Tax Breaks, Gas Plants, and Grid Strains

Another week, another round of headlines highlighting the familiar dance between our ever-expanding digital footprint and the tangible world it relies upon. From coal plant revivals and a natural gas boom to local backlash and a state-by-state scramble to woo hyperscalers, here’s what’s making news in the world of data centers.

Fossil Fuel Recommissioning and Revival

If this week’s headlines make one thing clear, it’s this: power is everything in data center development – and operators are desperate to get it.

Take the U.S. trend of turning yesterday’s coal plants into tomorrow’s compute hubs. According to AP News, decommissioned coal-fired power plant sites are getting a new lease on life, with projects like the $10 billion natural gas-powered data center campus in Homer City, Pennsylvania, leading the charge. These sites offer something modern data centers desperately need: existing high-voltage grid infrastructure.

While these locations are being positioned to support a new generation of power plants – whether that’s nuclear, wind, solar, or even large-scale battery storage – natural gas is the current favorite for these redeveloped sites.

It’s all part of a broader trend: the data center industry’s growing entanglement with fossil fuels. Like the project in Homer City, Solaris has inked a seven-year deal to supply 900MW of natural gas power to a major unnamed data center operator, underscoring how natural gas remains a go-to for the rapid deployment.

This fossil-fueled future is not always welcomed with open arms. Elon Musk’s xAI has sparked controversy in Memphis over its use of 35 methane gas turbines – minus the proper air permits – raising pollution concerns in an already overburdened community. Meanwhile, Meta’s $10 billion AI-focused campus in Richland Parish, Louisiana, is stirring up a heated debate over Entergy’s plan to build three new natural gas plants – at a cost of $5 billion – to meet the massive power needs of Meta’s data center. The kicker? Entergy wants to recoup those costs from its 1.1 million customers, a move that’s drawing sharp criticism from consumer advocates and climate groups, who see it as a public subsidy for Big Tech’s energy appetite.

Still, signs of a broader interest in greener energy alternatives are present. Texas is making a calculated bet on advanced nuclear, with the state pouring $2 billion into next-gen nuclear reactors through partnerships with TerraPower and X-energy. 

States Roll Out the Red Carpet

The AI gold rush has states scrambling to offer increasingly generous incentives to lure in data center operators.

Michigan and Colorado are the latest to roll out incentives, with Michigan passing new tax exemptions to lure in hyperscalers like Google and Amazon. The move has its critics – namely, those pointing out that these facilities often consume resources without offering much in the way of permanent jobs.

Colorado isn’t far behind, advancing legislation that would offer nearly $17 million in tax breaks for AI-powered data centers. 

The South also has some big data center developments in the works: Digital Realty just filed plans to build a 400MW campus in Charlotte, while Dominion Energy is planning new high-voltage lines to power a proposed 900MW behemoth facility in Chesterfield County, Virginia.

But who should foot the bill for this ever-expanding infrastructure? That’s the hot topic in South Carolina, where policymakers are debating whether data centers should pay higher rates to cover the cost of new power generation.

Scaling Up and Reaching Out

Zooming out, the past week also brought major investment announcements from tech’s biggest players. Microsoft announced that it plans to boost its European data center footprint by 40%, expanding to 16 countries with annual investments reaching tens of billions of dollars. The tech giant also pledged to protect its local European operations amidst rising trans-Atlantic tensions.

Meanwhile, IBM is investing $30 billion in quantum and mainframes – part of a $150 billion U.S. spending spree to ensure it stays at the forefront of next-gen computing.

While IBM and Microsoft pour billions into compute capacity, power providers are quietly cashing in on the infrastructure needed to sustain it. Dominion Energy, for one, has reported a 32% earnings surge in Virginia, largely driven by the relentless appetite of Northern Virginia’s data centers.