Data Centers: From Economic Boon to Midterms Villain
Data centers, once darlings of bipartisan political support, are rapidly morphing into a political specter haunting the midterm elections.
Democratic governors are now scrambling to impose restrictions on new data center projects, which they previously incentivized with millions in tax breaks, all while facing an electorate enraged by skyrocketing electric bills. Meanwhile, President Donald Trump, who has previously championed the industry as a job creation engine by slashing regulatory barriers, used his State of the Union address to announce that he has instructed major tech companies to construct their own power plants, ostensibly to safeguard consumers from further price hikes.
This shift in rhetoric from leaders across the political spectrum is notable. It highlights the swiftly changing political landscape surrounding data centers, once celebrated as economic powerhouses, but now viewed with skepticism as constituents attribute rising utility costs to their expansion—a key concern in the run-up to the elections.
“The sudden urgency of this discussion indicates how rapidly the issue is evolving, with politicians mirroring the public’s frustration over inflated energy bills while data centers enjoy tax incentives,” remarked Jared Leopold, a Democratic strategist and co-founder of climate advocacy organization Evergreen Action.
These political gymnastics reveal that both parties are still trying to navigate this increasingly crucial issue.
Democrats capitalized on voter dissatisfaction with soaring utility costs—and the anxiety that energy-hungry data centers could exacerbate them—to secure governor’s offices in New Jersey and Virginia, as well as to unseat two Republicans on Georgia’s utility regulatory commission last fall.
Concern among voters remains high. A POLITICO Poll conducted in mid-January indicated that the primary worries about data centers are tied to household expenses. When asked about the potential downsides of data centers in the U.S., 29 percent of Americans expressed that they would likely lead to higher electricity bills, 24 percent cited an increased risk of blackouts, and 23 percent believed the projects would drain taxpayer resources.
In response, both parties have begun advocating for tech companies to bear the financial burden of their power consumption.
Just six months ago, Trump was busy promoting the rapid federal permitting of data centers, lauding companies for their hefty investments in energy infrastructure as part of his grand vision for the U.S. to become the “world’s No. 1 superpower in artificial intelligence.”
Yet, during his latest address, he shifted gears, announcing negotiations with data center companies to construct their own power plants, claiming this would “lower electricity prices” for consumers.
Details about Trump’s “ratepayer protection pledge” remain vague, though the White House has indicated that tech companies are expected to converge on Washington next week to formalize these agreements. This notion has been brewing since at least January when Trump mentioned his collaboration with Microsoft to ensure that Americans would not be left “picking up the tab” for the energy consumption of data centers. He has also allied with Democratic governors to urge the grid operator PJM to regulate energy prices and ensure tech companies contribute to power costs.
Brendan Steinhauser, a Texas-based GOP strategist, noted that this pivot suggests that Trump and his administration are keenly aware of the potential backlash.
“It’s smart for the administration to acknowledge concerns over energy prices and water usage,” said Steinhauser, who also leads The Alliance for Secure AI, a group advocating for more regulation of the AI sector. “They want to avoid the optics of allowing companies to operate unchecked while energy prices continue to rise.”
Democrats share this sentiment.
At least six Democratic governors—some of whom are eyeing the 2028 presidential race—used their state-of-the-state addresses to propose regulations or retract previous incentives for an industry they had once celebrated.
Illinois Governor JB Pritzker is now advocating for a suspension of tax incentives he had long championed to attract data centers. Arizona Governor Katie Hobbs aims to eliminate tax breaks for tech companies she once supported a decade ago and is also looking to introduce new fees for water usage. New York Governor Kathy Hochul, having positioned her state as a “national leader in AI research and innovation,” has unveiled plans to require data center operators to either pay more for energy or generate their own. Connecticut Governor Ned Lamont has indicated that his state will aim to “slow down new data centers” unless they augment local power generation.
Pennsylvania Governor Josh Shapiro, who previously streamlined permitting to promote his state’s AI ambitions, is now urging the legislature to establish “responsible infrastructure development” standards for data center developers, which would include local hiring and self-generated power to alleviate voter concerns. A recent survey from Quinnipiac University revealed that 68 percent of registered voters would oppose data centers in their communities, including 81 percent of Democrats, 67 percent of independents, and 53 percent of Republicans.
Shapiro insisted that his new regulatory measures were “not a shift,” but rather an extension of his ongoing efforts to balance job creation with “controlling energy costs.”
“I’ve always advocated for end-users to either generate their own power or cover the costs to ensure we don’t burden the local community,” Shapiro explained to POLITICO following the National Governors Association winter meeting. “We’re just making our expectations clearer, so prospective businesses in Pennsylvania understand the standards they’ll need to meet.”
The rapid increase of data centers in pivotal states has also propelled energy costs into the spotlight of crucial congressional campaigns. Advocating for regulations in the AI sector has become a rallying cry for insurgent candidates during primaries and a point of contention in competitive districts. Calls for a moratorium on new data center projects are gaining traction on both ends of the political spectrum.
Politicians are “starting to align with the views of their constituents,” noted Mitch Jones, managing director of policy and litigation at environmental firm Food & Water Watch, which is advocating for a pause on construction.
However, Maryland Governor Wes Moore, who has outlined similar regulations for new projects in his state, argued that a “binary” approach to data centers is misguided.
“When discussions about data centers arise, it often swings between the extremes of unregulated expansion or outright bans. Neither is an effective solution,” Moore stated in a brief interview at the NGA. “I recognize that this essential infrastructure is crucial for economic growth, but industry cannot dictate the rules.”
