Proposed NC bill targets data center costs, power demand

As data centers drive a surge in electricity demand across North Carolina, lawmakers are proposing new rules aimed at making those facilities cover more of their own costs, including generating some of their own power.

The legislation, called the Ratepayer and Resource Protection Act, would require large-scale data centers to pay cost-based electric rates, cover infrastructure expenses tied to their growth and generate at least 25% of their electricity on-site using clean energy.

Supporters say the goal is to protect households and small businesses from rising utility bills as energy demand grows.

Several North Carolina communities have approved temporary moratoriums on new data centers as local leaders study their impact on energy use, water demand and costs.

“If a company wants to build a data center in North Carolina, they can,” said Rep. Lindsey Prather, a Buncombe County Democrat who introduced the bill. “They must simply pay their own way and stop shifting the cost onto you, me and families like ours.”

The proposal comes as utilities, including Duke Energy, warn that rapid growth in data centers — fueled by artificial intelligence and cloud computing — is accelerating the need for new power plants and grid upgrades.

Experts say the scale of that demand is significant.

“We’re looking at demand growth forecasts that are really nothing that we’ve seen since about the 1950s and 60s,” said Harrison Fell, a professor of agricultural and resource economics at North Carolina State University. “You’re basically adding a small city every time you add one of these data centers.”

The bill would apply to facilities with peak electricity demand of at least 40 megawatts, roughly enough to power 32,000 homes, or water use exceeding 1 billion liters annually.

Among its key provisions:

• Data centers must generate at least 25% of their electricity on-site using “clean energy.”
• They must pay electric rates that reflect the full cost of serving them, including new generation, transmission and distribution infrastructure.
• Local governments would be barred from offering tax incentives or subsidies.
• New water-use standards would require more efficient cooling systems and restrict certain high-consumption methods.

Lawmakers say those measures are designed to prevent “cost shifting,” where the expense of serving large industrial users is spread across other customers.

“Massive new costs through electricity generation and water needs have to come from somewhere,” Prather said. “When the state fails to act, families like mine bear the cost.”

North Carolina has attracted data center development in part because of relatively low energy costs and available infrastructure, making it a competitive location for new projects.

“This would be a significant addition to their costs,” Fell said. “I would not at all be surprised if a number of the proposed data centers withdraw those applications.”

State and local leaders have promoted data centers as major economic drivers, pointing to billions of dollars in investment and the potential for high-paying jobs.

That creates a balancing act for lawmakers weighing economic growth against rising demand on the grid, infrastructure needs and utility costs.

Powering facilities that operate around the clock adds another layer of complexity, particularly as utilities plan how to meet that demand.

Duke Energy has said growing electricity needs, including from data centers, are part of the reason it is planning to extend the life of some coal plants and build new natural gas generation.

Requiring data centers to generate 25% of their power on-site using clean energy would reduce how much electricity they draw from the grid over the course of a year.

“It’s part of the solution, not the whole of a solution,” said Anamika Dubey, an associate professor of electrical engineering and computer science at Washington State University. “It does help in reducing the annual energy need that these loads require, but not necessarily the complete burden.”

The remaining demand would still need to be met by the broader grid, especially during periods when electricity use is highest.

Electric grids are built to meet the highest-demand hours of the year, not the average day.

“It’s not just about the energy requirement,” Dubey said. “It’s also about when that energy is needed and whether it’s available at that time.”

That means even if data centers generate some of their own clean power, utilities may still need to build new generation to cover short periods of extreme demand — the hours that often drive the need for additional power plants.

Generating 25% of that energy on-site would reduce overall electricity use from the grid and the emissions tied to it, but it would not eliminate the need for new capacity to keep the system reliable during those peak moments.

Even with that reduction, meeting demand around the clock would still require a mix of energy sources, including fossil fuels, at least in the near term.

Stricter requirements in North Carolina could also have broader implications if projects move elsewhere.

“If they leave North Carolina and go to a state with a dirtier grid such as Indiana, then certainly from a CO2 emission standpoint, that would not be good,” Fell said.

The proposal is in its early stages, and it remains unclear whether it will gain traction in the Republican-controlled legislature.