The rising development of data centers - being used to power AI tools and cloud services - are increasing energy and water demands across the Western US.
If current trends continue, new data centers in states such as Arizona, Colorado, Nevada, New Mexico and Utah could collectively use billions of gallons of water annually. This is especially concerning for the West, where water resources are already severely constrained.
A new report from Western Resource Advocates highlights the need for policies to manage data center development, water use, and energy consumption. States need smart policies to turn this challenge into a clean energy opportunity—while protecting everyday customers.
Here are the key takeaways:
- Fund Green Growth with "Clean Transition Tariffs": Mandate or incentivize large data centers to use special tariffs. This forces them to directly fund and commit to purchasing power from new, innovative, zero-carbon projects (like advanced geothermal or long-duration storage), keeping the costs and risks off general ratepayers.
- Encourage On-Site Clean Power: Expedite approval for data centers that use behind-the-meter (BTM) zero-carbon microgrids and battery storage to meet their needs. However, ensure they still pay their fair share for using the wider grid's services (like transmission).
- Require Efficiency & Flexibility: Make cutting-edge energy efficiency and participation in demand response programs (curtailing power during peak times) a non-negotiable condition for interconnection. This helps manage system demand and avoids costly infrastructure upgrades.
- Fix Load Forecasting: Regulators must create new rules for utilities to manage speculative data center load forecasts. Use weighting factors for uncertain projects, require data centers to disclose duplicate applications to other utilities, and include financial penalties (like long-term contracts and exit fees) to protect customers from paying for infrastructure built for projects that never materialize.
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