Will data center boom strain Illinois’ power grids, force rate hikes?

SPRINGFIELD — Illinois and the suburbs have been at the forefront of the national data center boom, but state lawmakers are working to mitigate the impact these centers have on climate and energy consumption.

In the last two decades, data centers have multiplied due to increased demand for cloud computing, information storage and data processing. Data centers also serve AI and cryptocurrency mining, which puts new digital coins into circulation and enters transactions on the blockchain.

At least a dozen data center projects have broken ground or been completed in the suburbs in recent years, including in Elk Grove Village, Hoffman Estates, Mount Prospect and Aurora.

Powering data centers is costly and consumes large amounts of water and energy. The industry boom has prompted concerns about the impact on the environment and the electricity grid, including rising costs for consumers.

State Sen. Steve Stadelman, a Rockford Democrat who chairs of the Senate Committee on Energy and Public Utilities, has filed legislation that aims to gather data on the industry to determine its impact on energy and water usage and prevent them from overburdening Illinois' power grids.

“As data centers continue to multiply, they are putting an incredible strain on the grid,” he said. “And this legislation is trying to ensure that residents are not bearing the rise of this energy cost caused by the booming of this industry.”

Under Stadelman’s Senate Bill 2181, companies that operate data centers in Illinois would need to report their annual water and energy consumption to the Illinois Power Agency beginning next spring under threat of $10,000 fines for noncompliance. The IPA would then synthesize the data into annual reports addressing the environmental impact and whether residential ratepayers in Illinois are, in effect, subsidizing data centers.

‘Good stewards’

Across the U.S., utilities and grid operators are worried by the increased demand for electricity needed for data centers. Some have proposed delaying the closure of fossil fuel plants to support that demand, setting back environmental goals.

Stadelman cited similar environmental concerns about Illinois’ goals under the 2021 Climate and Equitable Jobs Act (CEJA), which requires the state to shift to 100% clean energy by 2050.

“When we passed CEJA, no one anticipated the impact of data centers,” he said.

But SB 2181 has not yet received a hearing — or any co-sponsors — despite agreement from fellow state Sen. Laura Ellman that data centers’ resource usage could become a problem for Illinois.

“Illinois has a wealth of power and water, but we have to be good stewards of that wealth,” said Ellman, a Naperville Democrat who chairs the Senate Environment and Conservation committee.

But trying to regulate the business could be “somewhat tricky,” according to Laurance Lewis, senior advisor at Metro Edge Development Partners, a Chicago commercial real estate firm focused on data center development.

All data centers are not the same, Lewis pointed out, noting there are “hyperscalers” and “colocation” centers. Hyperscaler data centers are usually owned and operated by one company, such as tech giants like Google or Amazon. Colocation centers rent space to smaller companies, which could make it difficult to collect data on resource usage.

An October study published by the Center for Secure Water at the University of Illinois found that hyperscalers can use up to 550,000 gallons of water per day, while smaller data centers can consume up to 18,000 gallons per day.

Lewis argues that many critiques on water consumption are “overblown,” and said the industry is working on solutions.

Weighing the economic benefits

In many municipalities, local leaders and residents are weighing the economic benefits of data centers — including new jobs and tax revenue — against environmental trade-offs. But absent state action like the data collection called for in Stadelman’s bill, those environmental factors are difficult to quantify.

Andrew Chien, director and founder of the Center for Unstoppable Computing at the University of Chicago, believes that in the meantime, “planning is always important.”

“In Virginia, for example, they are building fossil fuel generators alongside renewables because they did not have an adequate plan to support the demand of power data centers required through renewable energy,” said Chien, a professor at the university.

But he pointed out that Illinois has a different mix of energy sources than Virginia, owing to the state’s 11 reactors at six nuclear plants — the most of any state — “and ample wind and solar resources.”

“I think the right way to deal with this is to build capacity with those clean energy resources to be prepared for the growth in data centers,” Chien said. “If we are prepared, we would not only attract jobs and investments. We would also do so in a way that does not increase carbon emissions.”

Environmental concerns are not the only possible pitfall for data centers. Another concern is their impact on energy customers, who could see rates spike in coming years. Sarah Moskowitz, executive director of the Citizens Utility Board, said she worries that Illinois’ energy capacity may be monopolized by data centers in the near future.

“In Illinois, we have put together solutions to ensure adequate energy supply for citizens through ratepayer support for nuclear power plants,” Moskowitz said, referring to fees approved by the General Assembly in the last decade that support the continued operations of nuclear plants.

“Those supports do not expire for a couple of years, but now is the time to start working on strategies to ensure that the power generation that citizens need is not all gobbled up by these single, powerful customers,” she added.