- Data center developers are facing mounting pressure from local communities
- States like New York and Michigan — along with federal lawmakers — are moving to put guardrails around AI infrastructure growth
- Operators say “responsible development” means early community engagement, funding their own grid needs, minimizing environmental impact and proving long-term local value
The data center boom is in full swing. But energy constraints, rising public backlash and increased government intervention have forced developers to grapple with the question of what responsible AI infrastructure development looks like going forward.
There is now a global pipeline of nearly 1,500 data center projects being undertaken by 74 different companies, according to Synergy Research Group’s latest count. Nearly half of these facilities will be built in the U.S.
"It is indisputable that constrained availability of power and rising local concerns over data centers are crimping many new plans for data centers,” Synergy’s Chief Analyst John Dinsdale said. “But it is also clear that data center developers will continue to find ways around those issues and that booming demand will continue to drive aggressive capacity growth.”
Some of the ways they’re finding around roadblocks – according to in-depth reporting by the New York Times – include speed and secrecy.
And so, with a seemingly unstoppable wave of data centers on the way, states across the U.S. have begun shifting from encouragement of data center investment to implementation of explicit guardrails for developers. The idea is to ensure these facilities are built responsibly – that is, in ways that don’t negatively harm the communities they’re built in.
Responsible development mandate
At the top of the list of resident and government concerns are those related to electricity and water consumption, and the impacts those have on residential bills. Citizens have also expressed concerns about noise, pollution, community character and tax breaks for developers.
This month, New York Governor Kathy Hochul signed an executive order pausing hyperscale data center development in the state for one year to allow officials there to create standards for responsible development. Michigan Governor Gretchen Whitmer, meanwhile, launched an action plan to ensure that companies pay the full cost of data center construction and operation.
On the federal level, Washington State Congressman Michael Baumgartner last month introduced legislation to ensure that AI data centers pay the full cost of power and water infrastructure needed to support them.
These efforts come in addition to the Ratepayer Protection Pledge the White House debuted in March, which calls on data center operators to protect the public from price hikes related to their energy requirements. Several hyperscalers as well as utility providers and 23 state governors have signed the pledge, though it’s not clear that there’s any enforcement mechanism for compliance.
Investment impact
Carl Fleming, global co-head of McDermott Will & Schulte’s Energy & Project Finance Group, told Fierce that moratoriums like the one implemented in New York state are “absolutely” changing the investment calculus for data center developers and financiers.
“What has changed is that investors increasingly recognize that development schedules can be dictated as much by local political dynamics as by engineering or construction considerations,” he said. “The market is becoming less willing to underwrite assumptions and more willing to underwrite demonstrated execution.”
Fleming added that sophisticated investors are starting to conduct “much deeper diligence around stakeholder engagement, permitting pathways, utility coordination, and political support before committing capital.”
The key, according to Fleming, is that while investors can tolerate cost increases, commodity fluctuations and even changes in market demand, they aren’t keen on uncertainty.
“Certainty is increasingly becoming a competitive advantage in infrastructure development,” Fleming said.
Putting it all together: To get much-needed capital for expensive data center builds, developers increasingly need to show that they’re on good terms with local officials, permitting authorities and utilities. And those locals are increasingly demanding responsible development.
What are data center operators saying?
So, what does responsible development look like from the data center perspective? Fierce took the question to QTS, which has or is planning to build data centers in 16 U.S. states and 5 European countries, and Digital Realty, which has more than 300 data centers in 55 metro areas across three continents.
QTS recently ditched plans for a massive 2,100-acre, 37-building data center campus in Northern Virginia – dubbed the Digital Gateway project – following a protracted legal battle and opposition from residents against the project’s proximity to a major Civil War battlefield park.
Digital Realty, meanwhile, is facing pushback on plans to build a data center in De Soto, Kansas.
A QTS representative told Fierce “responsible data center development means working with communities early, protecting ratepayers, minimizing environmental impacts, investing in local priorities and creating infrastructure that delivers long-term economic value.” The rep added that “communities deserve the opportunity to ask questions” and said QTS is committed to engaging, listening and working to plan infrastructure “while addressing local priorities and long-term needs.”
The representative said QTS “will fund our data centers’ energy needs” to help prevent costs from being passed onto utility ratepayers. That includes paying for “any upgrade or specific improvement to the grid needed to serve our data centers.” Alongside investor Blackstone, it also plans to build more power generation than its data centers use.
Additionally, QTS said it uses closed-loop cooling systems to minimize water usage and claimed its tax contributions and jobs at its facilities benefit local communities.
Data centers can generate significant tax revenue, though tax breaks can eat into realized benefits. And recent research from Brookings found that data centers do create jobs, but not as many as industry advocates claim and the number of long-term jobs is dependent on the type of data center facility. In Virginia, the largest data center market in the world, data center operators reported 1,197 net new jobs created on an investment of $32 billion in 2024 and 1,610 net new jobs on an investment of $48.6 billion in 2025.
Digital Realty CTO Chris Sharp told Fierce that responsible development means “engaging communities early, planning with utilities and local leaders before we commit to a site, and designing facilities with neighbors in mind.” It also extends to investments in workforce development, sustainability initiatives and “programs that create lasting value in the places we call home.”
Looking ahead, he said stakeholder collaboration will become increasingly important: “There are no quick fixes when it comes to power, water, or infrastructure capacity. That's why responsible growth requires industry, policymakers, utilities, and communities to plan together and continue working in partnership long after a facility is built – and it's why we welcome the transparency communities are asking of operators.”
Read more about data center development issues:
Oracle does damage control after New Mexico data center backlash
Podcast: Data Center 2.0—The New Sustainability Math
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AI power demand hits regulatory tipping point