As business leaders from throughout the state gathered on Mackinac Island for their annual confab centered on solving the state’s political and economic issues, the question of data centers was one of many up for debate.
In recent years, opposition to data centers has grown as more of these facilities – which serve as the backbone of our online services, and are increasingly in demand for AI development – look to set up shop in Michigan.
While concerns of rising electricity bills and depleted water resources often follow pitches for new data centers, former U.S. Secretary of Energy and 47th governor of Michigan Jennifer Granholm; Google’s head of data center market development and policy, Liz Schwab; and John Rakolta III, president of the building design and construction company Walbridge, pitched these facilities as the balm for Michigan’s economic ills, if they are approached correctly.
Granholm said she firmly believed that large-scale data centers would drive a transition to clean energy and, if done well, could help reduce energy rates for customers by covering the cost of infrastructure and upgrades to the grid.
Rakolta framed the facilities as “golden tickets” for communities, later pointing to property tax revenue as the most compelling reason for communities to take on one of these projects.
While Michigan is best known for its auto manufacturing, Granholm questioned why the state couldn’t work to leverage engineering expertise used for autos to gain a competitive advantage in manufacturing components for data centers.
Although these facilities are not major providers for full-time jobs, Rakolta pointed to other jobs that would be created within the supply chain, and for various support services needed to keep these facilities running.
The panelists generally agreed that trust and transparency are needed in the planning process to address the concerns community members have and to ensure residents benefit from a data center constructed in their area.
Schwab cheered the 2024 law which created tax exemptions for data center equipment, saying the state “has done a great job of laying that groundwork to say we want to welcome this investment in the right way.”
In order to receive the tax break, a data center must certify to the Michigan Strategic Fund that it has met certain green building standards and that it has or will procure 90% of its electricity use from clean energy, either through self-supply, a long-term contract with an energy utility or participating in voluntary clean pricing programs.
Data centers receiving the tax exemption cannot accept an energy rate that would require residential customers to subsidize their use. The facilities must also use municipal water sourced from a municipal water system with available capacity.
However, multiple environmental advocacy groups, including the Michigan League of Conservation Voters, opposed the law due to concerns that it did not offer sufficient protections for energy rates and natural resources.
When panelists were asked how they would address data centers if elected to office, Granholm said she would enhance the provisions within the tax break law requiring data centers to bring their own energy capacity to the grid. She also encouraged data centers to be a part of community benefit by providing citizens with the opportunity to access battery storage and solar energy.
Environmental advocates say more certainty is needed from the state
While the panelists didn’t shy away from discussing the energy, water and land use concerns fueling opposition to data centers in Michigan, the panel focused more heavily on their potential benefits than any drawbacks.
Throughout the discussion, Rakolta repeatedly downplayed opposition to these projects within Michigan communities. He also voiced opposition to data center moratoriums, questioning why community leadership would avoid engaging in conversations with developers.
“We’re placating to 30 people in these townships,” Rakolta said. “That’s what’s happening. We’re spending a ton of time wasting resources doing that.”
In a poll of Michigan voters released ahead of the conference, only 33.3% said they are open to a data center being built within 25 miles of their home.
While Schwab said companies like Google are incentivized to stay on the good side of local governments to keep their projects, Helena Volzer, the senior source water policy manager at the Alliance for the Great Lakes, said not all communities have the resources needed to negotiate a community benefits agreement that includes the protections they may need.
She pointed to the recommendations within the alliance’s “A Finite Resource” report, advising Great Lakes states to set energy and water efficiency standards for hyperscale data centers, require companies to disclose their water use and consider requiring the use of a community benefits agreement through their data center tax incentive laws, among other recommendations.
At present, there are no specific water use reporting requirements for data centers connected to public systems, Volzer said.
While discussing water use on the panel, Granholm also proposed adding requirements for data centers to cool their equipment through either closed loop systems, or air cooling, rather than evaporative systems.
However, Volzer said it’s difficult to compare water use between different cooling methods due to the lack of transparency around how much water and energy data centers are using.
Closed loop systems can also carry additional water requirements, Volzer explained, noting that the water and glycol mix used in these systems needs to exchange heat in some way.
“That is either rejected through an air chiller, which means more electricity, or a liquid chiller, which means water,” Volzer said. “So, a closed-loop system can still have large water requirements for that liquid cooling process.”
Although data centers could theoretically provide benefits to other energy customers on the same grid, those savings have not been realized nationally, Poulson said.
There should also be clear guarantees on local tax revenue, workforce standards, infrastructure contributions and environmental protections for communities hosting a data center, Poulson said, arguing the state should implement regulations to guarantee local revenue and community funds for each data center project.
As Michigan continues to evaluate data center growth, Poulson said there is a real need for legislation to ensure communities have a meaningful voice and that companies are held accountable for their commitments.
“Transparency and community engagement cannot be optional or left to individual developers, they need to be built into state policy,” Poulson said, advocating for strong public notice and engagement requirements and as transparent energy and water use reporting, alongside environmental impact reviews for these projects.
