Deep Dive: A Primer on Data Centers

One of the fastest-growing policy issues facing county governments is the rapid expansion of the data center industry.

Historically, data centers attracted relatively limited public attention and were often viewed as low-impact components of the broader digital infrastructure. However, as facilities have grown in size, increased in number, and expanded beyond traditional industrial areas, their impacts have become more visible to nearby communities and policymakers.

At the same time, the General Assembly has placed increasing attention on residential energy affordability and the significant growth in electricity demand associated with data centers. State-level decisions can have substantial implications for counties, both through their effects on shared constituents and because some proposed policy responses could alter or preempt elements of local authority.

As counties respond to growing public scrutiny of data center development, including calls in some communities for temporary moratoria or additional restrictions, the issue is likely to remain a significant focus of state and local policymakers. The following provides a primer on several of the most frequently raised concerns surrounding data center development and identifies the levels of government that generally exercise authority over each issue.

Top Four Concerns

Energy Demand and Utility Costs

One of the most significant issues associated with data center growth is the substantial amount of electricity required to operate these facilities. For much of the past several decades, U.S. electricity demand remained relatively stable as improvements in technology and energy efficiency offset growth in other areas. That period of relatively flat demand allowed energy planners to focus largely on system maintenance, reliability, and other policy objectives, including the transition toward cleaner generation sources.

The rapid expansion of data centers is changing that dynamic. Large-scale computing facilities require significant and continuous electricity, contributing to broader concerns about generation capacity, transmission infrastructure, system reliability, and customer costs. A July 2026 report from the Kansas Health Institute estimated that U.S. data centers consumed approximately 183 terawatt-hours of electricity in 2024, representing more than 4% of total national electricity consumption. The report projects that consumption could increase by approximately 133%, reaching 426 terawatt-hours by 2030.

Primary Regulator: State and Federal Governments

Counties exercise significant authority over land use and development, but regulation of electricity generation, transmission, distribution, and utility rates largely occurs at the state and federal levels. Counties may negotiate commitments related to energy infrastructure or community impacts through development agreements and other local processes, but they are generally not the primary regulators of electricity markets, utility rates, or regional energy supply.

Community Character and Aesthetics

As data centers expand beyond traditional industrial corridors, some communities have raised concerns about how these facilities fit within existing neighborhoods and development patterns. Data centers are typically large, secure structures with limited windows and extensive mechanical infrastructure, creating design and compatibility considerations that may differ substantially from other commercial or residential development.

Concerns may include building height and massing, setbacks, landscaping, screening, lighting, visibility of mechanical equipment, and compatibility with surrounding uses.

Primary Regulator: County Governments

Counties generally exercise broad authority over local land use, zoning, and development standards. These powers allow local governments to determine where data centers may be located and to establish requirements governing site design and development characteristics that address community concerns.

Environmental and Infrastructure Impacts

Data centers may also create environmental and infrastructure impacts that extend beyond the footprint of the buildings themselves. High-volume computing generates substantial heat, requiring cooling systems that may consume significant amounts of water or rely on other cooling technologies. Facilities may also use emergency or backup generators, which can create air-quality concerns, and large concentrations of computing and mechanical equipment can generate persistent noise.

Other potential considerations include wastewater discharge, stormwater management, transmission infrastructure, land disturbance, and the cumulative effects of multiple large facilities within the same area.

Primary Regulator: County and State Governments

Responsibility for these issues is shared between county and state governments. Counties exercise authority through land-use regulation, infrastructure planning, water and wastewater systems, development review, and other local regulatory tools.

The State also exercises substantial environmental regulatory authority, including approval of back-up generation, oversight of air quality, water quality, permitting, and other environmental standards. The respective roles of state and local governments may therefore vary depending on the specific environmental impact or infrastructure involved.

Broader Impacts of Artificial Intelligence

The growth of artificial intelligence has also introduced broader policy questions surrounding the data centers that support increasingly powerful computing systems. Public debate has focused on issues ranging from workforce displacement and economic disruption to privacy, cybersecurity, algorithmic decision-making, and the long-term societal implications of advanced artificial intelligence.

Although these concerns may influence public attitudes toward new data center development, many are distinct from the traditional land-use and infrastructure questions counties address through local development review.

Primary Regulator: State and Federal Governments

Regulation of artificial intelligence systems, digital markets, privacy, employment impacts, and other economy-wide or societal effects generally falls primarily within the jurisdiction of state and federal governments. While counties may regulate the physical development associated with data centers within the limits of local authority, broader regulation of how artificial intelligence is developed, deployed, or used is generally beyond the scope of traditional county regulatory powers.

Regional Competition and Consideration

Data center development can also generate significant new tax revenue, creating resources that governments may use to offset infrastructure impacts or advance other policy priorities. West Virginia, for example, has paired an aggressive data center development strategy with a framework for distributing the resulting revenue. Under the state’s plan, 30% of associated revenue would go to the county hosting the development, 10% would be distributed among counties statewide, 10% would support electric, water, and wastewater infrastructure, and the remaining 50% would be directed toward efforts to eliminate the state individual income tax. State officials estimate that two projects currently in planning or pre-construction could eventually generate more than $100 million annually for their host counties.

For county officials, this creates an additional consideration when evaluating data center development. Many of the industry’s largest externalities, particularly those involving electricity demand, transmission infrastructure, water resources, and environmental impacts, are regional rather than confined to the jurisdiction hosting a facility. A county that chooses not to permit data centers may therefore avoid some localized impacts, but that decision does not necessarily prevent development elsewhere in the region. Neighboring jurisdictions may approve projects whose infrastructure and energy impacts extend across county lines, potentially leaving a county exposed to some of the broader effects of data center growth without receiving the direct tax revenue associated with hosting the development. This dynamic does not necessarily favor permitting or restricting data centers, but it underscores the importance of considering both local and regional consequences when evaluating development policy.

Conclusion 

Data center development does not present counties with a simple choice between growth and restriction. These facilities can generate significant investment and tax revenue, but they can also create substantial negative externalities. Complicating that balance is the fact that many of the most significant impacts do not stop at county lines. Electricity demand, transmission needs, water resources, and environmental effects can be regional, even when the direct economic benefits of a project accrue primarily to the jurisdiction where it is located.

For county officials, that makes the division of authority particularly important. Counties remain central to decisions involving land use, siting, infrastructure, and community compatibility, while many of the larger questions surrounding energy markets, utility costs, and artificial intelligence are primarily shaped at the state and federal levels. As policymakers consider new approaches to data center development, the challenge will be developing a framework that recognizes legitimate statewide and regional interests while preserving an appropriate role for counties in managing the direct impacts of development on their communities.


Want to learn more about Data Centers? Check out The Briefing Room’s in-depth conversations:

This article is part of MACo’s Policy Deep Dive series, where expert policy analysts explore and explain the top policy issues of the day.