The rapid growth of data centers will inevitably push up energy costs—but who pays for that depends on state-level policy decisions. And that growth means Michigan likely faces a challenge meeting its clean energy goals without further state action.
Those conclusions come from a new report from the Union of Concerned Scientists. “Data Center Power Play in Michigan” models possible growth scenarios for data centers in the state, as well as possible ways to meet their growing demands for energy.
Data centers are the technological backbone of artificial intelligence. Michigan has seen an explosion in the proposed number of data centers in recent months, after the state implemented tax credits meant to lure them here.
Those facilities are notoriously power hungry. The report’s mid-range model suggests they will make up 40% of the state’s energy demand growth by 2030, and that “over the next 25 years, such data center growth could put Michiganders at financial risk of $18 billion in additional electricity systems costs."
Report author and Union of Concerned Scientists senior energy analyst Lee Shaver said that under any scenario, energy costs will go up. The real question, Shaver said, is who will pay for that.
“The really important thing is that just because costs increase does not mean that those costs have to be passed on to residents,” said Shaver.
But to prevent that from happening, Shaver said state lawmakers and the Michigan Public Service Commission must take steps to protect residential ratepayers, and to make sure the companies behind data centers foot the bill for their energy needs.
On the environmental side, Shaver noted that Michigan has set targets of reaching 80% power from renewable sources by 2035, and 100% by 2040. But with the growth of data centers, “What we see is that the amount of growth from data centers is so significant that even with those policies, carbon emissions in Michigan will still increase.”
Shaver said that if Michigan hopes to reach those targets, “there needs to be additional policy in the power sector to in order to make that happen.” The report recommends a carbon reduction strategy, which would involve putting stricter limits on carbon emissions. It also suggests that bringing back renewable energy tax credits put in place by the Biden Administration, but rescinded by President Donald Trump’s, would encourage the energy and industrial sectors to adopt renewables on a larger scale more quickly.
But the report stresses that the time for policymakers to act is now. The Michigan Public Service Commission recently approved contracts with DTE Energy to power the state’s first massive “hyperscale” data center in Washtenaw County’s Saline Township, which included some level of protections for residential ratepayers. But Shaver said much about the terms of those contracts either still remain obscure, or will be determined by future utility filings, and “we don’t think they’re going far enough” to ensure that data centers bear the burden of their energy requirements.
And with new proposed data centers entering the pipeline almost constantly, Shaver stressed that citizen input is also vital. “None of these hyperscale data centers have been built in Michigan yet,” he said. “So now is really an important time to make your voice heard. Because if we wait until they've been built, it's going to be too late to do anything about it.”
