Yves here. This New York data center ban, even if intended to be only for a year, has the potential to have much more significant effects. First, the pause is to give New York the time to develop rules to limit their bad effects on water and air quality, as well on the grid and energy prices. That may encourage other states to launch their own regulatory processes, or to later use the New York framework as a point of departure. Second, the very fact of the New York review and its potential to spur similar action elsewhere, particularly given high odds of the Democrats scoring gains at all levels of government in fall elections, is this initiative may have a chilling effect on development of new data centers generally.
By Samantha Maldonado, who covers climate, resiliency, housing and development at The City Reporter. Originally published at The City Reporter
New York will impose a yearlong moratorium on new energy-intensive data centers, Gov. Kathy Hochul announced Tuesday — the first such ban in the country as officials scrutinize the burgeoning sites’ impact on local environments.
Under an executive order, the state will not grant environmental permits for data centers of at least 50 megawatts for up to a year while agencies craft regulations on the projects, Hochul’s office said. Her administration cast the moratorium as part of a larger effort to tamp down on any harmful effects related to data centers, such as their substantial water use for cooling servers. The facilities are becoming more important due to the rise of artificial intelligence technologies.
“As data center development threatens to hike up utility bills, deplete our natural resources and create uncertainty for New Yorkers, it’s my responsibility to take action and lead,” Hochul said in a statement. “New York will lead the way in creating the strongest standards in the nation for data center development, ensuring that when companies succeed because of New York, New Yorkers succeed too.”
Large data centers powering AI, Bitcoin mining and other heavy-computing tasks have popped up across the nation, but New York has not yet seen a boom. Still, dozens of projects have requested connections to the state’s electric grid and officials have looked to get ahead of a wider proliferation, The City Reporter previously detailed.
Data centers typically require a significant amount of energy and may further strain the already aging grid, according to environmental advocates and experts. Without a commensurate expansion of the grid and boost in power supply, advocates warn energy reliability could falter. But the cost of upgrading the grid could fall to regular customers, as utilities seek rate hikes to get a return on their investments on energy infrastructure.
Hochul’s order calls for the state Department of Public Service, which regulates utilities, to create a generic environmental impact statement for evaluating proposed projects’ effects on water and air quality as well as energy and water use. Such assessments will not consider individual proposals but would examine data center construction and operations broadly.
New York’s economic development arm, Empire State Development, will also develop a framework to help local communities negotiate benefit agreements for data center projects. Another possibility set out in the executive order: DPS could establish a fund mandating data centers invest in the state’s power grid and energy development.
New York is already weighing measures requiring data centers to provide their own power so they avoid taxing the grid, or to pay a premium to stop the expense from falling on regular customers.
Hochul on Tuesday indicated she’d pursue legislation, once the state’s legislative session starts in January, to repeal sales tax exemptions for data centers. In Rockland County, the $77 million in tax breaks that a local agency greenlit for JPMorganChase to expand a data center sparked outrage.
The data center moratorium comes after state lawmakers this year passed a bill for another version of a yearlong ban on the facilities. That bill applies to data centers of at least 20 MW, smaller than those to which the governor’s action applies. If enacted, the legislation would also impose energy-efficiency standards on the projects.
Hochul has not indicated whether she will sign the bill, but her office said she is reviewing it./
