As developers eye Colorado for a wave of new data centers to power the AI boom, a new bill backed by environmental and consumer groups aims to shield residents from the impacts of the massive, energy-hungry facilities.
The legislation was introduced on Wednesday by state Sen. Cathy Kipp, a Democrat representing Fort Collins, and state Rep. Kyle Brown, a Democrat representing Louisville. It comes weeks after pro-business Democrats introduced a competing bill to lure more data centers to the state by exempting the developers from state sales and use tax, setting up an intraparty brawl over the hulking facilities.
“We tried to learn from what other states have experienced and build upon that,” Kipp said.
Colorado’s energy grid is already strained while demand for power continues to rise, and data centers require massive amounts of power.
If approved, the latest bill would require large data center operators to build or purchase enough renewable energy to cover their annual electricity usage beginning in 2031. By the same year, those developers must enter formal contracts with utilities lasting at least 15 years to cover the cost of any grid upgrades necessary to deliver reliable power to the facilities.
Other provisions would require developers to notify communities about their plans. Once a large data center opens, the operators will be required to report their annual energy and water usage to state health officials.
One goal of the legislation is to ensure Colorado holds onto the chance of meeting its climate goals. In states with far more data center development, utilities have delayed coal plant retirements or built new gas plants to power the facilities.
The legislation is also designed to ensure data centers cover the full cost of their energy usage, rather than relying on ratepayers to subsidize new power plants, substations and transmission lines necessary to power the facilities.
An analysis published last year by Carnegie Mellon University and North Carolina State University modeled the links between household energy bills and large power users, like data centers and cryptocurrency mines. Without policy changes, it found that those facilities could increase wholesale electricity costs by 8% nationwide by 2030.
A long list of climate and environmental justice groups have lined up to back the legislation. Last week, a letter co-signed by 54 organizations called on state lawmakers and Gov. Jared Polis to take action to ensure rising data center development doesn’t increase energy bills or leave residents breathing exhaust from backup diesel generators attached to most facilities.
“With energy bills and other household expenses at an all-time high, it’s imperative that data center companies pay their way to use Colorado’s infrastructure,” the signatories wrote in the letter. After all, many of the companies building data centers, such as Google and Microsoft, are some of the richest companies in the world.”
It’s unlikely, however, that either bill related to data centers will pass in its current form. State Rep. Alex Valdez, D-Denver, who is sponsoring the tax incentive bill, delayed the first hearing last week, saying backers needed extra time to finalize amendments.
The original version of Valdez’s bill included labor requirements and environmental standards. He said the additional changes will further tighten water conservation rules and add new transparency measures.
Valdez added that he’s open to a compromise with backers of the newer bill. At the end of the day, he said the state needs an approach that learns from the drawbacks of data centers in other states and maximizes potential benefits, like a boost to local sales tax revenue.
“Let’s say their bill doesn’t pass, and our bill doesn’t pass. All this stuff is going to end up in Wyoming, and it’s going to be burning fossil fuels,” Valdez said. “That’s an outcome as a true environmentalist I’m not okay with, but it seems like that’s an acceptable outcome for other folks.”
Kipp said backers of the more recent bill are also open to a deal.
“We are considering our bill as a living document. We want to keep taking people’s feedback to make it better,” Kipp said.
