Connecticut leaders are weighing the stress that massive data centers could place on the region’s power grid against the economic opportunities they offer, as rapid advancements in technology accelerate demand for data processing capacity.
A proposal to study how large-scale data centers might affect the reliability of the state’s electric grid is drawing opposition from those who say it would delay critical development.
The General Assembly’s Energy and Technology Committee heard public testimony Thursday on the proposal. The legislation would require the Public Utilities Regulatory Authority to conduct the evaluation with the Department of Energy and Environmental Protection, the Office of Consumer Counsel and ISO-New England, the nonprofit corporation that manages the region’s power grid. It calls for the effort to be completed by July 1 of this year.
Leaders with DEEP and the state’s Department of Economic and Community Development took opposing stances on the measure.
“The demand and need for data centers is expanding significantly to keep pace with the needs of AI expansion and may constitute approximately 8% of U.S. energy consumption by 2030,” DEEP Commissioner Katie Dykes told the committee, expressing her agency’s support for the bill, S.B. 299.
“It’s really important to have the right framework to ensure that there’s equitable deployment of this kind of demand that doesn’t shift any costs — or increase costs — to other ratepayers and is harmonized with the need to maintain reliability of the grid,” Dykes said.
In written testimony, DECD Commissioner Dan O’Keefe urged the committee to shift the focus of the study.
“Instead of studying the impact of data centers on the grid, the state [should] instead study ways to support data centers on our grid to leverage the greatest economic benefit they enable,” he wrote.
Fostering more data center development is critical, O’Keefe argued. “We cannot afford to have them built first elsewhere, as these new computing technologies are important for our economic future,” he wrote. “It is in the states and communities where these data centers are ultimately built that the greatest economic benefits will accrue. We need that to happen here, in CT, and there is a limited window of opportunity in which to act.”
Three years ago, the legislature moved with urgency to pass a bill creating tax incentives to encourage data center development in the state. The program waives sales and property taxes for 20 years on data centers that invest at least $200 million in the state — or just $50 million if the facility is located within a state-designated enterprise zone. The tax exemptions may be extended up to 30 years with a larger investment.
Since the incentive was signed, a small number of developers have taken initial steps to begin data center construction in a few Connecticut towns. One major project — a hyperscale, 300-megawatt development on the site of the Millstone nuclear power station in Waterford — is closest to breaking ground. The developer behind that project, NE Edge, signed what’s known as a “host fee agreement” with the town last March, promising to pay a fee of $231 million over 30 years in lieu of property taxes, as provided for in the 2021 legislation.
The project consists of two 2-story data center facilities capable of processing the massive amounts of data required by AI and other advanced technologies. NE Edge would purchase power directly from Dominion Energy in a “behind-the-meter” agreement that would significantly reduce energy costs for the data centers.
NE Edge founder Thomas Quinn said if the legislature calls for a study now, it could significantly delay the project and lead to Connecticut potentially losing out to other states that are racing to build hyperscale data centers. (Quinn was closely involved in proposing and advocating for the 2021 legislation.)
“The market is ready for an AI boost, and we want to get this done while we’re still in the game,” Quinn said.
Quinn testified on S.B. 299 before the Energy and Technology Committee late Thursday, describing a wide range of economic benefits the Millstone project would generate and urging lawmakers not to approve the study. He noted that he’d discussed with DECD the potential for the data centers to provide services to the state at a discounted rate.
“This just slows us down for absolutely no reason,” Quinn told the committee.
S.B. 299 also drew opposition from the Connecticut State Building Trades Council, which has signed a project labor agreement with NE Edge for the construction of the data centers, according to written testimony.
Advocates from the Sierra Club, the Connecticut League of Conservation Voters and Save the Sound offered testimony in favor of the proposed study.
Lori Brown, executive director of CT League of Conservation Voters, encouraged the committee to expand the study’s scope.
“Data centers are one of the most energy-intensive building types, consuming 10 to 50 times the energy per floor space of typical commercial buildings,” Brown said. “We’re asking that the environmental and climate impacts be part of any study that you do to assess the impacts of data centers on the regional electric grid.”
Sen. Norm Needleman, D-Essex, who co-chairs the committee, said the legislation was specifically drawn up with the NE Edge project in mind. He said he was concerned with one technical aspect of the development: that the data center, powered directly by Millstone, would at times draw on the regional grid as its backup power source.
“My concern is not with having a data center,” Needleman said, reminding those at the hearing that he’d shepherded the 2021 legislation through the legislature. “It’s with having a very significant sized data center behind the meter at a nuclear power plant — backed up by the grid — and what the potential impact is.”
He said later: “I just want to make sure, as chair of the Energy Committee, that we don’t screw up the grid.”