Balancing Innovation and Responsibility: Pennsylvania Seeks to Manage the Rise of Data Centers
Pennsylvania is navigating a complex landscape as it anticipates significant economic growth driven by the expansion of data centers. While acknowledging the potential benefits these facilities bring, the state is actively exploring measures to safeguard consumers from potential increases in electricity costs and address environmental concerns. During a recent budget address, the governor outlined a new approach requiring data center developers to either generate their own power or fully fund the development of new power generation to meet their energy demands. These massive complexes, which are fundamental to the advancement of artificial intelligence, consume substantial amounts of electricity, often rivaling the energy needs of entire cities.
The administration emphasized the importance of open communication between data center developers and local communities. A key component of the proposed strategy involves ensuring that developers actively engage with surrounding areas and prioritize the hiring and training of local workers. Developers who adhere to the state’s forthcoming Responsible Infrastructure Development (GRID) standards will receive full state support, including expedited permitting processes. This approach aims to strike a balance between fostering technological innovation and ensuring accountability to the public.
This proactive stance aligns with a broader effort at the regional level. Earlier this year, Pennsylvania joined the governors of 12 other Mid-Atlantic and Midwestern states in issuing a statement of principles alongside the federal administration regarding new electric supply. A central focus of this statement was to protect residential consumers from escalating electricity prices that could result from the influx of data centers and other large energy consumers connected to the electric grid. Simultaneously, the regional grid operator, the PJM, released a policy designed to accommodate the growing power demands of data centers while maintaining affordability and reliability for all customers. This policy includes a recommendation, though not a mandatory requirement, for new large-load users to provide their own power sources.
The increasing energy demands of data centers are already having a noticeable impact on electricity prices for Pennsylvania residents. Data from the state’s Independent Fiscal Office indicates that average electricity prices have risen by nearly 50 percent between 2018 and the last year. The rapid expansion of data centers is contributing to this trend, with concerns that future demand could outstrip current supply. The PJM grid currently has a significant backlog of generation projects awaiting approval to connect to the grid, highlighting the urgency of addressing this issue.
Data indicates a substantial growth in the data center sector within Pennsylvania. The Pennsylvania Data Center Proposal Tracker, a publicly accessible online resource, currently lists 52 data center projects, including those in the planning and preparatory stages. A notable portion of these projects – 24 – are slated to have their own dedicated electric substations, indicating an intention to generate power independently rather than relying solely on the existing grid.
However, this growth has not been without criticism. Advocacy groups have voiced concerns that the state’s welcoming approach to data centers may not adequately protect consumers from rising electricity bills and potential environmental consequences. These groups argue that prioritizing the data center industry should not come at the expense of public affordability and environmental well-being. Furthermore, there are concerns that the increased energy demand will necessitate greater reliance on natural gas, leading to increased greenhouse gas emissions and exacerbating the climate crisis.
The development of data centers in western Pennsylvania is expected to spur a renewed boom in natural gas production, a region already heavily impacted by fracking for the past two decades. A significant example of this is a conversion project at an existing coal-burning power plant in Homer City, which is being transformed to power multiple data centers and is projected to become the largest gas-powered plant in the United States. In contrast, a recent project in neighboring Delaware was halted by state environmental officials due to concerns about the environmental impact of a large data center, including the installation of numerous backup generators and a tank farm.
The Delaware action has prompted discussions about the need for stronger state-level regulations to protect ratepayers from the costs associated with new data centers. Proposals are being considered to grant states the legal authority to implement measures that safeguard both residents and businesses from the industry’s effects. In Pennsylvania, legislative efforts are underway to establish a model ordinance that municipalities can utilize to regulate data center development, addressing aspects such as size, setbacks, and noise. While some local officials have raised objections to incorporating these measures into existing municipal planning codes, proponents argue that such regulations are crucial for balancing economic opportunity with energy affordability and reliability in an increasingly technology-driven world.
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