• Indiana's data center boom requires a lot more power, and it risks saddling customers with the cost.
• State lawmakers are considering a bill to put tech companies on the hook for 80% of project costs.
• Data centers may need more power than all of Indiana's 7 million residents combined.

When President Donald Trump in January announced a deal with a billionaire in Dubai to build data centers across the US, it immediately raised alarm bells in Indiana.

Trump said the state and seven others were part of the first phase of the $20 billion foreign investment plan. It could add to Indiana's growing fleet of data centers under construction by companies including Amazon, Microsoft, and Google, which need huge amounts of computing power for the artificial intelligence boom. The growth risks saddling residents with hundreds of millions of dollars in additional costs through higher energy bills.

The situation has set off a debate in Indiana over who should foot the bill for the new power plants and transmission infrastructure needed to serve data centers. A bill moving through the Indiana legislature would require tech firms like Amazon, Microsoft, and Google to cover 80% of project costs, which, if enacted, would make it the first state to do so. At the same time, the bill would allow Indiana utilities to try and pass the costs of building smaller nuclear reactors to customers. Tech companies hope these early-stage energy solutions could someday supply cleaner, around-the-clock power to data centers.

It's a mixed bag for Indiana residents that consumer advocacy groups oppose, and underscores a dilemma many states across the country are confronting: how to hold tech firms accountable for their power-hungry data centers and their promises that AI will be powered by green energy. So far, fossil fuels like natural gas and coal plants are expected to meet the demand.

"If companies want to build a data center here, and we have to build new power generation for them, then they need to share in that risk," Indiana Rep. Ed Soliday, a Republican who authored the bill, told Business Insider. "There are a couple of data center folks that have said, 'Oh no, that's not fair.' Yes, it is. Grandma down the street shouldn't have to pay for your dreams."

Indiana courts power-hungry data centers

While Indiana doesn't top the list of major US data center hubs, the Rust Belt state is emerging as another player for many reasons. Indiana has a reliable power supply from coal and natural gas and can draw electricity from two regional grids. That state has a low risk of natural disasters that could disrupt that supply. Indiana lawmakers in 2019 exempted data center equipment and energy use from sales taxes. Land is also cheaper than other parts of the country.

Those perks have attracted large data centers to northern Indiana. Last year, Amazon Web Services started construction on an $11 billion data center campus in New Carlisle. Google announced plans to build a $2 billion data center in Fort Wayne. Microsoft is planning a $1 billion data center in LaPorte; Meta is investing $800 million in a campus in southern Indiana that could operate by 2026.

Projects in the pipeline could consume more electricity than the nearly 7 million residents in Indiana combined by 2035, according to forecasts by state utilities analyzed by the Citizens Action Coalition of Indiana, an advocacy group that opposes data center development in the state.

The coalition has called for a moratorium on new data centers until state leaders can study their potential impact on the electric grid and utility bills. But as more projects enter the pipeline with support from state officials, the coalition last year intervened in negotiations between a utility and the data center industry — including Amazon Web Services, Google, and Microsoft — aimed at ensuring the companies pay a fair share for their energy use and associated power grid infrastructure upgrades. The parties in November reached an agreement aimed at shielding Indiana customers from some of the extra costs by requiring large data centers each month to pay at least 80% of their contracted electricity use, even if they don't use it. New transmission infrastructure and power generation to serve data centers could cost up to $1 billion, the agreement said.

Indiana regulators approved the settlement in February. The utility, Indiana Michigan Power, initiated the changes to what its big industrial energy users pay after forecasting that data centers could increase peak electricity demand by 150% by 2030, to more than 7,000 megawatts. That's equivalent to power for about 4.6 million residents in the state or two-thirds of Indiana's entire population. And that's just one utility's service area. The Northern Indiana Public Service Company's latest forecast shows data centers could double its energy demand by 2035.

Andrew Williamson, Indiana Michigan Power's directory of regulatory services, said in written testimony that the magnitude of demand for electricity was unprecedented and unlike any previous energy load additions the utility had ever experienced.

'More harm than good'

Rather than striking deals utility by utility, consumer advocates said a statewide law could better protect Indiana residents from rising energy bills associated with new data centers.

But the bill moving through the state legislature falls short, said Ben Inskeep, program director of the Citizens Action Coalition of Indiana. He said the bill contains a loophole, in that it doesn't cover special contracts utilities can negotiate with data centers for electricity rates. The bill also would create an expedited process for approving new power generation by a utility that wants to connect large energy loads like a data center, which Inskeep worried wouldn't allow enough time for public input. The coalition also wants lawmakers to eliminate provisions allowing utilities to seek permission from state regulators to recover up to 100% of the costs of building small nuclear reactors from customers.

"We need state policymakers to be thinking about these issues in a comprehensive way," Inskeep said. "But we want to make sure what they do doesn't create more harm than good."

Indiana Gov. Mike Braun told News 10 in February that he supported nuclear power but that utilities should shoulder the costs.

"I'm hesitant about putting that solely on the back of the ratepayers," Braun said, adding that the utility companies will have to absorb those costs through "capitalism."

"They are out there as investor owned, and some of that is going to have to be the risk that they take," Braun said.

The bill passed the House on February 13 and was referred to a Senate committee. The Indiana legislature is in session through April.

Meanwhile, the data center boom shows no signs of slowing in Indiana and across the US, including from foreign investors eager to get a stake in the AI race.

Hussain Sajwani, a real estate tycoon dubbed the "Donald of Dubai," has business deals with Trump and Elon Musk. Whether Sajwani's planned $20 billion investment in data centers is getting underway in Indiana is unclear, but for Inskeep, it wasn't surprising.

"Oh, here comes another one," Inskeep said of his initial reaction. "At this moment in time, we're just seeing so many data centers flood into Indiana that's a bit overwhelming. And it's really hard to fathom the magnitude of the impacts."

Google declined BI's request to comment, Microsoft didn't respond, and Amazon and the Data Center Coalition did not send comment by the time of publication.

Do you have a story to share? Contact this reporter at [email protected].