Tapped: Is water a problem for data centers in Colorado?
Colorado policymakers and experts are debating the impact of data centers, particularly regarding water and electricity usage. While water consumption is considered a minor issue, electricity demand is a significant concern. Denver has enacted a one-year moratorium on new data center construction to develop regulations, and state legislators have considered proposals for tax incentives and renewable energy requirements.
Colorado is grappling with the implications of growing data center development, with experts and policymakers debating the key challenges. According to Lon Huber, senior vice president for Xcel Energy, and Colorado Energy Office Director Will Toor, energy demand is a much larger concern than water usage, despite common criticisms. While data centers might consume about 0.1% of the state's consumptive water, they could use up to 20% of Colorado's total electricity if the market expands rapidly.
Denver Mayor Mike Johnston has positioned the city to embrace AI, yet the city recently approved a one-year ban on new data center construction. City officials aim to use this pause to develop comprehensive regulations addressing community safety and equity, as data centers currently lack specific permitting requirements in Denver. Meanwhile, state legislators considered two competing proposals: one offering tax breaks to attract large facilities (House Bill 26-1030), and another requiring data centers to source electricity from new renewable sources (Senate Bill 26-102). A coalition of data center developers urged lawmakers to pass the former and opposed the latter.
Officials, including Denver Water CEO Alan Salazar, emphasized the need to understand the complex issues data centers introduce, particularly concerning economic development, energy, and water strategies in a region facing water scarcity. Colorado currently does not offer incentives for data center development, which industry leaders say is a reason why companies headquartered there choose to build projects in other states.