October 08, 2025

Power and Energy Trends Shaping the Data Center Industry

Proactive Legal and Advocacy Strategies Are Increasingly Critical

At a Glance

  • States are working to solve energy resource adequacy considerations as demand increases; but in many states, supply is being reduced either by policy developments or market considerations.
  • Legislatures in multiple states are considering or enacting mandates that require data centers to source a significant portion — or even all — of their electricity from renewable sources.
  • There is a growing trend towards clean-firm technologies — including enhanced geothermal, long-duration storage technologies and next-generation nuclear technologies such as small modular reactors. Data centers are also exploring unique arrangements, collocating natural-gas turbines, solar and storage technologies to diversify their energy supply and enhance reliability.
  • Successful advocacy in this context involves early outreach to municipal leaders, residents and regional planning agencies, along with transparent communication about energy sourcing, sustainability measures and community benefits. Building coalitions with organized labor, business interests and advocacy organizations is essential.

Reliable, scalable and sustainable energy is the lifeblood of the data center industry. With the rapid growth of cloud adoption, artificial intelligence and next-generation connectivity, data centers are driving unprecedented demand for electricity. This surge in demand has elevated power supply and energy policy as top priorities for developers, operators and state policymakers. Recent activity at public utility commissions (PUCs) and state legislatures is reshaping the energy landscape, creating both challenges and opportunities for industry stakeholders.

Data Centers’ Growing Energy Needs

Data centers now account for some of the largest electricity loads in many regions, leading utilities and PUCs to review and update large-load tariff structures. In several states, utilities are exploring new grid interconnection frameworks to accommodate the rapid expansion of data center campuses. Investments in transmission upgrades and grid modernization are underway, as utilities seek to balance reliable service with cost control and ensure that new data center loads do not strain existing infrastructure. States are working to solve for resource adequacy considerations as demand increases; but in many states, supply is being reduced either by policy developments or market considerations. These developments require careful legal review and advocacy to ensure that data center projects are not delayed by regulatory barriers or insufficient grid capacity.

Trends Towards Renewable Power

Environmental concerns and corporate commitments to ESG goals are also driving a shift toward renewable energy procurement in the data center sector. According to S&P Global, the technology and web services industry was responsible for 84% of the tracked U.S. clean energy procurement from February 2025 through July 2025. In 2024, data centers accounted for roughly half of the clean energy procurements nationally. Legislatures in multiple states are considering or enacting mandates that require data centers to source a significant portion — or even all — of their electricity from renewable sources. Utilities are responding by developing green and large-load tariffs and programs that allow direct access to wind, solar and battery storage projects. Data center operators are increasingly entering into power purchase agreements for renewable energy, navigating the complexities of interconnection queues and grid balancing. Public utility commissions are actively crafting policies to facilitate these transitions, with new regulations designed to encourage both sustainability and grid reliability, while ensuring continued economic development opportunities.

The energy generation and transmission issues faced by the data center industry varies considerably between states that have established ambitious clean energy goals compared to states that have not. For example, in Illinois, renewable energy and nuclear power have garnered more attention given the planned fossil fuel plant retirements as established under the Illinois Climate and Equitable Jobs Act, whereas natural gas continues to be a key generation source in states that have not established such ambitious clean energy targets.

Trends Towards Nuclear Power

At the same time, the data center industry is leaning into nuclear power generation as evidenced by a number of power purchase agreements between data center companies and nuclear energy generators. Nuclear power generates nearly 20% of U.S. electricity, over 50% of Illinois’ power and nearly 55% of America’s emissions-free power generation — more than all other clean energy sources combined. Data center companies are adding nuclear to their energy portfolios because it’s carbon-free, scalable, safe and provides reliable baseload power.

For example, in June 2025, Meta and Constellation announced a 20-year power purchase agreement whereby Meta will purchase the clean energy attributes of Constellation’s 1,092-megawatt Clinton Clean Energy Center in central Illinois. This agreement supports the relicensing of over one gigawatt of carbon-free power and an additional 30 megawatts of power at the Clinton Clean Energy Center, enabling continued operation of the facility without increasing costs to ratepayers. Other hyperscalers have taken similar actions. Increasingly, agreements with existing nuclear facilities include efforts to uprate their capacity, extend their operating life and provide more financial stability, contributing to both sustainability and grid reliability.

Trends Towards Reliable, Diverse & Clean-Firm Power

Alongside these developments, there is a growing trend towards clean-firm technologies — including enhanced geothermal, long-duration storage technologies and next-generation nuclear technologies such as small modular reactors (SMRs). Data centers are also exploring unique arrangements, collocating natural-gas turbines, solar and storage technologies to diversify their energy supply and enhance reliability.

Regulatory Advocacy & Coalition-Building

Evolving state and local energy regulations present both hurdles and opportunities for strategic engagement. Data center stakeholders are actively lobbying for streamlined permitting for new grid connections and substations, as well as incentives for on-site generation, microgrids and energy storage solutions. The legal landscape is dynamic, requiring skills in securing regulatory approvals and structuring compliant development agreements. Stakeholders and their counsel need to anticipate regulatory shifts, advocate for favorable policies and unlock new opportunities as the industry continues to grow.

Large energy projects face heightened scrutiny from local governments, environmental groups and community stakeholders. Successful advocacy in this context involves early outreach to municipal leaders, residents and regional planning agencies, along with transparent communication about energy sourcing, sustainability measures and community benefits. Building coalitions with organized labor, business interests and advocacy organizations is essential to support legislative and regulatory priorities and to help ensure that data center projects receive broad-based support.

Looking Ahead

As power and energy issues take center stage in data center development, proactive legal and advocacy strategies are increasingly critical to help anticipate regulatory changes, shape policy outcomes and achieve goals in a rapidly evolving environment.

For More Information

This client alert is the result of an interview conducted by Matt Olsen (a construction and real estate litigation partner in Faegre Drinker’s Indianapolis office) of Brad Tietz (a director in the firm’s government and regulatory affairs team). You may contact them for further information.