U.S. and European AI Data Center Regulation Moves Spread, Forcing Big Tech to Reconsider Expansion Plans

In the United States, data centers' power and water use, as well as noise concerns, are fueling local backlash and becoming campaign issues. Residents' opposition to data centers near residential areas has continued, with noise, heavy power consumption, and large-scale water use cited as key factors. Rising electricity bills and complaints over water use have also emerged as election issues.

Against this backdrop, uncertainty over AI infrastructure investment is growing after the U.S. midterm elections. Reuters reported on the 4th, local time, that Democrats won control of the U.S. House and Senate in the midterm elections, and said candidates backed by Democrats and pledging construction restrictions won gubernatorial races in major data center development states such as Texas and Georgia. In a DataCenterWatch survey cited by AP, 32 of the 34 governor candidates who were confirmed elected supported tighter data center regulations or limits on development. With candidates calling for restrictions on data center construction winning repeatedly, investment uncertainty is deepening.

As tax incentives vary from state to state and construction regulations differ as well, concerns are also rising over the possibility that costs for expanding the power grid and environmental burdens will be passed on to local communities. These conditions are acting as factors shaping data center investment and site selection decisions.

On top of that, restrictions on grid access in Europe are prompting major technology companies to rethink their data center expansion strategies. With grid access limits in Europe overlapping with tighter regulation in the United States, major tech companies are revisiting their data center expansion plans.

In the Texas governor's race, Democrat Gina Hinojosa won, while Republican incumbent Greg Abbott lost. Texas, with abundant energy resources and ample land, is a major hub for data center investment by large technology companies. With this change in governor, a tougher regulatory stance toward data centers has been signaled.

Greg Abbott temporarily suspended new data center grid connections and also temporarily halted environmental permitting. Those measures were taken to review their impact.

Gina Hinojosa said she would hold off on new approvals until laws are put in place to protect residents. She also called for scaling back data center tax breaks. In remarks to CNN on the 5th, she said she was not opposed to data center construction itself, but that development models that place burdens on local communities need to change. In an interview with KPRC, she called for abolishing data center tax breaks and argued that a sales tax should be imposed on power use.

This tightening regulatory trend is not limited to Texas and could affect data center supply plans across the United States. Goldman Sachs projected that about 45% of the capacity planned for U.S. data center expansions could be affected by temporary construction suspensions.

Expectations are growing that election results will change the business environment for companies led by Elon Musk. Reuters analyzed that Musk, who spent heavily to support Republican candidates, could face greater political and regulatory pressure as Democrats take control of Congress and Texas changes governors. SpaceX is headquartered in Texas.

SpaceX is pushing to expand its AI computing infrastructure business. Tesla supplies energy storage systems (ESS) for data centers. Because these companies are involved in data center-related businesses, delays in new data center construction could affect related infrastructure investment.

If new data center construction is delayed, it could also affect demand for equipment. This comes as regulatory burdens on ground-based data centers are increasing.

In this situation, Musk mentioned the appeal of space data centers in a post on X after the election. Through that post, he referred to a space-based AI infrastructure concept.

According to reports including WSJ, as other AI companies review their data center expansion plans, OpenAI is reassessing its target for securing future data center capacity. Meta and Anthropic are considering overseas data center acquisitions while also reviewing alternatives for expanding existing facilities.

The background to this review includes burdens such as water use and local opposition. OpenAI CEO Sam Altman said in an employee Q&A that he empathized with concerns over data center water use and with residents' backlash, and mentioned the possibility of building facilities in desert areas.

However, AI infrastructure investment is not being halted entirely. OpenAI CFO Sarah Friar said in a CNBC interview on the 6th that even as she watched the midterm elections, the company was thinking about continuing investments to meet customer demand.

OpenAI announced a policy of covering the power infrastructure costs for data centers it owns and operates directly, along with principles of disclosing water and power usage, disclosing noise impacts, and easing local opposition.

In Europe, management of grid access and system reforms are being pursued because data center power demand could burden power grid operations. Limits on data center power use are emerging in Europe, and Statnett, Norway's state-owned grid operator, announced on the 9th a temporary suspension of reservations for new data center grid capacity. The background cited was surging electricity demand and concern over the burden of maintaining stable grid operations.

At present, the capacity of data centers connected to Norway's power grid stands at 800 megawatts (MW). Reserved grid access capacity amounts to 4,200 MW, and another 9,100 MW is waiting for access. In response, the Norwegian government is pursuing a system for data center permitting.

The Norwegian government is also pursuing a plan to give priority in power supply to essential facilities such as defense and healthcare. Data center regulatory moves in the United States and Europe offer implications for Korea as well.

In Korea, local governments including Gangwon Special Self-Governing Province are pushing to attract AI data centers. However, these overseas regulatory trends, together with local governments' discussions about attracting AI data centers, show that the economic benefits of large-scale investment and the local burden from power and water use need to be considered together.

A local data center official in Korea said data centers have limited direct employment effects relative to their investment scale, while consuming large amounts of power and water, adding that it is important to ease residents' concerns and mediate conflicts.

Against this backdrop, the main variables in building AI data centers are securing power, securing land, resident acceptance, and regulatory response. Companies relying on new construction could face greater exposure to regulatory changes than companies that already have existing facilities and power infrastructure secured. Accordingly, analysts say local governments in Korea need to consider both ways to contribute to the local economy and the burden on residents when trying to attract data centers.

Source: TECHWORLD · Kim Seung-gi
Original: https://www.epnc.co.kr/news/articleView.html?idxno=409423

References

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