Indiana Faces a Data Center Backlash

Indiana has power. Indiana has transmission. Indiana has a business-friendly Republican government. Indiana is close to Chicago but — crucially — not in Illinois. All of this has led to a huge surge of data center development in the “Crossroads of America.” It has also led to an upswell of local opposition.

There are almost 30 active data center proposals in Indiana, plus five that have already been rejected in the past year, according to data collected by the environmentalist group Citizens Action Coalition. Google, Amazon, and Meta have all announced projects in the state since the beginning of 2024.

Nipsco, one of the state’s utilities, has projected 2,600 megawatts worth of new load by the middle of the next decade as its base scenario, mostly attributable to “large economic development projects.” In a more aggressive scenario, it sees 3,200 megawatts of new load — that’s three large nuclear reactors’ worth — by 2028 and 8,600 megawatts by 2035. While short of, say, the almost 36,500 megawatts worth of load growth planned in Georgia for the next decade, it’s still a vast range of outcomes that requires some kind of advanced planning.

That new electricity consumption will likely be powered by fossil fuels. Projected load growth in the state has extended a lifeline to Indiana’s coal-fired power plants, with retirement dates for some of the fleet being pushed out to late in the 2030s. It’s also created a market for new natural gas-fired plants that utilities say are necessary to power the expected new load.

State and local political leaders have greeted these new data center projects with enthusiasm, Ben Inskeep, the program director at CAC, told me. “Economic development is king here,” he said. “That is what all the politicians and regulators say their number one concern is: attracting economic development.”

This can sometimes mean policies to support data center development that CAC describes as giveaways, such as utility customers having to cover the bill for transmission upgrades and a 50-year sales tax exemption specifically for data centers. It’s all in the name of economic development and job growth, but that comes at “the detriment of ratepayers and taxpayers,” Inskeep told me.

Take that sales tax exemption: A 1,000 megawatt data center might face $500 million in annual electricity costs, Inskeep told me. “If they’re not having to pay that 7% sales tax on half a billion dollars, times 50 years, we’re talking about $1.7 billion per data center in sales tax exemption, just on the electricity portion of their bill,” Inskeep said.

Even that $500 million is not guaranteed. The minimum payment for such a data center has to pay is $332 million — having been doubled from just $173 million after CAC petitioned for an increase. Ratepayer advocates celebrated the settlement because it guaranteed that large data centers would pay for some of the costs they impose on the whole electrical system, even if their actual consumption is not as high as forecast.

Indiana is “an ideal jurisdiction for data center siting given its physical advantages such as available land, access to grid transmission, water, fiber optic cables, proximity to population centers,” Mizuho Securities analyst Gabriel Moreen wrote in a note to clients. “The state has demonstrated a political and economic receptivity to data centers, such as tax incentives for building data centers and political support at local and state levels.”

But cracks in that edifice of political support may be beginning to show. While data center development has substantial support from the state government — a bill to speed up regulatory approvals for data centers and the generation to serve them is on Governor Mike Braun’s desk after a party-line statehouse vote — projects are also being withdrawn in the face of popular outrage.

Earlier this month, county commissioners in Kosciusko County rejected a rezoning proposition that would have been necessary for a data center project on rural land near Leesburg after a number of local residents spoke out against it. Before that, the city of Valparaiso rejected a data center project in March, following a city council meeting where residents complained about “ noise, power and water consumption and the impact on property values,” according to Lakeshore Public Media.

The objections in Kosciusko County and across the state will not be unfamiliar to anyone with experience in large scale development — residents don’t like noise; they worry that the projects will lead to higher electricity costs across the board; they’re skeptical of the job benefits; they think the developers are getting taxpayer giveaways; they don’t want to see agricultural land converted for the sake of industry.

“That’s a big red flag for a lot of local governments where they’re a bit more skeptical of those types of development,” Inskeep told me.

Of course, these objections will be familiar to anyone who follows local opposition to renewable power developments like wind and solar, which regularly draw on farm land, noise, and skepticism of promised economic benefits.

And just like with solar and wind, these local objections could be slowing a projected build out that many analysts simply assume will follow an exponential path — which would, ironically, put a dent in the demand growth that many energy developers, renewable or not, are hoping to ride to more profits.

But at the local level, for activists, the fight happens one project at a time, Inskeep told me.

“We’re building out tools to help local folks feel like they have the knowledge and the resources to be able to engage at these local levels. Because when we have several dozen data center proposals in the state of Indiana and more coming, a small organization like ours can’t be there for each individual fight,” Inskeep said.