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What happens when one of energy’s oldest bottlenecks meets its newest demand driver?

Often the biggest impediment to building renewable energy projects or data center infrastructure isn’t getting government approvals, it’s overcoming local opposition. When it comes to the transmission that connects energy to the grid, however, companies and politicians of all stripes are used to being most concerned about those at the top – the politicians and regulators at every level who can’t seem to get their acts together.
What will happen when the fiery fights on each end of the wire meet the broken, unplanned spaghetti monster of grid development our country struggles with today? Nothing great.
The transmission fights of the data center boom have only just begun. Utilities will have to spend lots of money on getting energy from Point A to Point B – at least $500 billion over the next five years, to be precise. That’s according to a survey of earnings information published by think tank Power Lines on Tuesday, which found roughly half of all utility infrastructure spending will go toward the grid.
But big wires aren’t very popular. When Heatmap polled various types of energy projects last September, we found that self-identified Democrats and Republicans were mostly neutral on large-scale power lines. Independent voters, though? Transmission was their second least preferred technology, ranking below only coal power.
Making matters far more complex, grid planning is spread out across decision-makers. At the regional level, governance is split into 10 areas overseen by regional transmission organizations, known as RTOs, or independent system operators, known as ISOs. RTOs and ISOs plan transmission projects, often proposing infrastructure to keep the grid resilient and functional. These bodies are also tasked with planning the future of their own grids, or at least they are supposed to – many observers have decried RTOs and ISOs as outmoded and slow to respond. Utilities and electricity co-ops also do this planning at various scales. And each of these bodies must navigate federal regulators and permitting processes, utility commissions for each state they touch, on top of the usual raft of local authorities.
The mid-Atlantic region is overseen by PJM Interconnection, a body now under pressure from state governors in the territory to ensure the data center boom doesn’t unnecessarily drive up costs for consumers. The irony, though, is that these governors are going to be under incredible pressure to have their states act against individual transmission projects in ways that will eventually undercut affordability.
Virginia, for instance – known now as Data Center Alley – is flanked by states that are politically diverse. West Virginia is now a Republican stronghold, but was long a Democratic bastion. Maryland had a Republican governor only a few years ago. Virginia and Pennsylvania regularly change party control. These dynamics are among the many drivers behind the opposition against the Piedmont Reliability Project, which would run from a nuclear plant in Pennsylvania to northern Virginia, cutting across spans of Maryland farmland ripe for land use conflict. The timeline for this project is currently unclear due to administrative delays.
Another major fight is brewing with NextEra’s Mid-Atlantic Resiliency Link, or MARL project. Spanning four states – and therefore four utility commissions – the MARL was approved by PJM Interconnection to meet rising electricity demand across West Virginia, Virginia, Maryland and Pennsylvania. It still requires approval from each state utility commission, however. Potentially affected residents in West Virginia are hopping mad about the project, and state Democratic lawmakers are urging the utility commission to reject it.
In West Virginia, as well as Virginia and Maryland, NextEra has applied for a certificate of public convenience and necessity to build the MARL project, a permit that opponents have claimed would grant it the authority to exercise eminent domain. (NextEra has said it will do what it can to work well with landowners. The company did not respond to a request for comment.)
“The biggest problem facing transmission is that there’s so many problems facing transmission,” said Liza Reed, director of climate and energy at the Niskanen Center, a policy think tank. “You have multiple layers of approval you have to go through for a line that is going to provide broader benefits in reliability and resilience across the system.”
Hyperlocal fracases certainly do matter. Reed explained to me that “often folks who are approving the line at the state or local level are looking at the benefits they’re receiving – and that’s one of the barriers transmission can have.” That is, when one state utility commission looks at a power line project, they’re essentially forced to evaluate the costs and benefits from just a portion of it.
She pointed to the example of a Transource line proposed by PJM almost 10 years ago to send excess capacity from Pennsylvania to Maryland. It wasn’t delayed by protests over the line itself – the Pennsylvania Public Utilities Commission opposed the project because it thought the result would be net higher electricity bills for folks in the Keystone State. That’s despite whatever benefits would come from selling the electricity to Maryland and consumer benefits for their southern neighbors. The lesson: Whoever feels they’re getting the raw end of the line will likely try to stop it, and there’s little to nothing anyone else can do to stop them.
