Indiana advocates press for data center pause amid rising energy demand
Despite tech companies’ clean energy pledges, data centers are fueling demand for new natural gas–fired generation in the state, customers and advocates say.
Consumer and clean energy advocates in Indiana are calling for a moratorium on new ​“hyperscale” data centers, which are driving a huge surge in power demand, until state leaders can study their potential impact on the electric grid and utility bills.
Indiana is projected to see a boom in data center construction in the coming years, with one recent report estimating that within a decade the facilities could consume more electricity than the state’s nearly 7 million residents combined. That projected demand has spurred utilities and state lawmakers to plan to ramp up natural gas–fired generation and build small modular nuclear reactors.
A state House committee this month approved a bill that would create tax breaks for small modular reactors on top of existing state tax breaks for data centers. That’s a risky approach, said Citizens Action Coalition program director Ben Inskeep. In addition to cutting state revenue, tax breaks have the potential to shift costs onto residential electricity customers, the consumer protection group warns.
The coalition demands that rather than scrambling to build more fossil-fuel and untested nuclear generation, lawmakers pass a moratorium on new hyperscale data centers so the issue can be studied further.
Inskeep said.
The General Assembly should press pause on giving out additional subsidies to trillion-dollar big tech companies and ensure hardworking Hoosiers are protected and prioritized,
​“A moratorium strikes a reasonable balance, recognizing that we need time to understand the full impacts of the extraordinary data center growth already underway and make adjustments to current policies to protect consumers, taxpayers, and the environment while still allowing the possibility for sustainable data center growth in the future.”
Data center demand
Indiana is a particularly attractive state for new AI-focused data centers since it offers access to fiber optic cables, high-voltage transmission, and major information-demand regions like Chicago. The state has relatively cheap land and access to water needed for cooling.
It also draws power from both the PJM and MISO regional grids, meaning added electricity capacity and resilience, and is at relatively low risk of natural disasters that could interrupt electricity supply.
Meanwhile, a 2019 state law exempts large data centers from paying sales and use tax, including on the electricity they consume.
Two Microsoft data centers and an Amazon data center are in the works for Northwest Indiana near the shore of Lake Michigan, a region home to steel mills, a massive BP oil refinery, and other heavy industry. Google is planning a data center in Fort Wayne, also in northern Indiana, and Meta has proposed two data centers farther south in the state. Last year, a real estate and investment firm scrapped plans for a $1.3 billion data center in northern Indiana’s Chesterton amid intense opposition from residents.
While Meta says its data centers will be powered by 100% renewable energy, and Google and Microsoft also have ambitious clean energy goals, the companies have not provided specifics on clean energy for their Indiana centers. Plans filed with the state regulatory commission by two utilities — Northern Indiana Public Service Co., or NIPSCO, and Indiana Michigan Power, or I&M — indicate gigawatts of new natural gas–fired generation will be built to meet demand driven by data centers.
“Regardless of whatever accounting tricks Amazon and Google might try to claim, their data centers are very likely to be directly causing an enormous addition of fossil fuel resources,” said Inskeep, echoing analyses by experts in other states.
Google and Amazon did not return requests for comment for this story, and a Microsoft spokesperson declined to comment. Utilities NIPSCO and I&M did not return requests for comment.
Gas, nuclear, and coal
Plans already filed by utilities show major increases in natural gas–fired generation. In testimony filed in December with the state’s regulatory commission, I&M consultant Caleb Loveman noted that the utility expects its Indiana load to grow by 4.4 GW by 2030 largely because of data centers. The utility is proposing scenarios including new natural gas–fired generation and shifting power from Michigan to its Indiana customers through an ongoing regulatory process. NIPSCO has proposed more than 3 GW in new natural gas generation over the next decade, according to regulatory filings.
There are currently no nuclear reactors in Indiana, and critics note that small modular reactors are a relatively untested technology that has not been deployed at commercial scale.
Meanwhile, nationwide, data center demand has meant coal plants converting to natural gas generation or staying open longer and continuing to burn coal.
- Trump’s climate spending freeze is already causing serious economic harm
- Trump admin’s attack on clean energy and climate funding continues
- Power companies pressure Trump EPA to roll back rules on toxic coal ash
Utility Hoosier Energy announced plans to close the Merom coal plant in Indiana in 2023 but then sold it to a company called Hallador Energy that is keeping the plant open and reportedly making a deal with a data center developer.
