By now you’ve probably heard that Pennsylvania is on the cusp of a data center boom.
Over the last year, dozens of proposals have been floated — and that pace has only quickened — for new facilities to support emerging AI technology, cloud storage, and other energy-intensive computing applications. Some of these projects are only speculative, others are already underway. Some would be powered by electricity generated onsite; many would tap into a regional electric grid already under serious strain. All could have significant impacts on local communities, both positive and negative.
The prospects for economic growth from such investments are well publicized. Pennsylvania’s high concentration of research expertise, skilled workers, existing infrastructure, and abundant natural resources make the Commonwealth an attractive target for data center development, and leaders from both political parties have welcomed the attention, citing the potential for job creation and enhanced competitiveness. At the same time, those same leaders are hearing back in their districts that there’s growing concern over how rapid, large-scale development will affect consumer energy costs, greenhouse gas emissions and air quality, availability and quality of drinking water, decisions about land use, and quality of life for Pennsylvanians. All of those concerns are genuine.
Given the wide-ranging implications of this burgeoning industry in our state, it’s no surprise that multiple legislative and regulatory policy proposals are beginning to circulate, and more will soon become public. PEC has been an active participant in these discussions, and recently shared our preliminary analysis of risk factors and possible solutions with leaders in the General Assembly. The comments can be viewed in their entirety here [pdf], but the main takeaways are summarized below:
Energy
Historically, demand for electricity in Pennsylvania has grown predictably in the range of one to three percent each year. But with electron-hungry data centers in the mix, some projections from the Pennsylvania Public Utility Commission (PUC) show demand increasing at more than double that rate over the next five years. Even if data center buildout in the Commonwealth turns out to be relatively modest, facilities built in other states within the regional grid operated by PJM will affect the supply and cost of electricity for Pennsylvanians.
To meet this historic demand we’ll need a beefed-up, all-of-the-above energy portfolio including new advanced nuclear and geothermal technologies, solar and wind power paired with battery storage, and natural gas generation equipped with carbon capture and storage. The good news: companies are ready to invest in new power generation projects, particularly renewables, and legislative proposals like the Pennsylvania Reliable Energy Sustainability Standard (PRESS) can help to ensure reliability by diversifying and expanding the range of sources. The not-so-good news: PJM has been painfully slow to connect new, clean power plants to the grid, and the backlog is already driving steep price increases even without the anticipated new demand from data centers. There’s also the danger of over-reliance on natural gas, which — though plentiful in Pennsylvania — is subject to fluctuating global market conditions that can and often do lead to higher prices and diminished availability.
Even more concerning is the possibility that, rather than bring their own clean power generation to the table, data centers will simply dip into the existing supply through power purchase agreements. Such arrangements are easily spun to appear climate-friendly by linking them to zero-carbon-emitting generation sources. But the reality is that, unless new capacity is built, these deals only displace existing demand onto dirtier sources while doing nothing to ease upward pressure on prices, or to improve grid resiliency.
By far the most cost-effective way to make up the supply shortfall is by investing in clean generation, and PEC continues to advocate for those investments through legislation like PRESS. Even better, from a cost standpoint, is focusing on the demand side: energy efficiency programs that reduce overall usage, upgrades to outdated transmission infrastructure, and direct use of recovered waste heat or geothermal energy, are cheaper and faster to implement than new power plants. And they ease congestion on the grid for everyone.
Water
Data centers’ thirst for electricity is equaled by their need for water, a need shared by humans and all living things. Daily water use for some types of facilities can run in the millions of gallons, more than all but the largest cities and towns consume — and that’s not even counting usage from adjacent power plants built to supply those facilities. Withdrawing and discharging that kind of volume every day is rough on local watersheds, to say the least. But the greater danger is that data center campuses end up taking out more than they put back — threatening to dry up water supplies.
Regardless of supply, heavy usage will take a toll on treatment systems and other infrastructure operated by public water systems, many of which are already struggling. Without protections in place, we face the same risk scenario posed by exploding electricity demand, in which the costs of maintaining and replacing overburdened systems fall disproportionately on utility customers. We need to ensure not only a fair distribution of costs, but also a role for regulators in seeing that large withdrawals by data centers don’t result in water shortages.
Regulation
Across the board, resource usage and environmental impacts from data centers will require care and transparency on the part of government entities tasked with upholding the public good. This means not only a robust set of policies based on a thorough public engagement process, but also well-funded agencies to administer and enforce them.
One area where data center proponents, environmental advocates, and citizens should be able to find common ground is the need to improve the processes whereby businesses — whether tech companies or clean energy developers — get permission to build. But it’s essential that we’re all on the same page about what that means. PEC urges stakeholders to consider the permitting reform principles adopted by the nonpartisan Carbon Capture Coalition, of which we are a member. These include staffing, training, and equipping state agencies to properly review permit applications; meaningfully involving the public in permitting decisions from the outset; strictly observing existing environmental standards and protections; and ensuring that all projects are considered fairly, transparently, and efficiently.
Given local impacts from noise, air pollution, and the sheer scale of some proposed facilities, data centers call for special attention from local governments. Again, many of our cities and towns currently lack the capacity and expertise to conduct this kind of oversight, and matters are further complicated by the need to coordinate across county and municipal boundaries. The General Assembly should not only identify a meaningful role for local government in these decisions, but also provide them with resources and support to carry it out.
What’s next?
As the policy discussion unfolds in the months ahead, expect to hear lots more about the economic opportunity data centers represent for Pennsylvania. To be clear — the opportunity is real, and the stakes are high. But in order to realize the potential, it’s critical that we prepare for unprecedented impacts on grid infrastructure, figure out how to control greenhouse gas emissions implied by much higher energy usage, and grapple with the many complex implications for land use, water consumption, and community impacts.
A forthcoming measure from the PUC, and bills already introduced in the General Assembly, explore a variety of strategies to mitigate consumer cost impacts and address issues of resource consumption, and we know that others are in the works. PEC will have more to say about these proposals as they evolve. But we already have more than enough information to conclude that the promise of a data center boom won’t be realized without carefully crafted policies in place. And if we get it wrong, we won’t just miss out in the near term — we’ll incur future costs that Pennsylvania simply can’t afford.