Yves here. This ban on the New York data center, even if it is only intended to last a year, has the potential to have far-reaching consequences. First, the moratorium gives New York time to develop regulations to limit its negative effects on water and air quality, as well as on the grid and energy prices. That may encourage other states to initiate their own regulatory processes, or later use New York’s framework as a starting point. Second, the very fact of the review of New York and its ability to encourage similar action elsewhere, especially given the high probability that the Democrats will receive benefits at all levels of government in the fall elections, that this measure can have a negative impact on the development of new data centers in general.
By Samantha Maldonado, who covers climate, sustainability, housing and development at The City Reporter. Originally published in The City Reporter
New York will impose a year-long shutdown on energy-intensive data centers, Gov. Kathy Hochul announced Tuesday – the first such ban in the country as officials consider the impact of growing areas on local areas.
Under the executive order, the state will not issue environmental permits for data centers of at least 50 megawatts for a year while the agencies develop regulations governing the projects, Hochul’s office said. His administration cast the decision as part of a larger effort to eliminate any harmful effects associated with data centers, such as their high water consumption for cooling servers. Institutions are becoming more important due to the rise of artificial intelligence technology.
“As data center development threatens to increase utility bills, deplete our natural resources and create uncertainty for New Yorkers, it is my responsibility to act 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 if companies succeed because of New York, New Yorkers succeed.”
Big data centers powering AI, Bitcoin mining and other heavy-computing operations have sprung up across the country, but New York has yet to see a breakthrough. However, a number of projects have requested to be connected to the state’s electricity grid and officials are looking to continue the expansion, The City Reporter previously explained.
Data centers often require a significant amount of energy and may strain an already aging grid, according to environmental activists and experts. Without equal expansion of the grid and increased electricity supply, advocates warn energy reliability could be shaky. But the cost of improving the grid could fall on ordinary customers, as utilities seek price increases to get a return on their investment in energy infrastructure.
Hochul’s order calls on the state’s Department of Public Works, which regulates utilities, to conduct a general environmental impact statement to assess the projects’ proposed effects on water and air quality as well as energy and water use. Such evaluations will not consider individual proposals but will assess the data center’s overall design and performance.
New York’s economic development arm, Empire State Development, will also develop a framework to help local communities negotiate revenue agreements for data center projects. Another possibility laid out in the administration’s plan: DPS could establish a fund that authorizes data centers to invest in the province’s electric grid and energy development.
New York is already weighing measures that would require data centers to hand over their power to avoid being taxed on the grid, or pay a fee to offset costs that fall on regular customers.
Hochul on Tuesday indicated that he would pursue legislation, when the state legislative session begins in January, to remove the sales tax exemption for data centers. In Rockland County, the $77 million in tax breaks the local agency gave JPMorganChase to expand a data center sparked outrage.
The data center freeze comes after state lawmakers this year passed a bill that would replace a year-long ban on the centers. That bill applies to data centers of at least 20 MW, smaller than those covered by the governor’s action. If enacted, the law would also set energy efficiency standards for projects.
Hochul has not said whether he will sign the bill, but his office said it is reviewing it.
