Opponents of new development often voice concerns over issues such as illegal construction, noise, water use, land use, and electricity prices. While each of these should be evaluated and addressed on their own merits, blanketing local, state, or national moratoriums discourage investment and drive projects to jurisdictions with more predictable regulatory environments, such as Texas and Florida. 

Notably, American public opinion has been subject to anti-data-center rhetoric from foreign state media like the China Daily, Global Times, China Global Television Network, and Russia Today. Meanwhile, China has invested $6.1 billion in its own domestic data-center construction and plans to invest more. 

While obviously not every American who opposes data centers is being manipulated or is voicing non-germane concerns about local conditions, the policy debate is unfortunately being driven by knee-jerk reactions and, in part, by foreign actors with an interest in a weaker American economy and tech sector. 

The One Big Beautiful Bill Act allowed for full and immediate expensing for structures like data centers, factories, and warehouses. Instead of depreciating for up to 39 years, these structures could be written off of taxes immediately. This is sound tax policy because businesses should be able to deduct the full cost of investments in the year those expenses are incurred, rather than over decades through depreciation schedules that erode the real value of those deductions.  

By lowering the effective tax burden on new investment, full and immediate expensing encourages new investment and economic growth. 

The provision’s tight eligibility window requires construction to begin before 2029 and facilities to enter service by 2031. For these capital-intensive projects with long permitting, interconnection, and construction timelines, this temporary tax policy has created a race that has fueled large capital expenditure headlines for AI-related companies.  

However, since many companies are skeptical of making this short deadline, data-center investments are slowing or being canceled. To alleviate this short-term boom and ensure that data centers are built based on more reasonable projections, Congress should make full and immediate expensing for structures permanent so that investors can build with confidence that the tax code will not change in only a few short years. 

One of the biggest obstacles slowing America’s data-center boom is the growing inability of the electric grid to provide stable, baseload power. Data centers consumed roughly 4.4% of total U.S. electricity demand in 2023 and may reach 12% by 2028. Meanwhile, the National Electricity Reliability Council issued a rare Level 3 Essential Actions notice in May, whereby it directed data centers to report usage rates to avoid reliability issues with an increasingly intermittent grid. ‘

For years, policymakers subsidized less reliable energy sources like wind and solar while imposing regulatory pressure on baseload generation sources like coal and natural gas, undermining grid stability.  

By suppressing wholesale power prices during periods of high renewable output, these subsidies also eroded the economic competitiveness of nuclear plants, contributing to the premature closure of facilities despite their ability to provide reliable, clean baseload power at affordable rates. While wind and solar can contribute to the grid, they cannot replace the reliability provided by natural gas, coal, and nuclear power which large industrial consumers like data centers require.

At the same time, the process for connecting new power generation and transmission infrastructure has become bogged down in bureaucracy. At the end of 2024, roughly 10,300 power projects were stuck waiting in U.S. interconnection queues, representing approximately 1,400 gigawatts of generation and nearly 890 gigawatts of storage capacity.

Utilities and regional transmission organizations now average five years to process interconnection requests, complete environmental reviews, and approve transmission projects, all of which are essential for data-center construction. This results in data-center developers securing financing and land far before grid access. 

 Due to these supply-side issues, some developers are now pursuing behind-the-meter power arrangements, on-site generation, and private energy agreements. These innovations can diversify electricity supply, improve system resilience, and give large consumers greater control over their energy needs.  

However, their growing popularity also highlights the necessity for reforms to a grid that’s proving unable to deliver timely and dependable power connections. 

AMERICANS STILL BELIEVE IN WORK. THE AI CROWD HASN’T GOTTEN THE MEMO

Policymakers should make it easier not only to connect to the grid, but also to develop private power solutions that can complement and strengthen it. They must fix permitting bottlenecks, and localities should seek regulatory clarity instead of moratoriums. Congress should make pro-investment expensing permanent, and regulators should accelerate reporting procedures along with generation, transmission, and interconnection approvals.  

Together, these policy shifts would allow America to expand data-center buildouts, strengthen the energy grid, and improve affordability for American families. 

Sarah Wagoner is a Policy Analyst in Environmental and Energy Policy at the Heritage Foundation. Autumn Dorsey is a Policy Analyst  in the Center for Technology and the Human Person at The Heritage Foundation.