These hyperlocal fears about projects with broader regional benefits can be easy targets for conservation-focused environmental advocates. Not only could they take your land, the argument goes, they’re also branching out to states with dirtier forms of energy that could pollute your air.
“We do need more energy infrastructure to move renewable energy,” said Julie Bolthouse, director of land use for the Virginia conservation group Piedmont Environmental Council, after I asked her why she’s opposing lots of the transmission in Virginia. “This is pulling away from that investment. This is eating up all of our utility funding. All of our money is going to these massive transmission lines to give this incredible amount of power to data centers in Virginia when it could be used to invest in solar, to invest in transmission for renewables we can use. Instead it’s delivering gas and coal from West Virginia and the Ohio River Valley.”
Daniel Palken of Arnold Ventures, who previously worked on major pieces of transmission reform legislation in the U.S. Senate, said when asked if local opposition was a bigger problem than macro permitting issues: “I do not think local opposition is the main thing holding up transmission.”
But then he texted me to clarify. “What’s unique about transmission is that in order for local opposition to even matter, there has to be a functional planning process that gets transmission lines to the starting line. And right now, only about half the country has functional regional planning, and none of the country has functional interregional planning.”
It’s challenging to fathom a solution to such a fragmented, nauseating puzzle. One solution could be in Congress, where climate hawks and transmission reform champions want to empower the Federal Energy Regulatory Commission to have primacy over transmission line approvals, as it has over gas pipelines. This would at the very least contain any conflicts over transmission lines to one deciding body.
“It’s an old saw: Depending on the issue, I’ll tell you that I’m supportive of states’ rights,” Representative Sean Casten told me last December. “[I]t makes no sense that if you want to build a gas pipeline across multiple states in the U.S., you go to FERC and they are the sole permitting authority and they decide whether or not you get a permit. If you go to the same corridor and build an electric transmission that has less to worry about because there’s no chance of leaks, you have a different permitting body every time you cross a state line.”
Another solution could come from the tech sector thinking fast on its feet. Google for example is investing in “advanced” transmission projects like reconductoring, which the company says will allow it to increase the capacity of existing power lines. Microsoft is also experimenting with smaller superconductor lines they claim deliver the same amount of power than traditional wires.
But this space is evolving and in its infancy. “Getting into the business of transmission development is very complicated and takes a lot of time. That’s why we’ve seen data centers trying a lot of different tactics,” Reed said. “I think there’s a lot of interest, but turning that into specific projects and solutions is still to come. I think it’s also made harder by how highly local these decisions are.”
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1. Suffolk County, New York – Rarely do I get to say battery fire fears can be quelched but we have a very good example brewing in the Empire State.
2. Loudon County, Virginia – I can’t believe it: Data Center Alley is going to enact a moratorium.
3. Pulaski County, Arkansas – Entergy has dropped the lawsuit it filed against an Arkansas newspaper over the publication of a power deal with Google.
4. Darlington County, South Carolina – We conclude this week’s Hotspots with a focus on a GOP-leaning county rejecting a renewables moratorium.
A conversation with Sam Lyman of the Bitcoin Policy Institute.
This week’s conversation is with Sam Lyman, head of research at the Bitcoin Policy Institute. Originally focused on cryptocurrency, Lyman’s organization has expanded to policy and messaging development around data centers, most notably providing research many AI boosters cite to claim foreign influence is driving opposition to new hyperscale projects. Last week, the think tank released a new report calling for a novel solution to the data center permitting bottleneck: direct cash payments from data center projects to individuals involved with building them, as well as residents nearby facilities once they’re operating.
I reached out to BPI and asked for a chat with Lyman about the data center dividend proposal. I also tried to get to the bottom of where this increasingly relevant think tank stands on the general idea of a national data center law. The conversation was immensely informative. So here it is, in a lightly abridged and edited format.
Let’s start with the data center dividend proposal. Walk my readers through it.
Data center dividends came from the idea that, ideally in the AI revolution, we want all Americans to benefit. Especially rural Americans. You look at the landscape today, the majority of AI data centers are being built in rural America. It’s critical they’ll benefit from the massive wealth AI will unlock.
There’s lots of ways to make that happen. People point to the jobs AI data centers will build out, for example. But with data center dividends, we take the logic of the Alaska Permanent Fund and we apply it to America’s rural counties, which are sitting on a proverbial gold mine right now but lack any kind of public mechanism allowing them to benefit from that in a maximal way.
