Bill would hold data centers responsible for energy costs and environmental protections

After passing a series of landmark environmental bills in Illinois over the last few years, advocates and legislators are hoping to use that momentum to push through a new law that would regulate the growing data center industry in the state, ensuring efficient energy and water use and protections for ratepayers from rising utility bills.

“We cannot afford to be complacent now. As new industries emerge, we must continue strengthening regulations,” Lucy Contreras, Illinois state program director for GreenLatinos, said at a Wednesday news conference.

The growing use of artificial intelligence has drawn water-intensive data centers to regions where the resource is abundant, such as the Great Lakes, where experts say not all communities have the capacity to sustainably support the industry. The facilities also use massive amounts of energy that are driving electricity rates up for neighbors and nearby residents.

The POWER Act, introduced in collaboration with the Illinois Clean Jobs Coalition, would incentivize data centers to obtain power from local renewable energy sources and batteries, increase local accountability by setting water and electricity reporting requirements and water efficiency standards, and ensure community engagement.

“This is not too much to ask,” state Sen. Ram Villivalam, the bill’s House sponsor and a Democrat from Chicago, said at a news conference. “By establishing policies that ensure data centers, not consumers, bear the increasing energy costs and critical protections for our environment and sustainable water use, we can work towards a future built for technology to support our daily lives, not deplete our resources and price us out of our homes.”

The growth of this industry has brought forth a host of other challenges, including implications for labor — from economic opportunities created by new developments and from losses of jobs to artificial intelligence — as well as tight privacy laws in the state that pose hurdles for the industry.

Brad Tietz, director of state policy at the Data Center Coalition, said an “increasingly challenging regulatory environment” in Illinois has “unfortunately” led, in part, to billions in data center projects to bypass the state in favor of neighboring ones.

“While there are aspects of the bill we look forward to discussing, the Clean Jobs Coalition’s proposal as a whole would create significant uncertainty and market friction,” Tietz said in an emailed statement. “This would put the long-term viability of data center investment in the Illinois market at risk, at a time when Illinois has already become a declining data center market.”

The industry, he said, is “committed to working with policymakers and other stakeholders to promote policies that would help Illinois remain a competitive marketplace for data center investment.”

Lawmakers and advocates who are leading the bill say it creates plenty of incentives to keep the industry’s interest in operating in the state, within certain parameters.

“We don’t think it’s zero-sum,” said Brad Klein, managing attorney at the Chicago-based Environmental Law and Policy Center, who was involved in drafting part of the bill. “We don’t think it’s either-or.”

These include water and energy sustainability, as well as community participation.

Despite the abundance of surface freshwater in the Great Lakes — the largest system of its kind on Earth, providing for 40 million people — and of groundwater in the basin, a volume equal to that of Lake Huron, experts consider it a finite resource. Besides precipitation and snowmelt, inflow from aquifers helps replenish the massive bodies of water. But that still happens very slowly: Each year, only 1% of the Great Lakes is recharged.

“The region could go down a dangerous, unstable and inefficient path that impacts water supplies, businesses and water production,” said Andrea Densham, director of regional governmental affairs at the nonprofit Alliance for the Great Lakes. The resource “must be managed responsibly, for today and for tomorrow.”

The Lawrence Berkeley National Laboratory estimated that in 2023, data centers across the country consumed 17 billion gallons of water to cool down the massive, overheating computers and servers inside. It also projected that those figures could double or quadruple by 2028. This unprecedented demand, which uses water faster than it can be replenished, threatens to cause shortages in regions where the resource is already scarce and even where it is abundant.

Currently, data centers don’t have to report their water consumption; since the majority of data center operators obtain water from municipal supplies, like regular citizens, these companies are considered customers and not required to publicly disclose their usage or report it to a regulatory body. But it means communities cannot plan or anticipate demand or make informed decisions to ensure the availability of clean water, Densham said.

The POWER Act would also require data centers to assess cooling alternatives, such as closed-loop systems or reclaimed wastewater.

“By ensuring standardization and reporting requirements across this emerging industry here in Illinois, we can safeguard sustainable water and protect our state’s critical water supply for generations to come,” she said. “No more can data centers operate in the shadows. The public is demanding sunshine and transparency.”

The industry presents a similarly unprecedented strain on energy resources. A new report from the Union of Concerned Scientists, a nonprofit organization, found that current policies and regulations — or lack thereof — in Illinois, data center growth would increase electricity system costs by $24 billion to $37 billion by 2050 in order to build new generation sources. Recent trends indicate that data centers could account for almost 75% of electricity demand in the state by 2030.

“Such large increases in demand for electricity put pressure on our grid reliability and result in higher costs to ensure (a) stable supply,” said James Gignac, Midwest policy director for the Climate and Energy program at the union.

Klein with the Environmental Law and Policy Center said it would require the current electric grid to double in size.

“And that’s just not going to happen — economically, and just the laws of physics do not allow ComEd to magically double the size of its grid,” he said. “Nor do we have the generation in place to serve that much new demand.”

And, if the facilities are not required to obtain their power from clean sources but rely on gas and coal-fired plants, which release heat-trapping greenhouse gases, data centers could represent $2 billion in health costs and $124 billion in climate damages by 2050.

“All of these numbers have real-world impacts without safeguards in place,” Gignac said.

He said the POWER Act would create a “race to the top” by rewarding data centers that bring clean energy capacity and battery storage online with a faster grid connection.

It would also “encourage these new data center customers to get more creative,” said Klein.

The legislation also seeks to regulate data center siting so that vulnerable communities are not additionally overburdened — securing not just basic protections, but also real benefits, said Contreras, of GreenLatinos, a national network of Latino leaders advocating for a clean environment.

“Major industries repeatedly target vulnerable communities, like mine, for large developments, and data centers are no exception,” Contreras said. “These massive facilities drive up energy costs, drain precious water resources and worsen air pollution, yet they are often built with little to no community (involvement), leaving residents to shoulder the burdens while having no real say over the decisions that affect their air, water and land. This is unacceptable.”

Some protections and benefits included in the bill are requirements for cumulative impact assessments for siting near vulnerable communities, guarantees for public engagement through community benefit agreements and prohibitions on nondisclosure agreements with local governments, and a fund maintained by data centers to assist communities with energy bills, air quality monitoring and water infrastructure.

“Illinois is a top target for data center development, and without commonsense guardrails in place, we will no doubt suffer the consequences of the rushed buildout of these behemoth facilities,” said Jen Walling, executive director of the Illinois Environmental Council. “We can show the rest of the country that it’s possible to encourage responsible economic development while also protecting our water, energy, ratepayers and frontline communities.”

____