- Michigan’s proposed legislation aims to attract high-tech data centers with tax incentives, despite concerns that these facilities could hinder state climate goals and increase local resource consumption.
- Critics argue that these data centers’ energy and water demands could compromise Michigan’s climate plan and strain the Great Lakes, escalating costs for local residents.
- Environmental groups advocate for amendments to the legislation to enforce renewable energy use, water conservation, and consumer protections to mitigate environmental and economic impacts.
Legislation moving through the Michigan Legislature would position the state to attract new high-tech data centers, but opponents fear the energy-intensive operations will destroy the state’s recently passed climate plan while draining the Great Lakes of large quantities of water.
The bills would offer state tax incentives for tech giants like Google and Microsoft to build data centers that consume “massive amounts” of energy and water, a coalition of environmental groups and lawmakers opposed to the legislation as written say.
The spike in energy consumption generated by data centers would likely derail Michigan’s nation-leading climate plan, which calls for 100% renewable energy use in electricity generation by 2040. The climate legislation approved last fall includes an “offramp” that would keep gas or coal plants running if renewable sources cannot handle the load from the grid.
Opponents say the data center electricity use surge would likely trigger that exception while also increasing residential consumers’ electric rates.
Meanwhile, the centers would potentially consume millions of gallons of water daily. The state’s freshwater and climate plan are “hugely important,” Abby Clark, midwest campaign manager for the Natural Resources Defense Council, told Planet Detroit. She said Silicon Valley tech giants’ plans present a dangerous threat to both.
“We have to be careful … that if some of these companies bring these facilities here, that we’re protecting our freshwater resources and our great climate policies,” she said
Data centers consume huge amounts of energy because they house servers and networking equipment that process and store massive amounts of the world’s digital traffic. The U.S. Department of Energy labeled them one of the most “energy-intensive building types,” consuming up to 50 times more energy per floor space of a typical office building.
They have emerged as an environmental threat because they require such high levels of resources to operate. Tech companies need to build more of them fast, a boom partly driven by the growth of artificial intelligence.
In a statement sent after publication, Sen. Kevin Hertel, one of the bills’ authors, said the legislation includes “more language to address environmental concerns than any of the 30 other states that have this tax policy in place currently.” He noted the required energy efficiency standards for the buildings, but the language does not address the issues raised by environmental groups.
“We are continuing to work with environmental organizations and others to address the concerns around energy and water use and to protect ratepayers,” he said.
Data centers boom across the country
Data centers are a problem in other states around the country. For now, they have derailed Virginia’s clean energy plans, while Wisconsin is considering building new gas plants or keeping fossil fuel plants online to serve data centers.
House bills for the Michigan data centers were quietly approved in the State House the day after the climate legislation passed, and bills have moved through the Senate in recent months.
“Everyone is starting to freak out and panic because data centers weren’t being built that fast six months ago,” said Christy McGillivray, legislative and political director with the Sierra Club Michigan, which is pushing for environmental protections in the legislation.
The Senate’s version of the bill is back in the House for approval, and a second bill related to the plans is in the Senate.
Environmental groups are trying to change the bills so that they include provisions requiring the companies to develop renewable energy generation to accompany their projects, as well as water conservation measures and consumer protections.
State Sen. Rosemary Bayer (D- West Bloomfield), who opposed the already-approved Senate bill because the centers are “massive users of electricity and water … unlike any other business,” proposed an amendment that would have required water conservation, ratepayer protections, and investment in renewable energy, but it was never attached to the legislation.
Bayer told Planet Detroit she is unsure why the amendment was not voted on, but she suggested that tech companies may want to implement the conservation practices outlined in the amendment and that “there’s a lot of pressure on legislators to do what they want.”
Michigan’s target year for reaching 100 percent clean electricity is 2040 – as fast or faster than every state except for Rhode Island. The law requires the state to generate all of its electricity from wind, solar and other carbon-free sources, and eliminate coal and gas-fired power plants.
Michigan taxes and a new data center
Opponents also attacked the tax credits. A data center is, in effect, a “glorified warehouse,” Clark said, and it creates few jobs.
