“Data Center Moratoriums Sweep Across the US” Construction Curbs Surge Over Environmental and Power-Grid Strains, Disrupting AI Infrastructure Expansion

Big Tech capital spending accelerates data center construction race
More than 500 local governments impose moratoriums on new permits
Community opposition mounts over electricity rate hikes and environmental costs

America’s artificial intelligence (AI) data center construction race has run up against the capacity constraints of its power grid and water infrastructure. More than 500 local governments have banned or halted new construction as large-scale projects proliferate before sufficient power plants, transmission networks, and cooling facilities are in place. Efforts to secure electricity through dedicated gas-fired power plants have intensified controversy over carbon emissions and air pollution, while cooling-water demand has triggered community opposition and legal disputes. With Big Tech capital expenditure and construction financing surging, infrastructure bottlenecks are expected to become even more severe.

Data Center Permitting Grinds to a Halt

According to the New York Post on August 12, local authorities in more than 500 US jurisdictions have enacted measures banning or suspending the construction of large-scale data centers. More than 150 jurisdictions introduced new restrictions over the past month alone. The successive postponement of permits for major development projects by local governments has begun to constrain data center expansion. The private research project Moratorium Nation had identified 533 infrastructure development moratoriums across 42 states as of the end of last month. Of these, 435, or approximately 82%, remain in effect, while 35 are undergoing legislative or administrative review.

The regulatory push has spread rapidly this year. New moratoriums listed in the database surged from seven in 2023 and six in 2024 to 59 in 2025 and 294 during the first seven months of 2026. The affected jurisdictions have also expanded from small and midsized cities and counties to major metropolitan areas. Seattle adopted an emergency ordinance on June 9, while the Cleveland City Council approved a three-month development moratorium by a 14-vote majority on July 15. In Michigan, Ohio, Georgia, North Carolina, and other states with dense concentrations of prospective data center sites, authorities are using the moratorium periods to rewrite land-use and power-supply standards.

State governments have joined local authorities in suspending approvals for large data centers. New York imposed a one-year freeze on environmental permits for data centers consuming 50 megawatts (MW) or more. Texas, previously aggressive in attracting data centers, has also temporarily suspended its approval process pending the completion of an audit. Project cancellation rates have reached 71% in Michigan and 56% in Indiana. In Salem, Oregon, community protests disrupted a $5.1 billion project.

Data Center Power Demand Raises Supply Alarm

The immediate cause of the approval freezes is the power grid’s limited capacity. According to the US Department of Energy (DOE) and Lawrence Berkeley National Laboratory (LBNL), electricity consumption by US data centers more than tripled from 58 terawatt-hours (TWh) in 2014 to 176 TWh in 2023. Data centers accounted for 4.4% of total US electricity consumption in 2023. LBNL projected that consumption would rise to 325–580 TWh by 2028, representing 6.7–12% of total electricity demand. At the upper end of the forecast, consumption would increase tenfold from 58 TWh in just 14 years.

Data center demand is pushing up both power loads and wholesale electricity prices. The US Energy Information Administration (EIA) forecast that nationwide electricity demand would increase by 1.9% in 2026 and 2.5% in 2027. Average annual growth from 2025 to 2027 was projected at 10% in the Electric Reliability Council of Texas (ERCOT) region and 3% in PJM, the largest regional electricity market in the United States. In a simulation assuming that demand growth in data center clusters exceeded the baseline forecast by 50%, Texas wholesale electricity prices in 2027 rose by $37 per megawatt-hour (MWh), or 79%, above the baseline. The increase in New York and New England was estimated at $3 per MWh, or 5%.

In the PJM region, where electricity demand is heavily concentrated, concerns over supply shortages have become a tangible burden. PJM supplies electricity to 13 states, including Northern Virginia, as well as Washington, DC, and expects demand across its service territory to increase by 32 GW by 2030. Data centers account for 30 GW of that increase. As power plant retirements continued and delays mounted in new generation development, grid interconnection reviews, and transformer procurement, spare capacity was rapidly depleted. A simultaneous influx of large-scale interconnection requests has made substation expansion and new generation capacity prerequisites for project approvals. Concerns that authorizing construction without corresponding supply measures could destabilize the grid and raise residential electricity rates have driven the regulatory expansion.

Table 1. Growth in US Data Center Electricity Demand and Regional Power-Market Impact

Permitting Standards Revised as Queues Surge

Pressure on the power grid is also mounting outside the PJM region. New York’s queue of pending data center interconnection requests has rapidly eroded the capacity of existing infrastructure. According to an executive order signed by New York Governor Kathy Hochul on July 14, pending data center interconnection requests with the New York Independent System Operator (NYISO) reached 12 GW as of May. More than 8 GW entered the queue in 2025 alone. Demand equivalent to the generating capacity of roughly 10 large nuclear reactors accumulated within a short period, forcing authorities to address power generation, transmission upgrades, and electricity-rate allocation simultaneously.