Experts note that ensuring data centers are actually using renewable energy around the clock is extremely difficult since they draw energy from fossil fuel–heavy local grids at times when the sun isn’t shining and wind isn’t blowing. Indiana got 45% of its electricity from coal in 2023, according to the Energy Information Administration, making it the nation’s second-largest coal consumer after Texas.
Ashley Williams, executive director of Just Transition Northwest Indiana, said :
We’re unilaterally opposed to data centers, especially hyperscaler ones,
She described data centers as ​
An investment in an extractive economy, doubling down on it, when what we’re advocating for is regenerative and renewable energy.
The national landscape
An analysis by Ivy Main, a lawyer and renewable energy co-chair for Sierra Club’s Virginia chapter, found that Amazon’s data centers in Virginia — the world’s largest data center market — have likely increased the burning of fossil fuels in the region, despite the company’s claims to have reached 100% renewable energy worldwide.
Main wrote in an opinion piece for Virginia Mercury, said:
The self-styled climate hero turns out to be a climate parasite,
A Virginia legislative audit predicts data centers could increase the state’s electricity demand almost three-fold between 2023 and 2040.
The situation is similar in Wisconsin and Illinois, where a data center boom is keeping fossil-fuel generation running and making it harder for the states to meet their ambitious clean energy goals. Customers are better insulated from possible bill increases in Illinois, where the deregulated energy market means power companies can’t directly charge ratepayers for building new power plants.
Nationwide, states have adopted tax breaks and other incentives to attract data centers. At least 16 states offer sales tax exemptions, and some also offer property tax breaks, according to Data Center Dynamics, an industry publication. A recent Policy Matters Ohio study found that local sales tax breaks given to Microsoft, Google, and Amazon for data centers could have totaled almost $1.6 billion over the last two years. States including Virginia and Alabama make tax breaks contingent on wage and job creation requirements.
Along with exempting data centers from sales and use tax, Indiana’s 2019 law allows individual counties and municipalities to offer property tax breaks. In 2023, Fort Wayne, Indiana, approved a more than $55 million property tax break over 10 years for a data center with the code name Project Zodiac, to be built by a mystery developer that turned out to be Google. The South Bend Tribune estimated that a proposed Amazon data center’s property tax abatements could eventually reach $4 billion.
Data center opponents say subsidies are unnecessary and unhelpful for the local economy. Kasia Tarczynska, senior research analyst at the national corporate watchdog organization Good Jobs First, during a webinar cited a statement from Microsoft executive Bo Williams in The New York Times that subsidies have not been a determining factor in where the company locates data centers.
Agreements and solutions
Google, Amazon Web Services, and Microsoft signed an agreement in November with I&M, Indiana’s Office of Utility Consumer Counselor, and Citizens Action Coalition meant to make sure that the cost of new generation and grid upgrades isn’t unduly passed on to regular customers.
Under the agreement, in I&M territory these companies developing data centers must provide collateral during early years of operation, sign contracts of at least 12 years, and agree to pay at least 80% of their expected demand each month. Advocates consider such safeguards especially important in the new world of AI-driven data centers because if a facility’s energy demands end up being much lower than expected or if it closes prematurely, customers could end up paying for stranded assets — grid and generation investments made by the utility.
I&M’s large industrial customers previously had contracts but with much shorter minimums and lower payment thresholds.
The agreement creates a program where the companies can voluntarily invest in clean energy. The companies also agreed to pay half a million dollars each annually for five years into a fund that helps low-income residents access energy programs like weatherization.
Inskeep said that while the Citizens Action Coalition is frustrated at lawmakers’ enthusiasm for data centers and small nuclear reactors, the advocates do support a state bill introduced in January that would demand more transparency about data centers’ energy use. The bill would require that local governments review projected energy and water usage and other impacts before approving permits for a data center. Once a data center is operating, it would need to publicly report its energy use each quarter.
Inskeep said this bill would be a good start, and the coalition thinks even more study should be done during a moratorium.
He said,
We think such a study should analyze trends and impacts, include opportunities for stakeholder involvement and public comment, and identify potential policy solutions,
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Indiana advocates press for data center pause amid rising energy demand, source
