Consumer group calls for moratorium on new electricity-guzzling data centers
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A consumer advocacy group is calling on the Indiana General Assembly to enact a moratorium on huge new data centers, saying they could lead to skyrocketing utility bills and large tax subsidies.
Citizens Action Coalition of Indiana issued the call Tuesday, saying that so-called “hyperscale” data centers will provide few jobs relative to their energy consumption and the incentives they receive.
A hyperscaler is a massive data center that is engineered to deliver large-scale cloud computing power and data-management services to business customers. They can also provide clients with artificial intelligence, machine learning, and big data analytics. The centers typically house computers, servers, digital storage and cooling systems. Hyperscalers are making huge investments in data centers to keep up with AI demand.
The data centers operate around the clock, guzzling huge amounts of electricity to run their computers and servers. And some consumer groups, such as the Citizens Action Coalition, worry they could strain the system.
“Hoosiers must be fully protected from the rapacious resource needs, massive tax subsidies, and extraordinary utility cost burden associated with these facilities that could lead to skyrocketing utility bills across Indiana,” said Kerwin Olson, CAC’s executive director, in written remarks.
In recent years, Indiana has been offering “data-center incentives,” a series of tax breaks, often worth hundreds of millions of dollars, which can be locked in for up to 50 years.
The push for a moratorium comes as Big Tech companies have announced plans for numerous hyperscaler data centers in Indiana. Amazon Web Services said in April it plans to invest $11 billion to build a data center about 10 miles west of South Bend in New Carlisle that would create about 1,000 jobs.
The state’s job creation agency—the Indiana Economic Development Corp.—plans to provide nearly $150 million in performance-based incentives for the Amazon project. The center also qualifies for Indiana’s data center sale tax exemption, which means AWS won’t have to pay the state’s sales tax on the purchase of the computers, servers and software in the data center or on the electricity used in running that equipment.
Also in April, Google said it planned to spend $2 billion on a data center project in southeast Fort Wayne—more than double the amount the company said the development would cost when it first disclosed its involvement in January. The project is expected to create about 200 jobs over the next several years.
In June, Gov. Eric Holcomb’s office announced that Microsoft plans to spend $1 billion to build a data center in La Porte. The company aims to use the facility to accelerate its Microsoft Cloud infrastructure to support growth in technology and artificial intelligence.
In January, Meta Platforms announced plans to establish a new $800 million data center campus in Jeffersonville, which will support about 100 operational jobs.
Many of the announced projects will take place within the service territory of Indiana Michigan Power, along the northern border of Indiana and in the state’s northeastern quadrant.
I&M said in August it would “take the steps necessary” to acquire additional resources to serve the load growth associated with the hyperscaler customers, but it did not say how much customers’ monthly bills might rise as a result. The utility did not immediately respond to two emails from IBJ seeking comment.
I&M is forecasting that its hyperscaler data centers will use more electricity by 2030 (35 million MWh per year) than all 6.8 million Hoosiers use in their homes today (31.9 million MWh per year), according to Citizens Action Coalition.
The utility is proposing tariff changes for hyperscaler customers to ensure that it has reasonable terms and conditions of service in place. That matter is now before state regulators.
Brian Inskeep, program director for Citizens Action, said I&M does not currently have any customers who use 150 megawatts or more. However, new hyperscaler data centers with loads in the hundreds to thousands of megawatts are now planned to locate in I&M’s service territory.
These new large loads will require billions of dollars in I&M investments for electric service, Inskeep told the Indiana Utility Regulatory Commission in written testimony he filed on Tuesday, in support of I&M’s proposed tariff changes.
“The new large loads anticipated for I&M’s service territory are unprecedented and staggering, including facilities that will be among the single largest electric users in the state,” Inskeep wrote. “Without the prompt implementation of robust consumer protections and enhanced transparency, existing ratepayers are at extraordinary risk from these new large loads.”
Another utility, AES Indiana, which serves the Indianapolis area, told IBJ on Tuesday it is in “advanced discussions” with a hyperscaler, but did not name the party. It previously told IBJ that a hyperscaler in its service territory would require additional power generation. It has not said whether that would mean the construction of a power plant.
The Indiana Energy Association, a statewide trade group for investor-owned utilities, told IBJ on Tuesday it supports the state’s efforts to recruit new businesses, including hyperscalers.
“Understanding the significant amount of electricity data centers can consume, electric companies are working with these businesses who are targeting Indiana to understand their timelines, energy needs, and where they are wanting to locate,” Danielle McGrath, the organization’s president, told IBJ in an email.
She added: “Through this type of advance planning and coordination with state, regional, and local partners, our goal is to support this growth and the communities who have welcomed them. Further, we will not compromise the reliability of the service we provide, and a key priority is to ensure that existing customers are appropriately protected (in terms of both reliability and cost) with the addition of any new customer growth.”