Indiana Gov. Eric Holcomb, in blue, looks at an aerial overview of Google’s data center project in Fort Wayne during an announcement and groundbreaking ceremony on April 26, 2024. (From Holcomb’s official Flickr)
Citizens Action Coalition, a utility-focused customer advocacy group, on Tuesday called for a moratorium on new, large data centers.
Data centers house the computing equipment, network infrastructure and digital storage that we use to process, send, receive and store data. “Hyperscale” facilities are larger, and handle more.
The pricey facilities guzzle electricity. A single 1,000 megawatt hyperscale data center will use 52% more electricity than Indiana Michigan Power’s 420,000 residential customers combined used in 2023, according to a news release from CAC.
“Hoosiers must be fully protected from the rapacious resource needs, massive tax subsidies, and extraordinary utility cost burden associated with these facilities that could lead to skyrocketing utility bills across Indiana,” CAC Executive Director Kerwin Olson said.
He called on lawmakers to block new “hyperscale” data centers and to study what policies should be enacted before lifting the moratorium.
Olson said each Hoosier data center — eight are operating or have been announced — could earn billions in government subsidies.
Seeing green
Lawmakers enacted a data center-specific equipment sales tax exemption in 2019, before the boom in artificial intelligence propelled another boom in data center construction.
Computer equipment, software, security systems, cooling infrastructure and electricity qualify for the 7% exemption.
That “will provide a significant reduction in cost” for data centers, said Lauren Tanselle, an assistant director at the nonpartisan Legislative Services Agency’s Office of Fiscal and Management Analysis. She gave a statutorily required presentation before lawmakers on Tuesday.
Seven have been approved for the exemption, although the contracts for three remain pending.
In the short-term, Tanselle said, her office estimated that 63% of the data centers’ initial $14 billion to $20.8 billion investments — so, between $8.8 billion to $13.2 billion — could be spent on equipment that qualifies for the exemption.
A corresponding report noted that the estimates don’t account for labor and installation, which isn’t subject to sales tax. Using a U.S. Chamber of Commerce estimate — that 75% of data center equipment costs are in labor and installation — the exempt amount could be between $2.2 billion and $3.3 billion, according to the report.
In the long-term, Tanselle continued, data centers could save big. Electricity is approximately 40% of annual operating expense for data centers, according to the report. They’d also see discounts on routine equipment replacement.
Data centers get the benefits by meeting minimum investment thresholds: $25 million in counties with 50,000 people or less, $100 million in counties with 50,000-100,000 people and $150 million in counties with more than 100,00 residents.
The report noted that the incentive’s fiscal and economic impact “depends on the share of the investments that would not occur without it.”
It’s unclear if it’s worth it. Tanselle told curious lawmakers that “it’s still a little bit too soon” for a return on investment analysis.
The state also lets counties offer a data center property tax exemption, but Tanselle said it hasn’t been used yet.
Some projects have also been offered other incentives: business investment credits, redevelopment credits, economic development credits, workforce training grants and more.
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