign that, for now at least, the opportunities presented by the rapid development of data centers still outweighs the concerns.

Policy Snapshot: Regulatory

State regulators, regulated utilities, transmission and market operators are faced with unprecedented demands to ensure that electricity is delivered in a safe, affordable, and reliable manner to customers. This includes addressing the challenges that exist under the current regulatory framework and paradigm to serve customers by developing novel rates and new customer classes, updating resource planning, and cost allocations.

Nevada’s Public Utilities Commission approved an agreement allowing data centers to purchase clean energy under specialized tariffs, catering to companies that prioritize sustainability and carbon reduction.
The Georgia Public Service Commission (PSC) approved a rule requiring data centers to contribute to power grid upgrades rather than passing the costs onto residential consumers. The rule addresses growing concerns over energy demand from large-scale data centers and aims to prevent rising utility costs for local residents.
The Indiana Utility Regulatory Commission (IURC) approved Indiana Michigan Power's joint settlement requiring new large load customers to make long-term financial commitments proportional to their size. Any reduction of more than 20% of a large load customer’s contracted peak capacity must be submitted to IURC for review and approval before it becomes effective.

Policy Snapshot: Local

At the local level, jurisdictions are revising zoning ordinances to introduce stricter oversight of new data center developments, energy infrastructure, and other facilities. Concerns over land use conflicts, noise pollution, and energy costs are driving policymakers to reconsider the long-term sustainability of continued expansion, even as the industry contributes billions to the state’s economy.

On April 2, 2025, the Albemarle County, VA Board of Supervisors will hold a public hearing to receive comments on proposed regulations for data centers. The ordinance updates regulations requiring special use permits in commercial districts while allowing by-right use for centers up to 40,000 sq. ft. in industrial zones. Key requirements include public water and sewer, closed-loop water cooling, setbacks from lot lines, and noise-controlled generator enclosures with restricted maintenance hours.
On August 22, 2025, the St. Charles City Council approved a resolution imposing a one-year moratorium on applications for the establishment or expansion of data centers. St. Charles is the first city in the nation to adopt a citywide moratorium, citing examples from other jurisdictions that have taken steps to restrict or delay data center development.
On September 3, 2025, the Board of Supervisors will hold the final public hearing on an ordinance amending Chapter 107 of the Code of Ordinances, relating to nuclear energy generation and nuclear material storage. The ordinance would establish a new exclusive-use zoning district with its own application process and requirements for nuclear energy or waste storage facilities. Applicants would need to submit a site plan, economic development plan, application form, and fee, as well as enter into a host community agreement to offset county costs. While the U.S. Nuclear Regulatory Commission retains authority over safety and operations, the ordinance is designed to give the county more oversight of local impacts, such as neighborhood fit and community effects. Supervisor Kirsten Running-Marquardt emphasized the ordinance is meant to ensure Linn County residents have a voice in decisions that affect them.