Data centers powering artificial intelligence are forcing governments worldwide to choose between protecting consumers from rising electricity costs and enabling the infrastructure that tech companies say is essential for AI innovation. In North Carolina, a new bill aims to shield ratepayers from data center costs while simultaneously fast-tracking fossil fuel projects. Meanwhile, Australia faces a similar tension as it tries to match explosive data center growth with renewable energy development.

What's Driving the Data Center Boom Right Now?

The surge in data center construction is almost entirely driven by artificial intelligence. Companies including OpenAI, Anthropic, Amazon, and Microsoft have all announced plans to build AI capacity in Australia alone. These are not traditional data centers; they are massive "AI factories" designed specifically to train and run AI models. The scale is staggering. Australia's proposed 1.2 gigawatt Mamre Road Data Centre in Sydney would become the country's largest single energy user, surpassing even the Tomago Aluminium Smelter by over 25 percent.

The energy demands are growing faster than anyone anticipated. Australia's energy market operator expects data center electricity demand to triple to nearly 12 terawatt-hours by 2030, equivalent to roughly 6 percent of the country's entire grid, or enough to power all homes in Victoria. By 2049-50, data centers are projected to consume approximately 34 terawatt-hours, or around 12 percent of Australia's power.

How Are Lawmakers Trying to Protect Ratepayers?

In North Carolina, the Ratepayer Protection Act, known as Senate Bill 730, takes a direct approach to limiting data center impacts on consumers. The bill's first section includes several consumer protections that have earned praise from environmental advocates and progressive lawmakers:

• Eminent Domain Restrictions: Data center developers would be prohibited from using eminent domain to seize private land for their projects, protecting homeowners from forced sales.
• Economic Incentive Limits: Local governments would be forbidden from offering tax breaks and other economic incentives to data center developers, reducing the public cost of attracting these facilities.
• Ratepayer Cost Shield: North Carolinians would be protected from paying higher electric bills as a direct result of data center operations, shifting costs away from residential consumers.
• Environmental Impact Assessments: Data centers of 100 megawatts or larger would be required to conduct site assessments examining noise impacts within 500 feet, effects on groundwater and surface water, air quality, heat plumes, farms, parks, and historic sites.

"I couldn't ask for more in this political climate than what is in part one," said State Representative Pricey Harrison, a progressive Democrat from Guilford County, noting that the data center regulations represent a significant bipartisan achievement.

Pricey Harrison, State Representative, North Carolina House of Representatives

What Are the Weaknesses in Current Protections?

Despite the progress, environmental experts warn that the protections have significant gaps. Water management is a particular concern. Data centers require enormous volumes of water for cooling, and industry estimates suggest water demand will triple by 2030 in Australia. Sydney Water is receiving applications for single data centers requesting up to 40 million liters daily, equivalent to 16 Olympic swimming pools.

Amy Adams, deputy and programs director for Southeast Climate and Energy Network, explained that the bill's water protections are insufficient. "No closed-loop system is 100 percent closed," she stated. "Every loop has an entry point. Every loop has its losses. It has chemicals, it's not magic, it's not creating water, it's not purifying water." Adams recommended that the bill include a prohibition on potable water use and numeric caps on water withdrawals, rather than vague terms like "de minimis" and "maximum extent possible".

"There is zero requirement that says that the public gets to know that the data center won't impair the water supply. This should not be a private business decision. It's a public resource," explained Amy Adams.

Amy Adams, Deputy and Programs Director, Southeast Climate and Energy Network

Another weakness is transparency. Current state law allows data centers to keep secret many aspects of their operations, including the amount of tax exemptions they receive and their water and energy usage. The bill does nothing to change this.

Why Are Fossil Fuels Getting a Boost From Data Center Legislation?

The North Carolina bill reveals a troubling political compromise. While the first section protects ratepayers from data centers, the second section would fast-track environmental permits for fossil fuel projects and could further delay the retirement of coal-fired power plants, potentially eliminating Duke Energy's goal of carbon neutrality by 2050.

The bill would require state environmental regulators to offer expedited permitting for projects involving "the generation, distribution or transmission of energy or fuel, including natural gas, diesel, petroleum or electricity." This creates a perverse incentive: as data centers demand more power, the state is making it easier to build the fossil fuel infrastructure to supply it, rather than investing in renewable energy.

State Representative Dean Arp, a Union County Republican, framed the bill as a solution to rising electricity rates. "The whole bill is about reducing rate payer cost for energy, they're getting squeezed," he said at a May committee meeting. However, experts note that fuel prices and fossil fuel infrastructure buildout are largely responsible for the rate increases in the first place.

What Could Go Wrong if Data Centers Outpace Renewable Energy?

Australia's experience illustrates the stakes. If data center growth is not matched with new renewable generation and storage, wholesale electricity prices could increase by more than 20 percent across the main grid by 2035, with increases reaching 26 percent in New South Wales and 23 percent in Victoria. Since wholesale prices make up roughly 40 percent of a typical residential power bill, these increases would significantly impact households and businesses.

The uncertainty is compounded by "phantom demand." Network service providers are receiving large numbers of connection requests from data centers, but some applications are being made for projects that will never materialize. In New South Wales, 44 data centers totaling 11.4 gigawatts are in the development pipeline, yet industry estimates suggest only 1.2 gigawatts will actually come online by 2030. This mismatch makes it difficult for grid planners to invest in the right renewable energy infrastructure.

How Can Governments Balance Data Center Growth With Clean Energy?

Experts and advocates recommend several steps to align data center development with renewable energy goals and consumer protection:

• Lower Regulatory Thresholds: Expand data center regulations to facilities of 50 megawatts or larger, aligning with the definition of large-load customers and capturing more facilities that impact local communities.
• Strengthen Water Protections: Implement numeric caps on water withdrawals and consumption, prohibit potable water use, and require public disclosure of water usage and cooling chemicals.
• Extend Noise Study Distances: Expand noise impact assessments to one mile from the property line, since low-frequency sound can travel that distance depending on topography.
• Increase Transparency: Require data centers to publicly disclose energy usage, water consumption, tax exemptions, and environmental impacts, allowing communities to make informed decisions.
• Coordinate Grid Planning: Align data center connection applications with renewable energy zone development to avoid phantom demand distorting infrastructure investment.

Cyndie Roberson, of the National Coalition Against Cryptomining, who relocated from North Carolina to Georgia to escape data center noise, praised North Carolina's bill as "better legislatively than Georgia," but emphasized that it should go further. She noted that the data center near her cabin was 50 megawatts and "drove people crazy," underscoring the need to lower the regulatory threshold.

The Data Center Coalition, representing Google, Amazon, Meta, and Microsoft, has expressed concerns about the North Carolina bill's mandates on specific cooling technologies and restrictions on local government incentives. Cara Bunder, director of state policy at the coalition, told lawmakers that these provisions "could reduce North Carolina's competitiveness".

As data center energy demand is expected to triple in Australia by 2030 and similar growth is anticipated in other jurisdictions, the decisions made in North Carolina, Australia, and other regions will shape whether AI's infrastructure boom accelerates the clean energy transition or locks in decades of fossil fuel dependence. The outcome depends on whether governments can resist the pressure to trade long-term climate goals for short-term economic growth.