If you look at the tax revenue these data centers create, which is astronomical, how do we distribute this tax revenue in a way where it has the most tangible impact on the families living there? We believe data center dividends are the best way to do that – after allocating money for schools, public safety, and infrastructure, it allows these counties with tens of millions of dollars left over to distribute them as they see fit. They should distribute that money to the men and women who make those data centers happen in the first place.
The most effective form of a dividend would take a direct payment: a cash payment, a physical check, a direct deposit. Or the form of credits paying back property taxes, utility bills, an endowment for scholarships. There’s a number of different forms this can take.
Hopefully this gets the conversation going about how we can make these work for everybody.
Who do you want to see set up this dividend mechanism? How’s your approach to implementation?
The report is addressed to county commissioners. I’m thinking of commissioners who represent both sides of the political spectrum facing this huge backlash. Many of them want to do good by their communities and their voters, even if it means doing a data center, in places where it’s difficult to explain right now. Dividends make this indisputably clear.
I tried to put myself in the shoes of an enterprising county commissioner who sees the merits in the data center buildout and wants to break out of the political storm. It’s important to note data centers can be a huge economic boon for communities, in ways that can impact lives positively.
Have any communities – counties, as you noted – taken this idea up yet? Are there any models for this proposal?
The best analogue is West Feliciana, Louisiana, which is the case study we feature. West Feliciana made an agreement with a data center developer where in lieu of taxes, they make direct payments of about $90 million a year to the parish. That triples the community’s tax budget every year. It leaves ample room not only for essential services but dividends afterwards. Louisiana then passed a law – Act 434 – that allowed West Feliciana to remit some of those payments to residents as a tax credit. This bill first provided the opportunity for the parish to even remit those payments as cash, but it was changed in the legislature to make it a credit. That’s the closest we’ve gotten so far.
As far as reaching out to individual counties, we’re a think tank. We put ideas into the universe. We haven’t had anyone reach out to us since the publication of the report so far but we’re hoping they will.
Your report does lay out how there’s a bottleneck in development and this could help with easing it. Do you see an impetus to put ideas like the dividend out there right now, in light of the increased data center scrutiny in this year’s midterms?
Our publication is irrespective of the midterms. But it is tied to the fact that a bottleneck facing the data center buildout includes it becoming a politicized issue. We’re of the belief these projects shouldn't be political at all. One way to break through the noise is by showing how they can benefit those involved in construction and residents who live there. Data centers are critical infrastructure; other forms of critical infrastructure aren’t being politicized. Our efforts are to demonstrate how these shouldn’t be political.
When it comes to the future of AI data center regulation, this proposal is obviously geared towards incentivizing a resolution to the bottleneck through using resources produced from data centers – namely, new investment.
Where does your organization stand on the increased push for environmental or siting regulation on AI data centers?
I’m not familiar with what you might be referring to there.
I mean, there’s all kinds of proposals at the federal level and in states for everything from being required to pay for infrastructure upgrades to being required to use closed-loop cooling to siting restrictions, like temporary moratoria.
What I’m asking is, what else do you as an organization believe when it comes to regulating AI data center development at the federal level? State level?
We believe data centers should work for the communities where they’re being built. That’s important. So the concept of BYOP – Bring Your Own Power – we very much support that idea. We think the Ratepayer Protection Pledge is a great proposal because ultimately we want data centers, with them being critical infrastructure, to not only strengthen our national security but strengthen the communities where they’re being built.
Some states are rejecting data centers. We think that’s a mistake because it's something that’ll ultimately short-change the people who live there. For the states that do decide to build data centers, it's up to them what regulations make data centers more sustainable over time.
There’s increased public discussion for policy on AI development – as an organization, do you see any role in the federal government making policy here with a national data center law?
We think AI will be key to America’s prosperity over the long-term. We have concerns about the regulation of open-source artificial intelligence; bitcoin is a form of open-source software and open-source money. We believe intelligence should be something available to all Americans. That’s our concern with talk about regulating AI right now, it feels like a ploy for regulatory capture.
But what about national policy on AI data centers? Does your think tank support the national legislature doing a federal data center bill or is that something best for localities or states?
