Best practices forAIdata center projects vary based on community needs and location, but experts agree more of one thing can help to support a successful build: transparency.

The rise in AI demand is causing the data center market to expand, too. However, the power they demand is significant, and the costs could outweigh the benefits if government officials don’t take certain considerations into account, panelists said Thursday during “The Future of Data Centers,” a Brookings Institution event. The nonprofit released a paper last week that examined these topics. It highlighted a 40 percent annual acceleration rate for the GenAI market and indicated an expansion of data centers will be “imperative” to meeting AI-driven digital demand.

“The AI revolution cannot take place without the computing power associated with data centers, but … there are issues for local communities,” Darrell West, senior fellow at the Brookings Center for Technology Innovation (CTI) and Center for Effective Public Management, said during the event. West co-authored the Brookings paper with CTI Director Nicol Turner Lee.

Despite the demand, West said, there are several barriers to data centers’ expansion, including the need for more efficient cooling methods, workforce capacity, permitting reforms, higher electric rates — and public opposition.

In some places — like Tucson, Ariz.; St. Charles, Mo.; and Valparaiso, Ind. — community opposition has halted, or at least delayed, data center projects. Elsewhere — in West Virginia and Statesville, N.C., — projects have moved forward amid significant public outcry. Sometimes these projects are shrouded in secrecy, even involving nondisclosure agreements.

Data centers will lead to a substantial economic output, Turner Lee said, and communities that do not have them will face an “AI chasm,” if the technology advances as predicted.

So, what steps can community leaders take to ensure that if data centers are being built in their communities, the people living there see the benefits? The primary best practice, she said, is to educate community members right alongside industry on data centers and their potential benefits. Convening stakeholders also creates an opportunity to increase awareness about what the community might need from agreements.

Community benefits agreements — contracts that guide equitable development practices — allow for data center expansion to accommodate AI demand “in ways that make sense for communities, businesses and governments,” she said.

The private sector’s substantial financial investment in data center expansion, Turner Lee said, is a bet on the future of the AI economy.

Part of the challenge the projects can face derives from a lack of transparency about their potential community-level impacts — both good and bad. More transparency is needed so that communities have the right information to make informed decisions, Michael Blackhurst, executive director for the Open Energy Outlook Initiative at Carnegie Mellon University, said. This information, he argued, should be made available by members of industry that want to operate data centers.

It may not be made available voluntarily, however, Kate Stoll, project director at the American Association for the Advancement of Science’s Center for Scientific Evidence in Public Issues, said — and so community leaders may need to write that into a local ordinance to ensure that transparency.

One practice that could increase transparency, Stoll said, is to require data center operators to use water and energy best practices and to report openly on water use. Governments can monitor and audit that, to ensure alignment.

More openness on data centers’ impact may also lead to a greater understanding of the community benefit, Blackhurst said.

Notably, there is an opportunity to build equity in as part of the data center expansion planning process, Turner Lee said. However, she underlined that the AI Action Plan from the Trump administration removes and expedites some environmental protections: “That’s an equity concern.”

Some data centers consume as many as 500,000 gallons of water a day, the Brookings paper said.

Energy and water are “inextricably linked” when it comes to data centers, Stoll said, noting a significant portion of the water they use simply goes to keeping them cool. There are more efficient cooling systems that use less water — but they in turn use more energy. As such, when these projects are being planned, she emphasized the importance of considering community needs in relation to the area’s climate: communities with higher temperatures may face greater burdens in cooling than others.

The amount of electricity data centers need is expected to rise quickly. The facilities consumed around 4.4 percent of the U.S.’ electrical power in 2023 — a demand that projections in the paper expect to increase between 6.7 percent and 23 percent by 2028.

This demand is inevitably going to cost the average consumer more, Blackhurst said. There will likely also be an increase in emissions and potential negative impacts to the environment and public health. But some states and utilities, he said, are taking action to ensure data centers pay their fair share for energy, or use energy from cleaner sources.

ONE GOVERNMENT’S APPROACH

One city that is actively investing in data centers while simultaneously prioritizing environmental sustainability, is San Jose, Calif.

The city is attracting new AI companies, in part through an incentive program, as part of a broader AI ecosystem the city is working to create. Data centers play an important role, from an infrastructure standpoint.

Data centers are a “launchpad to what’s next,” San Jose’s Deputy City Manager Manuel Pineda said.

“To be the hub of AI, to be the hub of cloud, to be the hub of R&D infrastructure, the data centers have to be close to us so we can sustain that,” he said, arguing the city supports innovation in the most environmentally friendly way possible.

San Jose announced a new agreement with PG&E in July, to support the energy demands of new data center projects. In it, officials sought to address several key factors, Pineda said.

First, leaders were looking for a commitment of energy. The city’s current energy load is about 1,000 megawatts, and the agreement aims to support requests for nearly 2,000 megawatts of additional demand from data centers. The city was also looking for a commitment to infrastructure improvements, and a timeline on their delivery. If that timeline is not met, the city is able to step away from the agreement.

Regular meetings between the city and PG&E enable flexibility and, Pineda said, the city does have the ability to amend the agreement. Nine data centers were originally part of it, and the city is adding three more.

“I think open communication is always the best when it comes to any project,” Pineda said of the city’s approach to building public buy-in. San Jose has been transparent about the agreement, its plans for data centers and their purpose. This includes formal outreach about associated financial benefits, but also aspects like power and water usage, which Pineda said, “tends to be a concern for the community.”

San Jose is uniquely positioned to tackle these challenges. Being a city of about 180 square miles with large industrial areas, these projects do not have to be located close to homes. The existence of San Jose Clean Energy (SJCE) and the South Bay Water Recycling program also support its posture for sustainable AI advancement.

The city has a robust recycled water system, including over 100 miles of recycled water pipeline in the city, Pineda said. SJCE uses PG&E equipment to provide power to about 97 percent of the city’s customers; the majority of SJCE-provided energy is carbon free. Data centers are not required to choose SJCE, but many of them are, Pineda said. And, like every project in the state, these must follow California Environmental Quality Act rules.

Best practices may vary by location, but for other cities without these types of robust, environmentally sustainable systems in place, Pineda said site selection and community outreach are essential.

“The public can communicate with city officials at any time,” the deputy city manager said, explaining this outreach and community feedback are part of the city’s development process.