New York orders one-year pause on large new data centres

NEW YORK: New York on Tuesday became the first US state to stop construction of large new data centres, announcing a one-year moratorium as concerns mount over the effect of the facilities on electricity prices, water resources and nearby communities.

The move places the state at the centre of a wider debate in the United States over how to regulate the infrastructure needed for the artificial intelligence industry. While technology companies are pushing ahead with rapid data-centre expansion, lawmakers and regulators in many states are considering steps to limit the burden on power systems, consumer utility bills and the environment.

Governor Kathy Hochul said the state was acting because of growing concern over the impact of the projects on residents and natural resources.

“As data centre development threatens to hike up utility bills, deplete our natural resources, and create uncertainty for New Yorkers, it’s my responsibility to take action and lead,” said New York Governor Kathy Hochul.

Hochul also said she would seek legislation to end sales tax exemptions for large data centres.

Scope of the moratorium

Officials in the governor’s office said the construction freeze will apply to data centres using 50 megawatts or more of electricity. During the moratorium, the state Department of Environmental Conservation will not issue discretionary permits for projects unless they had already been deemed complete.

According to the governor’s office, Hochul has directed state agencies to prepare a Generic Environmental Impact Statement to make sure future data centres are subject to consistent standards. The review will also examine the environmental effects linked to the construction and operation of such facilities across the state. The moratorium will end once those standards are finalised, her office said.

Legislative and industry context

New York’s legislature passed a bill last month intended to place guardrails on data centres, but it has not yet reached Hochul for signing. That bill would cover facilities using more than 20 megawatts of power, making it broader than the executive order announced on Tuesday. Officials in Hochul’s office described the measure as complicated and said it would take time to work through with lawmakers.

Alphabet, Microsoft, Meta, Amazon and Oracle did not immediately respond to requests for comment on the state’s decision. Data-centre operators Digital Realty, Equinix and NTT Data also did not immediately comment.

Across the United States, the growth of data centres has increased power demand and pushed up electricity bills in many areas, fuelling opposition at both the local and political level. A recent Reuters/Ipsos poll found that only one in three Americans support the current pace of data-centre construction, and most said they would oppose one being built in their own community.

Dozens of state legislatures have introduced bills aimed at limiting the impact of data centres on utility costs and the environment, but New York is the first state to impose a full moratorium. In April, Maine Governor Janet Mills vetoed a bill that would have created a similar pause.

A recent report by the New York Independent System Operator said that, as of May, more than 12 gigawatts of very large energy-consuming loads, including data centres, were waiting to connect to the state grid. One gigawatt of electricity can power about 750,000 homes. US Energy Department data shows New York has the eighth-highest residential retail electricity price in the country.

Although high land costs and tight electricity supplies have generally made New York less attractive for data-centre development than states such as Texas and Ohio, the state has still drawn interest from the sector. Data Center Map says New York currently has more than 130 data centres, compared with more than 600 in Virginia and about 500 in Texas.