Audits and approval suspensions by Texas and other local governments are proceeding under the same rationale. Whether data centers will actually consume the power they have requested, whether they have secured the necessary generation capacity, and who will bear the cost of transmission upgrades have become central review criteria. If power plants and substations are constructed to accommodate proposed interconnection volumes and the projects are subsequently canceled, unrecovered costs could be transferred to households and manufacturers through higher electricity rates. Some jurisdictions are considering requiring dedicated generation facilities, long-term power purchase agreements (PPAs), and advance payments for transmission and distribution upgrades as conditions for new permits.

Carbon Emissions and Water Scarcity Constrain Construction

Environmental and resource pressures have emerged alongside grid bottlenecks as additional constraints on data center construction. Earlier this month, Amazon confirmed that it had invested in a dedicated natural gas power plant for a data center development in Pecos County, Texas. Equipped with 35 gas turbines, the plant will have a maximum supply capacity of 7.65 GW. Its permitted annual carbon dioxide emissions could reach 33 million metric tons, prompting analysis that it could become the largest single source of carbon emissions in the United States if operated at full capacity. Amazon said the plant would operate separately from the public grid to prevent increases in residential electricity rates, but the company has faced criticism that AI infrastructure expansion is entrenching large-scale fossil fuel consumption.

Such concerns are intensifying as plans for dedicated gas-fired power plants serving data centers spread across the United States. The US nonprofit Environmental Integrity Project (EIP) identified 74 natural gas power plants under construction or expansion to supply electricity to data centers, with planned generation capacity totaling 143 GW. Their annual greenhouse gas emissions were estimated at up to 662 million metric tons, while emissions of air pollutants, including nitrogen oxides and fine particulate matter, could reach 159,142 metric tons. Four proposed sites are located in areas where ground-level ozone concentrations fail to meet federal standards, while three others are situated within 10 miles, or approximately 16 kilometers, of such areas. Cooling processes impose additional pressure on local water resources. Two-thirds of the data centers built or planned in the United States since 2022 are concentrated in water-stressed regions, while indirect water consumption associated with electricity use in 2024 was estimated at approximately 800 billion liters (L).

Water shortages are also delaying construction in India, which is accelerating the expansion of large-scale computing infrastructure. Google’s proposed $15 billion AI data center in Visakhapatnam, Andhra Pradesh, has encountered community opposition and legal disputes over cooling-water supplies. Visakhapatnam, a city of 2.5 million people, requires 480 million L of water per day but receives only 410 million L, resulting in frequent supply restrictions. Community groups have filed lawsuits with the High Court and an environmental tribunal, arguing that the state government guaranteed water supplies for the facility over the next 20 years without adequately assessing the impact on local availability. Google said it would introduce air-cooled systems to reduce water consumption, while the state government said it would not supply water reserved for households and rural communities or draw from nearby reservoirs. The Andhra Pradesh High Court is scheduled to continue hearings on the water-supply plan and environmental review process on August 24.

Massive Investment Pipeline Deepens Infrastructure Bottlenecks

With investment in AI data centers expanding rapidly, bottlenecks involving power grids, water supplies, and environmental permitting are likely to intensify. According to the International Energy Agency (IEA), capital expenditure by five major technology companies exceeded $400 billion last year and is projected to increase by approximately 75% this year. TD Economics estimates that hyperscalers’ planned investment in computing infrastructure will surpass $750 billion this year and $900 billion in 2027.

Regulatory burdens on data center securitizations have also eased, further widening the channels for construction financing. In response to an inquiry from law firm Latham & Watkins on July 29, the US Securities and Exchange Commission’s (SEC) Division of Corporation Finance determined that certain forms of data center securitizations do not qualify as asset-backed securities (ABS) under the Securities Exchange Act of 1934. As a result, many data center-backed securitization transactions may no longer be subject to existing ABS regulations.

The most notable change is the potential exemption from “risk retention” requirements. Risk retention rules require the company or financial institution issuing securitized debt to retain a portion of that debt, typically 5%, so that it shares potential losses with investors. The requirement was introduced after the 2008 financial crisis to prevent issuers from originating poor-quality loans, transferring all of them to investors, and exiting the transaction without retaining exposure. The SEC’s determination is expected to reduce this burden for a substantial number of data center securitization transactions. When issuing and selling bonds backed by future rental income, data center operators will be able to raise the necessary funds while committing less of their own capital. Financing will consequently become easier, creating greater scope to channel the proceeds into new data center construction.