As data centers continue driving electric load growth and greenhouse gas emissions, states must ensure they have robust protections in place. Understanding how these facilities are sited, what types of generation they are investing in, and what jurisdiction state governments have over them is essential.
In Climate XChange’s recently released State Policy Toolkit for Data Center Regulation on Greenhouse Gas Emissions, co-authored with experts from the World Resources Institute (WRI) Polsky Energy Center, we explore state policy solutions for reducing data centers’ emissions.
In this webinar, we reviewed the emissions impacts of data centers, what technical solutions are available, and how state policy can mitigate adverse impacts to the grid and state greenhouse gas targets. Our speakers included Ian Goldsmith, Clean Energy Research Associate with the WRI Polsky Center for the Global Energy Transition; Jordan Gerow, Director of Policy and Research at Climate XChange; and Ruby Wincele, Policy and Research Manager at Climate XChange.
Strategy 1: Powering Data Centers with New Clean Energy
Learn more by watching the webinar at 08:50.
States should require data centers to be served by additional, deliverable clean energy, and consider encouraging time matching, which ensures that facilities use clean energy on a daily or hourly basis, instead of in aggregate over the year. There are various policy options to enable, incentivize, and require clean energy, including:
- Enabling Programs: Allow data centers to purchase or support the construction of clean energy(e.g., Georgia Power’s Customer-Identified Resource Program).
- Clean Energy Requirements: Require data centers to partially or fully match their energy usage with clean energy.
- Surcharges and Fees: Levy fees on data centers to support clean energy and grid development in the state (e.g., Maryland SB 341 (introduced, 2026)).
- Conditional Incentives: In states with existing data center incentives, require facilities to procure clean energy in order to receive incentives (e.g., Michigan Public Act 181 (SB 237, enrolled, 2023)).
Strategy 2: Direct data center development toward sites with clean energy, grid, and waste heat opportunities.
Learn more by watching the webinar at 19:43.
States should identify locations where data centers can best utilize existing clean energy resources or bring new resources online, and steer data center development to those sites. As locations are identified, communities should be notified and engaged to ensure robust disclosure and local benefits. Identifying “opportunity zones” may take into account:
- Surplus Interconnection: States can direct utilities to identify sites with existing grid connections (e.g., Indiana SB 240 (enacted, 2026)), and create expedited permitting pathways (e.g., Maryland HB 940 (introduced, 2026)) or pilot programs (e.g., Virginia SB 508 (enacted, 2026)) to encourage data centers to co-locate with new renewables in those areas.
- Off-Grid Renewables: States can lease state land for off-grid renewable development or inventory suitable areas.
- Geothermal Energy: Next-gen geothermal may be able to co-locate with data centers, and states can inventory lands (e.g., Washington SB 6039 (enacted, 2024)), streamline permitting for geothermal, and clarify ownership of subsurface heat resources.
- Thermal Energy Networks (TENs): TENs can reuse waste heat from data centers to power nearby customers, and states can require feasibility studies (e.g., New York AB 9136 (introduced, 2025)), incentivize waste heat reuse through tariffs (e.g., NJ A796 (enacted, 2026)), and help match data centers with existing TENs (e.g., Virginia HB 2578 (not enacted, 2025)).
- Distributed Capacity: The potential energy savings of distributed solutions like solar, storage, and heat pumps, can account for much of data center energy demand. States can require mapping of this technical potential and encourage data centers to pay for distributed projects through tariffs.
Optimal siting may be incentivized by favorable electric rates, relaxed operational requirements, and permitting incentives like Build Ready programs, as well as penalties like fees on data center emissions or electricity consumption, peak demand surcharges, and franchise taxes.
Strategy 3: Reduce emissions and air pollution impacts from on-site operations and backup generation.
Learn more by watching the webinar at 28:20.
Many data centers are trying to bypass grid constraints by building their own behind-the-meter (BTM) gas plants, and many are using fossil fuel backup generators for uninterrupted operation, with higher emissions rates than gas-fired power plants. States should limit direct emissions from this on-site power generation, including through:
- Cumulative Impact Analysis (CIA): Taking into account existing local health burdens when evaluating potential air pollution from a proposed data center during permitting processes. (e.g., Maryland HB 1484 (introduced, 2025)). Additionally, states can lower the air pollution threshold of existing CIA laws to include all on-site primary and backup generation, explicitly include all data center proposals in CIA laws, and require standardized emissions reporting from on-site generation.
- Limiting On-site Fossil Fuel Use: Study, promote, or require low- or zero-carbon alternatives for data centers’ on-site power (e.g. Colorado SB 26-102 (introduced, 2026)). States can also directly prohibit on-site fossil fuel generation, though this may be perceived as a ban on new data centers as current alternatives cannot fully replace diesel and gas backup generators. States can also enact partial prohibitions of on-site fossil fuels, only allowing these resources if they are:
- Necessary for grid reliability
- Paired with carbon capture and storage
- In line with state GHG reduction and clean energy targets
- Outside of non-attainment areas or otherwise overburdened communities
- Restricting Backup Generation: States can set stricter-than-federal limits for backup generators, including prohibiting use in non-emergencies, non-grid supporting situations, and setting strict definitions and hourly limits for emergency situations (e.g., Colorado SB 26-102 (introduced, 2026)).
- Strengthening Backup Generator Emissions Standards: Require data centers to meet or exceed EPA Tier 4 or equivalent emissions standards (e.g., Virginia HB 507 (introduced, 2026)).
Strategy 4: Take steps to reduce the need for utility-scale fossil fuel generation through demand-side solutions, flexibility, energy efficiency, and grid utilization.
Learn more by watching the webinar at 38:15.
In addition to requiring new clean energy to meet demand, states can also reduce the need for new utility-scale power by taking pressure off the system through distributed, customer-based, and grid-based solutions, including:
- On-site Energy Efficiency: States can enact data center pilots or requirements related to waste heat reuse and energy efficiency, such as limiting power usage effectiveness (PUE).
- Distributed Capacity Investment: States can require data centers to directly procure distributed capacity (e.g., demand response, virtual power plants, distributed energy resources), or fund energy efficiency and conservation work through mandatory fees.
- Data Center Flexibility: States can require utilities to offer or incentivize demand flexibility options for data centers, and can incentivize on-site or nearby clean energy and storage as flexibility solutions.
Strategy 5: Require analysis and transparency of data center impacts on greenhouse gas emissions or clean energy goals.
Learn more by watching the webinar at 48:11.
In order to better understand data center emissions impacts, states can require facility-level emissions disclosures before permitting and annually thereafter, and can also conduct independent studies of impacts at either the project level or statewide.
Q&A
Learn more by watching the Q&A at 51:00.
Q: When you talk about time-matching, how do you take battery storage paired with solar into account?
Q: How are state-level renewable requirements for data centers aligning or pushing back on federal energy and data center policies?
Q: Can you speak to the overall grid safety impacts associated with large-scale behind the meter generation coming online for data centers?
