The Northeast-Midwest Institute hosted a briefing on Capitol Hill today on the implications of the data center buildout on water use in the Great Lakes region. The pace of data center construction and the lack of information about their energy and water consumption makes this a difficult issue for policymakers to track, and the briefing aimed to clarify the landscape for an audience of Congressional staff. Information was provided by panelists João-Pedro Ferreira, Acting Director of the Center for Economic and Policy Studies at the University of Virginia’s Weldon Cooper Center for Public Service; Preeti Shankar, Environment Program Officer at the Joyce Foundation; Sarah Bloom Anderson, Assistant Director for Policy at Columbus Water and Power; and Peter Johnson, Deputy Director, and David Naftzger, Executive Director of the Great Lakes-St. Lawrence Governors & Premiers.
Ferreira opened the briefing with findings from the Weldon Cooper Center’s research – funded by the Joyce Foundation – on the economic, energy, and water-related impacts of data centers in Great Lakes states. He noted that there are roughly 2,717 operational data centers in the United States, and that planned development in the region is concentrated in hyperscale and wholesale data centers, which are much larger than the retail and telecoms facilities that have historically accounted for most data centers. Hyperscale facilities can occupy more than 325,000 square feet and draw up to 46 megawatts of installed capacity each. “These new facilities are completely different, and these are the ones we are seeing,” he said. Illinois and Ohio are the most extreme cases for projected energy demand: data center load in Illinois in 2029 is expected to equal the output of the state’s largest nuclear power plant, while Ohio’s largest coal plant produces only 13 TWh per year. Data center energy use in Ohio has already exceeded what their 2024 report projected. “This is a new customer that is coming into town and completely reshaping the energy markets,” he said.
The economic picture, Ferreira explained, is a mixed bag. Across the Great Lakes region, the construction and operation of data centers is associated with approximately 63,000 construction jobs per year, 15,500 operational jobs, and a $10.9 billion annual contribution to regional GDP, alongside an estimated $468 million in state and $439 million in county tax revenue annually. The report does not project jobs from data centers to be a large share of employment; only in Illinois and Ohio will data centers represent more than 0.5% of total state employment by 2029, while in Wisconsin and New York the share is projected to remain below 0.1%. The vast majority of employment, 80%, is in temporary construction jobs and not long-term operational jobs, something Ferreira said states and municipalities should take into account when considering their tax exemptions to avoid a “race to the bottom” that leaves communities with little investment, jobs, and tax revenue in the long term. “Data centers can pay taxes and local taxes as long as the states and the local areas charge those taxes,” he emphasized, but often “those taxes are being given away because localities, as they want to attract data centers, they gave away many of those benefits.” Additionally, fossil fuel plant retirements could be delayed and regional emissions goals could be compromised if demand for energy outstrips clean energy deployment.
Shankar highlighted the need for more information on the data center buildout and associated energy and water consumption to help policymakers make decisions. Private philanthropy like the Joyce Foundation has a role to play in closing this knowledge gap. “We are focused on helping states maximize the economic benefits of this fast-growing industry while minimizing risks to water, energy systems, and local communities,” she said. To this end, the Joyce Foundation’s data center initiative has funded work like Ferreira’s, as well as policy convenings where policymakers can learn from each other. The Foundation also shares biweekly updates on data center technology, investment, and policy. Shankar closed by underlining the urgency of the challenge data centers pose. “Data centers are already here,” she said. “The question is not whether they will shape the Great Lakes economy but whether we will shape the rules that guide their impact.
Anderson followed with a utility perspective, drawing on the experience of Columbus Water and Power. Ohio ranks fifth nationally in data center volume, with roughly $40 billion in planned investment by 2030, and with a growing population and plentiful water resources, Central Ohio is already the largest data hub in the Midwest. Ohio’s largest hyperscale facility draws five million gallons-per-day. This means that upgrades to water treatment systems are necessary. “Data centers are extremely water intensive,” she said. “So before they can operate, they often require major investments in infrastructure for water utilities.” Anderson drew attention to the potential for source water contamination, particularly from thermal loading, and how that can impact investments in water infrastructure. “Many utilities are already operating under consent orders requiring substantial capital investment to reduce overflows and improve water quality,” she said. “And those investments are long-term, but they could be at risk if there is overdevelopment and under-regulation of data center discharges.”
Anderson then outlined the steps Columbus Water and Power has taken to prepare for data center growth, including a 2026 transition from a declining-block to a uniform-block water rate structure, which ensures that large users pay the same rates as small users. Columbus also increased commercial capacity fees for the first time in 20 years, and is evaluating non-potable water reuse for industrial customers, with a potential initial system capacity of 20 million gallons per day and possible expansion to 40 million gallons per day in a future buildout. Finally, Anderson identified specific federal actions that would help water utilities, including reauthorization of the Clean Water and Drinking Water State Revolving Funds at $3.25 billion each in FY 2027 alongside a restructuring that would ensure earmarks do not take away from SRF funding; $10 million in FY 2027 for the Pilot Program for Alternative Water Source Grants; and enactment of H.R. 2940, the Advancing Water Reuse Act, which would establish an investment tax credit for industrial and municipal water reuse infrastructure.
Finally, Nafzger and Johnson from the Great Lakes-St. Lawrence Governors and Premiers covered the potential region-wide impacts, and the tools the Great Lakes already have in their arsenal to address those impacts. Data centers, they stressed, are treated no differently than any other large water user under the Great Lakes Compact, an interstate agreement that prevents diversions outside the basin. Data centers outside the Great Lakes basin cannot draw Great Lakes water, and inside the basin, states must report to one another if there is a new water user drawing more than 5 million gallons per day. Informally, the Compact Council established by the Compact provides a forum for states to learn from each other, and the Great Lakes Governors and Premiers have facilitated presentations and information sharing among states and provinces. “We have the institutions in place to cooperate and collaborate,” Johnson said.