It depends on the bill. Are you talking about Sen. Bernie Sanders’ national moratorium?
The administration told a federal court that it has a “new analytical methodology,” hence the continued delays.
A federal judge ruled in early August that the Trump administration’s freeze on vertical height clearances for wind turbines was likely illegal. More than a month later nearly all of the wind energy projects remain on pause, as federal officials add new red tape that industry representatives say runs afoul of the court’s edict.
Let’s catch-up quickly on the American wind sector’s existential dilemma: the federal government has control over airspace higher than 200 feet from the ground and wind farm turbines essentially always enter that sphere of control. For at least a year and a half, the Trump administration through the Department of Defense and the Federal Aviation Administration has slowly gummed up what industry and former government officials have said was once a rote, benign bureaucratic process for ensuring turbine rotation didn’t interfere with flight patterns or radar at nearby airports.
So, Trump is delaying key approvals even for wind projects on private land, a worst-case scenario for the industry during his presidency. With support from their respective trade groups, many project developers sued and in August won a preliminary injunction against this de-facto national wind energy freeze. The court ruling said federal law laid out clear deadlines for completing these airspace reviews and the administration was willfully missing them.
“[In] light of DoD’s review freeze that started a year ago and still has no end in sight, the wind developers would naturally look to the same deadlines for relief,” U.S. District Judge Karin Immergut wrote, stating the administration’s pause violated the Administrative Procedures Act. Immergut also said the Trump administration potentially violated the law by reviewing projects under a new national security “methodology” that was defined by Congress.
But on Thursday, in its first update to the court since the ruling, the Justice Department laid out how essentially all projects remain at a standstill because they were adopting a new kind of comprehensive review process.
The administration claimed that “as a matter of policy” it had “resumed processing wind energy project applications,” but it only described a single instance where a company had heard from the military about moving forward. In addition, that company as well as all others affected by the freeze would still face a “new analytical methodology” for federal agencies reviewing height clearances for all projects, which appears to fly in the face of the ruling. The Justice Department did not provide any more detail about the methodology in its status update to the court.
Nicole Hughes, executive director of lead plaintiff Renewable Northwest, asserted in an interview Tuesday that the agency isn’t complying with the court order. “It appears to me they’re still stalling,” Hughes told me, adding the federal government’s reluctance to proceed is creating “a pretty high risk” for developers of any new wind projects in the United States. She said if nothing changes in the short term, they’re going to “have to go back to the judge and ask for further clarification as to what it means to comply with this order.”
“The lack of compliance by the administration does put into question the credibility [of the courts] and what pieces hold their feet to the fire? What remedies do we have? There’s never been a time an administration flaunts a judge’s orders the way the administration is.”
The Justice Department status update described a multitude of wind energy projects impacted by the freeze. At least 30 projects apparently already signed deals proposed by the military to mitigate radar impacts and were awaiting a counter-signature from the Department of Defense (which Trump calls the Department of War or DoW). Those previous legal agreements are now at risk of being thrown out, according to the Justice Department filing. The new pathway forward for them apparently is: “DoW will either (i) provide a notice that the project presents an unacceptable risk to national security, (ii) re-engage in negotiations with the developer to attempt to ameliorate any unacceptable risks, or (iii) circulate to the project proponent [a] new model mitigation agreement.”
At least 110 projects were in the middle of discussions with the federal government about mitigating airspace impacts when the injunction came down, according to the DOJ filing, which says none of them have heard from officials since the injunction. “As of this filing, developer re-engagements have yet to begin because such discussions need to be informed by the analytical results. Given the number of projects in this category, DoW has been assessing how to resume review and engagement with the developers.”
The DOJ said another 50 projects awaiting initial meetings with the federal government about airspace risk will begin once the administration “finishes with those” 110 projects that were in the middle of the process. That waiting list will also include another at least 40 projects the Justice Department said received “presumed risk” airspace notices from the federal government.
We’ve seen the Trump administration use extralegal means to delay wind energy before, but never to this extent or after a judge ruled against them. The Interior Department had been freezing wind and solar projects on federal lands under a policy requiring Secretary Doug Burgum sign off on routine approvals, but those typical government processes seem like they’ve resumed after a different federal court ruling enjoining that policy.
American Clean Power, the largest utility-scale solar and wind energy trade group, declined to comment. The Department of Defense did not respond to a request for comment.