New Restrictions On Data Centers Proposed In 2 Major Industry Hubs

As data centers become a prominent policy concern across the U.S., Virginia and Pennsylvania could soon change their oversight of the sector’s rapid growth.

Virginia lawmakers have filed more than 60 bills about data centers in the ongoing legislative session. The barrage of bills in the world’s largest data center market includes proposals ranging from outright moratoriums on new data centers to new environmental restrictions and measures meant to prevent the industry’s growth from driving up electricity prices. 

In Pennsylvania, Gov. Josh Shapiro, a Democrat, used his annual budget speech to lay out guidelines for data center development that he says will apply to future projects in the state. At the heart of this new framework is a requirement that hyperscale data centers “bring their own power” and fund the development of new generation to supply them with electricity, rather than relying on already strained utilities. 

Shapiro remains a vocal proponent of data center development in Pennsylvania. But his effort to manage the industry’s growth, as well as the growing momentum in Virginia to further regulate an industry for which it is the global epicenter, reflects the political tightrope elected leaders in major data center hubs are increasingly being forced to walk. They are grappling with how to balance the economic opportunity data centers offer with concerns about energy prices and the environment that are becoming top of mind for voters. 

“I know everyone in this room wants to see our economy grow and create more jobs and more opportunity, but I also recognize that this is uncharted territory,” Shapiro said in his address Tuesday. “We can play a leading role in winning the battle for AI supremacy, but we have to do it in a way that puts the good people of Pennsylvania first.”

The requirement that hyperscale data centers provide their own power aims to address what has emerged as a primary anxiety around large-scale data center development nationwide. 

As power demand from data centers exceeds what’s available on regional grids, the imbalance between supply and demand has caused utility bills in some markets to skyrocket. There are also fears that residential customers could foot the bill for billions of dollars of infrastructure projects that only serve data centers. 

PJM Interconnection, the operator of the grid that encompasses Pennsylvania and Virginia, has been at the epicenter of this growing political storm. Demand from data centers is estimated to increase households' utility bills by nearly $70 within two years. 

Shapiro’s plan would make Pennsylvania’s data center tax incentives and streamlined permitting process — both major draws for developers — contingent on hyperscalers paying for all the new power generation needed to serve them. In doing so, their new projects wouldn’t exacerbate grid constraints or push costs on to regular utility customers. 

Bring-your-own-power requirements aren't a novel policy tool. Various PJM stakeholders have long advocated similar measures across the PJM system. Shapiro co-signed a Trump administration letter to PJM in January urging the grid operator to make tech giants subsidize the development of new generation. 

The new generation requirements for Big Tech were just one leg in a framework the Shapiro administration has branded the Governor's Responsible Infrastructure Development standards. Other GRID measures are largely intended to address growing local frustration with data center development in the communities where these projects are taking place. 

More than 14 gigawatts of data center projects have been proposed in Pennsylvania over the last 18 months, and opposition at the local level is becoming more common. Organized opposition has stopped or delayed projects, and municipalities are increasingly pushing for new zoning regulations to curtail the industry’s growth. 

While this has created tension between some local governments and the Shapiro administration, the framework announced Tuesday includes measures to create transparency standards for data center projects and ensure community engagement from developers. It also proposes a set of specific environmental standards for data center projects. 

“If companies adhere to these principles, they will unlock benefits from the commonwealth, including speed and certainty in permitting and available tax credits,” Shapiro said Tuesday.

Groups opposed to the data center industry’s rapid growth in the state were critical of the governor’s plan, which they framed as industry-friendly lip service that doesn’t go far enough to curtail data centers' impact on the grid and the environment.

“Naming affordability and data centers as priorities in the same breath is outlandishly paradoxical,” Food & Water Watch State Director Megan McDonough told Philadelphia’s WHYY. “The two cannot exist together, no matter how hard Shapiro tries to spin the benefits of Big Tech’s power grab.”

Data centers may be a new policy issue in Pennsylvania, but they have long been a force on the political landscape in Virginia.

The new wave of proposed legislation is indicative of the increasingly central role data centers occupy in Virginia politics. The prior two legislative sessions saw the introduction of just 29 bills related to data centers. 

Many of the proposed measures focus on similar concerns about data centers’ effects on power reliability and electricity costs. One of the most sweeping proposals, House Bill 1515, would impose a temporary moratorium on data center development, barring local governments from approving new projects through July 2028 or until utilities fulfill existing interconnection backlogs. 

Among the other bills aiming at reducing data center power demand is HB 155, which would require the State Corporation Commission to review all data center projects to evaluate their impact on the grid and electricity prices prior to interconnection. 

Both bills drew vocal support from groups opposed to continued large-scale data center development. 

“This has gotten so large and unwieldy, and honestly, it is complete chaos in terms of planning for the energy infrastructure,” Julie Bolthouse, director of land use with environmental group Piedmont Environmental Council, told Virginia Public Media.

Among the dozens of other data center bills filed this session, many also focused on more stringent planning restrictions, giving local governments more authority to regulate new development, and creating more rigid environmental guidelines

These include measures allowing stricter enforcement of local noise ordinances, requiring developers to publicize water consumption estimates, and mandating data centers use batteries as their primary backup generation instead of diesel generators. 

Should any of the pending bills clear the Virginia Legislature, questions remain as to whether newly elected Gov. Abigail Spanberger, a Democrat, would sign them into law. 

Former Gov. Glenn Younkin, a Republican and proponent of data center development, rejected legislation passed by the commonwealth’s General Assembly last year that would have required data center developers to perform site studies and disclose a range of environmental impacts.