The average cost per subsidized job at data centers nationally is $2 million, said Kasia Tarczynska, an economist with Good Jobs First, which tracks data centers and tax incentives. The nonpartisan Senate Fiscal Agency found the incentives would cost at least $95 million or more in lost state and local tax revenue through fiscal year 2065-66.
“At this rate, it is impossible for the public to recoup invested revenue … and it’s truly a race to the bottom,” Tarczynska said during a Monday morning press conference in which environmental groups and local leaders voiced opposition to the plan.
Draining the Great Lakes, driving up water costs
Large data centers can use between 1 million and 5 million gallons of water per day in evaporative cooling systems.
That’s many times more than the amount that caused controversy over a Nestle bottled water facility in Evart in 2016. The facility proposed pulling just 576,000 gallons per day—nearly four times less than a typical data center.
“This is a huge problem for the state of Michigan, that we would be giving away our water again for more corporations to turn a profit,” Clean Water Action Director Sean McBrearty said on a press call. Moreover, Michigan legislation would require the water to come from a municipal source, which could impact local water rates.
Data centers do not need to use such water-intensive systems, but they are the cheapest method available, McBrearty said. An alternative is air conditioning, which would use more power, but could be offset by onsite renewable energy production. Closed-loop systems are also a possible alternative.
McBrearty called on the Michigan Legislature to prohibit data centers from using evaporative cooling systems.
“This legislation moved so fast that there was almost no research on anyone’s part to figure out the right way to do this,” McBrearty told Planet Detroit. “There’s still a chance to do that.”
Pontiac City Council Member Mikal Goodman highlighted the broader context of water affordability and resources for basic services throughout the state. Thousands of state residents, many in communities of color, cannot afford water and have it shut off or face legal punishment for turning it back on, he said during the press conference.
The state has failed to move water affordability legislation, Goodman added, but at the same time, wealthy corporations get “free reign and access to whatever water they want.”
“Yet there are so many people in my community or in communities near mine that have an issue affording water bills,” Goodman added. “When we are willing to throw it at any corporation that wants it – that is deeply problematic”
Increasing electric costs for residential ratepayers
The centers would require infrastructure improvements, upgrades and additions, McBrearty said, noting that residential ratepayers would likely shoulder most of those costs,
Michigan’s 2016 energy bill shifted much of the state’s energy cost burden from large industrial and commercial users to individual residential customers. That helped send residential rates soaring while the state has continued to lower rates for industrial users.
“These companies will be paying an industrial rate which covers the cost of the energy, but not the cost of the infrastructure and infrastructure upgrades,” he said.
Though many tech companies have their own climate goals in place, advocates said they are unaware of examples of companies building renewable energy projects alongside data centers.
Meanwhile the strain on the state’s electric grid is expected to increase as the economy electrifies and consumers move toward electric vehicles and heat pumps.
Utilities already offer load forecasts that predict demand that would require coal plants to stay online, and the data centers will make the utilities’ case even stronger, said Charlotte Jameson, chief policy officer for Michigan Environmental Council.
Ultimately, Jameson said, the state must decide between its climate plan and requiring tech giants to power their projects with renewable energy.
“I don’t see how we can meet our climate goals if we allow one or more data centers to locate here without corresponding renewable energy components,” she said.
Still, lawmakers and advocates want to add consumer price protections and environmental safeguards to the final legislation.
Even then, Bayer noted that any requirement that tech companies use renewable energy or provide additional protections for residential ratepayers and water conservation stipulations would only apply to projects that use the tax incentives. The state must develop other requirements for those that do not, and the process is complicated because data centers are so new in Michigan and elsewhere.
“I don’t think anybody thought about this, so nobody was prepared,” Bayer said. “So we’re trying to avoid these problems but trying to find the answer to something that complex is not simple – that’s the bottom line.”
Planet Detroit contacted DTE Energy, Google and Amazon for comment, but they did not immediately respond.
Brian Allnutt contributed reporting to this article.