AI is reshaping the US grid. According to S&P Global’s 451 Research, power demand from US data centers will almost double, from 366 TWh in 2025 to 728 TWh by 2030. EPRI estimated that up to 17 percent of total US electricity demand will come from data centers by 2030, a 60 percent upward revision from their 2024 forecast, driven by the accelerated pace of AI infrastructure development over the past year..
Despite that growth trajectory, nearly half of all US data centers planned for 2026 are expected to be either delayed or cancelled, according to Bloomberg. Transmission bottlenecks and interconnection queue delays have dampened data center deployments. Concurrently, domestic manufacturers of critical electrical equipment have struggled to keep pace with rising demand driven by data center build, grid expansion, electric vehicles, and heat pumps.
Developers have become reliant on foreign imports for transformers, switchgear, and other essential grid components.. Sourcing hardware is only part of the challenge. Deciding where to site facilities is becoming just as fraught.
Data center-driven power demand is geographically concentrated. As of 2026, 87 percent of existing data centers are located in urban areas, but ballooning costs are driving a geographic shift. In search of cheaper land, 67 percent of planned data center projects are now situated in rural areas.
This strategy, while working to reduce land costs for developers, has not remedied a different obstacle: community opposition.. As of February 2026, 38 percent of Americans live within five miles of an existing data center, and an additional 4 percent live near a planned site. A Gallup poll released in May 2026 found that seven in ten Americans oppose local data center construction..
Concerns related to data centers’ water consumption are making national headlines. In Fayetteville, GA, residents began reporting weak water pressure before officials discovered a nearby data center project had consumed nearly 30 million gallons of water through improperly tracked industrial hookups during statewide drought conditions.
In Box Elder County, UT, more than 3,700 complaints were filed against the water rights for a more than 40,000-acre AI data center campus, out of a county population of roughly 65,000.. Americans are also finding that living in proximity to a data center can drive expenses up. In Abilene, TX, the arrival of workers associated with a large-scale infrastructure project has driven up rental costs, contributing to a homelessness crisis, which the local government is struggling to resolve.
Meanwhile, the US Energy Information Administration (EIA) projects average annual residential electricity prices to increase by 5.1 percent in 2026 and by 2.4 percent in 2027, with rising data center demand cited among the contributing factors.. Despite these concerns, the Trump administration has consistently been supportive of data center builds.
In order to keep an open market for development, the White House has mainly focused on publishing multiple supportive Executive Orders, with the view that artificial intelligence is crucial for economic growth and national security.. With federal government focused on driving data center investment, states have taken it upon themselves to enact legislation seeking to address power constraints, siting issues, and environmental concerns.
Legislation aimed at regulating data center development has been introduced or enacted in more than 25 states since mid-2025. While the approach varies some, state-level legislation falls into three categories: restructuring incentives, imposing additional oversight, and controlling growth rates..
Minnesota’s Data Center Regulatory Law (Chapter 12), enacted in June 2025, introduces a new customer class for large facilities – including hyperscalers – imposes clean energy procurement requirements and annual peak demand-based fees, and eliminates the electricity sales tax exemption for data centers. Texas’ Large Load Planning and Infrastructure Act (SB 6), passed in the same month, required interconnection cost sharing, curtailment obligations, and enhanced oversight for large power consumers, also including hyperscalers.
Oregon, in April 2026, paused data center eligibility for enterprise zone property tax subsidies to allow a task force to quantify environmental impacts of data center development in the state.. What is notable about this legislation is its political diversity. Bills, much like community protests, are being introduced by both Republican and Democratic legislators in red and blue states alike.
Regulating data center development has become a genuinely bipartisan issue, a direct reflection of the breadth of community concern.. In response to state-level restrictions, the Trump administration released a “National Policy Framework for Artificial Intelligence” in March 2026.
This Framework does not enact binding regulation, but it does assert that the White House will work directly with the federal legislature to enact a “minimally burdensome national policy framework for AI”, and makes clear policy recommendations to Congress.. There are several solutions on the table for developers, each involving their own set of considerations.
The task for developers is less about finding a perfect option than about finding the right fit for individual project circumstances; as a result, several business models have emerged.. The utility partnership model, in which developers work to secure long-term PPAs, provides grid access and cost predictability but requires long lead times and exposes developers to regulatory and rate-case risk..
The behind-the-meter (BTM) models have also gained traction. In this approach, developers co-locate on-site power generation to reduce dependence on the grid. This approach reduces interconnection queue exposure but introduces its own permitting, fuel supply, and capital complexity..
Given the emerging state-level and regional restrictions, developers are now also seeking to diversify their regulatory risk exposure. In this geographic and regulatory diversification model, developers target jurisdictions with favorable regulatory environments, available land, and renewable energy access.
This approach has contributed to the rural siting trend, though as community opposition in places like Box Elder County demonstrates, lower population density no longer guarantees a clear path to community approval.. None of these solutions eliminate risk. Rather, each trades one exposure for another, and all remain vulnerable to policy shifts and community pushback that can arrive after a siting decision is locked but before a facility is energized.
The binding constraint has quietly shifted from whether power and land can be secured to whether a community and its regulators will not only say yes, but remain supportive throughout project development till commissioning.. What this means in practice is that risk exposure no longer ends at financial close; it has to be understood and managed across the full arc of a project.
It is a vantage point AFRY pays close attention to, tracking how regulatory, permitting, power-supply, and community risks evolve between a siting decision and energization – the period in which, increasingly, projects succeed or stall.. Priya Mehta, consultant at AFRY, contributed to this article..
30 Mar 2026. 25 Mar 2026
