New Jersey Gov. Sherrill wants data centers to pay for their own electricity

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New Jersey Gov. Mikie Sherrill on Wednesday laid out a four-point plan that will require data centers to pay for the electricity they use, and to report how much power and water they consume.

Legislation is being crafted on these two points. The governor said guidelines are being developed to ensure community development agreements, so that data centers will help the communities where they are located. She said these deals will require data centers to address noise and pollution concerns.

“We’re going to require [data centers] to bring their energy to the grid, contracting with their own power generators, and paying for the grid updates needed to handle the larger load,” Sherrill said. “Instead of asking New Jerseyans to subsidize big tech, we’re asking big tech to improve our grid, making it more efficient and reliable and improving costs for everyone.”

The fourth portion of her plan is to ensure that good-paying, union jobs are created, once a data center location has been established and construction begins to build.

“If you’re going to build a data center here you should be using union labor and paying prevailing wages,” Sherrill said.

She said the legislature is also working on a measure to require data center transparency, by reporting energy and water use to the public every six months.

“People deserve to know what’s being built in their communities, and what shared resources are being used,” she said.

She noted data centers sometimes use 300 megawatts of power, enough to power an entire town, and increasingly, that demand is outpacing supply, increasing the cost of electricity for everyone.

“Not on my watch, not on your backs,” she said. “I’m on a mission to drive down energy costs in our state.”

The cost of power for Garden State residents is now among the highest in the nation, after New Jersey electricity rates soared as high as 20% last summer.

The cost surge has been driven by increasing energy demand from the growing number of data centers in the state.

On her first day in office, Sherrill declared a state of emergency and signed an executive order freezing utility costs, but the Garden State already has 80 data centers, and more are being built.

Why are data centers so expensive?

Data centers are typically large warehouse facilities with powerful computers that store information, run artificial intelligence software and keep digital services operating around the clock. To accomplish this they use tremendous amounts of water and electricity.

The growth of data centers has increased concern about pollution and public health nationwide. As much as 5 million gallons of drinking water must be used daily to run data center operations.

Some New Jersey towns are fighting efforts to build data centers.

In Vineland, residents have filed a lawsuit, claiming an AI data center is emitting a loud humming noise that is interfering with daily life.

In Monroe Township, town officials moved to ban data centers in April following local concern over a proposed 1.6 million-square-foot warehouse facility. The ban, which defines data centers as facilities tied to artificial intelligence, cloud computing and cryptocurrency operations, also bans land use considered similar to data centers.

Vineland and Monroe Township are not the only municipalities in New Jersey that have moved to ban data centers this year. Andover Township, Logan Township and Millville, among others, have proposed or implemented data center bans, too.

What’s next?

Democratic state Sen. Troy Singleton represents the 7th Legislative District in Burlington County and chairs the NJ Senate Community and Urban Affairs Committee. Singleton issued a statement applauding Sherrill’s announcement and then made a proposal of his own.

“I am proposing the ‘Responsible Data Center Development and Resource Protection Act,’ which would establish a comprehensive statewide framework governing the siting, utility and environmental impacts, water usage, and public accountability of large-scale data centers in New Jersey,” Singleton stated.

Singleton went on to state that the proposed legislation is designed to balance legitimate and competing public policy priorities.

“It supports responsible economic development and technological innovation while protecting residential and small-business electric ratepayers from unfair infrastructure cost shifting,” he stated. “It will also seek to safeguard New Jersey’s drinking water supply and environmental resources, preserve grid reliability amid rapidly increasing electricity demand, and encourage redevelopment of appropriate industrial and brownfield sites instead of environmentally sensitive lands.”

In addition, New Jersey Business and Industry Association President and CEO Michele Siererka released a statement following Sherrill’s announcement.

“NJBIA appreciates the Sherrill administration proactively addressing the opportunity for data center development in New Jersey,” Sierkerka said in the statement. “This is a signal that this growing and critical industry is welcome in the Garden State.”

“Like all development, opportunities and challenges are presented, and getting the right balance to move projects forward is significant. The governor’s parameters and expectancy of transparency are some first steps in establishing a process to get the ball rolling.