How Missouri communities can keep data centers from raising utility bills | Opinion

Many communities are unsure how to respond to data-center proposals.

The upside is real. Data centers have multibillion-dollar assessed valuations that can bring significant tax revenue, expand the tax base and allow for lowering tax rates for everyone. Loudoun County, Virgina — part of “Data Center Alley” — is a clear example. There, data centers account for almost half of property tax revenues, enough to fund every county function outside the school system.

But there are costs, too. A single 100-megawatt data center can use 80,000 households’ worth of electricity and consume, on average, 2,600 households’ worth of water. Hyperscale facilities push that further, and can have power draws of 1,000 megawatts, which is comparable to the output of the Callaway Nuclear Energy Center, one of Missouri’s most powerful generators. That kind of load can seriously strain infrastructure.

Further complicating matters is the fact that technology can change quickly, especially when billions of dollars and national security interests are at stake. Computing power that once required hardware that filled warehouses can now fit in a pocket or be worn on a wrist. A decision that originally seemed reasonable when a proposal was first presented might not age well if the costs or benefits of a data center change as a result of technological advances.

Missouri has already taken some action to limit ratepayer costs resulting from new data centers by requiring large data centers to pay their share of costs for connecting to the grid, such as for transmission lines. But Ameren recently stated:

All Ameren customers, including residential customers, pay for expanding the grid through building new power plants through rate increases, and that may be needed to accommodate large-load customers.

This means that average ratepayers would likely pay for new power plants constructed to meet data center demand if Ameren or Evergy does indeed need new power plants. But even this could change based on how major technology companies implement their recently signed Ratepayer Protection Pledge with President Donald Trump.

One promising state-level solution are private electricity grids, also called consumer regulated electricity or CRE. This could create a parallel path for energy generation, help protect ratepayers from risk and accelerate capacity buildout and innovation for both data centers and power plants. In addition, letting large-scale energy consumers such as data centers work directly with energy producers would alleviate pressure on the government to meet every aspect of this complex challenge. New Hampshire became the first state to allow CRE, and the U.S. Congress is considering a federal CRE policy. Similar solutions can be implemented for water usage.

Locally, the most important thing communities can do is resist offering large tax incentives in order to attract data centers. Beyond the digital services they support, the primary local benefit data centers provide is tax revenue. Unlike many other industries, data centers generally do not create large numbers of long-term jobs, generate substantial secondary development or attract tourists. If local governments drastically reduce tax collections through incentive packages, they would give up the primary benefit of hosting a data center while asking residents to absorb many of the significant costs.

Currently, developers are scrambling to find suitable locations. We don’t need to bribe them to come here. At Missouri’s Nuclear Energy Summit at the University of Missouri, numerous development experts noted how electricity availability and speed-to-operation had moved to the very top of many industrial corporations’ priority lists. Communities with reliable electricity, sufficient water and advantageous locations are already attractive. Reforms such as CRE could make Missouri even more competitive while ensuring that investors rather than ratepayers take on the risks that data-center projects bring.

The best approach is patience. If communities resist handing out tax incentives, ensure that additional revenues turn into broad tax cuts and focus on removing barriers that could hinder timely development, then data centers could become a genuine opportunity rather than a threat.

Avery Frank is a senior policy analyst at the Show-Me Institute, a 501(c)(3) nonprofit that promotes market solutions for Missouri public policy.