Indiana's betting big on data centers, but will Hoosiers end up footing the bill?

Indianapolis Star

4 hours ago

Patricia Fullen, 76, didn't turn on her air conditioning all summer. She couldn't afford the electric bill with it on.
Instead, she used floor and ceiling fans to cool the house. Guests didn't want to come over because it was so stuffy. Friends made fun of her for refusing to turn it on.
Fullen lives off her social security check and income from working part-time at the Jay C Store near where she lives in Georgetown, Indiana, a small town near the Kentucky border and right next to the site of Clark County's Meta data center.
The data center in Clark County is one of more than 20 proposed or under construction in Indiana, drawn by the state's generous tax incentives. These hulking steel complexes process, store and disseminate data, a mission critical to support the nation's growing technological infrastructure, but they also demand more power than Indiana can provide — at least without significant, often costly, upgrades for the grid.
But since the cost of grid upgrades can be passed onto residential customers, regular Hoosiers like Fullen may end up with bigger bills simply so data centers can get power — regardless of their ability to pay.
'People are going to have to make a choice,' Fullen said, 'Am I going to be able to afford to live?'
The majority of planned data centers in Indiana haven't publicly released information on how much energy they expect to need, making it challenging for the public and advocates to track the total impact of these centers.
Still, an IndyStar analysis, based on the information that is public, finds Indiana faces an uphill battle to connect proposed data centers to the grid. The anticipated energy needs for just nine data centers account for more than half of Indiana utilities' electricity capacity in 2023, based on data compiled by the U.S. Energy Information Administration and Citizen's Action Coalition.
That percentage shrinks when considering independent power producers, which are other potential sources of electricity for data centers, but it still represents a significant portion of Indiana's capacity.
Bottom line: Indiana's total electric industry capacity likely would not be enough to power the data centers on top of peak demand, according to 2021 demand data, the most recent available.
'We're talking massive, unprecedented increase in electricity consumption that we just have no recent experience with in Indiana,' said Ben Inskeep, director of the consumer advocacy organization Citizen's Action Coalition.
For example, the state's most energy intensive incoming data center project, according to public data, would require one-million-homes worth of power at a whopping 2,250 MW. That center, an Amazon endeavor currently under construction in New Carlisle, would help power AI startup Anthropic.
With so many unknowns, the true cost of powering data centers is a mystery even to experts in utility forecasting.
Timothy Phillips, the lead analyst for Purdue's State Utility Forecasting Group, said the organization's 2023 forecast — which already projects a decline in electricity resources — did not account for data centers. The group is currently working on an updated forecast for 2025 that will include data centers, which require so much electricity that they cannot be fed into the models but instead must be added on.
The little public data available, most tucked away in regulatory proceedings or utility presentations, all tell a similar story: Indiana needs to start generating more electricity if it wants to support data centers.
'But if you take the biggest numbers they were talking about, you would be talking about over 100% increase in energy required for the state,' Phillips said.
Generating enough new electricity for the data centers quickly enough could be challenging. Indiana Utility Regulatory Commission proceedings are slow. But data centers can be built within a year or two, presenting a problem for utilities that need quick approvals of grid upgrades so they can quickly bring centers online.
As utilities wait for approval on new power plants and transmission lines, they may prevent other large economic development projects from advancing.
'These data centers, because they are just guzzling up all of the existing infrastructure and natural resources available," Inskeep said, "it's actually creating a problem of preventing other types of economic development from coming to our state."
River Ridge Commerce Center, a manufacturing and business park in Clark County, testified in IURC proceedings last year that it may have to pause efforts to attract new economic development projects because Duke Energy did not have the capacity following its contract with a Meta data center. Instead, Duke Energy told River Ridge that most current and prospective companies in the area would need to wait four to five years for grid upgrades in order to get power.
Though utilities like Duke Energy may lose out on other large customers if they fail to adequately prepare, data centers offer money-making opportunities that are hard to refuse.
'For example, a utility that's making $1 billion a year in revenue, if they just add one or two data center customers they double that revenue in a short amount of time,' Inskeep said.
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Proponents of data centers, however, argue that attracting data centers are good for Indiana, spurring innovation and economic development. They also point out how much our daily lives have become entangled with tech, making data center expansion efforts inevitable.
"Data centers make our economy and our current way of life possible," said Joseph Rompala, legislative director for Indiana Industrial Energy Consumers, Inc, which advocates for cost-effective, reliable energy for large companies.
Rompala said data center companies can foster efficiency in energy storage, generation and transmission tech. Though a data center doesn't require many employees on its own, those working to manage or provide support services to the center may spark a trickle out effect, Rompala said, where businesses hire more people to serve the needs of the data center employees.
Indiana's data center rush follows a long-term decline in a reliance on coal for electricity and a shift from being a net energy exporter to a net importer.
In the past decade net interstate imports for electricity have risen, making up 16% of total supply in 2023. Importing energy isn't always more expensive than generating it, but it can raise rates for consumers if utilities become too reliant on purchasing electricity to feed power-hungry data centers, losing their flexibility to choose whatever option is cheapest.
'The risk is whether you can get it and how high the price is going to be, because the price can get really high,' Phillips said.
The decline of coal appears to be driving the dip in electric utility supply while natural gas and renewable sources struggle to fully replace it. Instead, a new power source has taken center stage in Indiana: small modular reactors.
Though no SMRs are currently operational in the U.S., these compact nuclear power plants provide up to 300 MW of electricity with a smaller carbon footprint than gas or coal.
Indiana lawmakers recently passed legislation that would incentivize utilities to invest in SMRs, allowing them to recoup costs from all the customers they serve.
Inskeep and experts agreed it's unlikely Indiana will run out of power; instead, Inskeep said he believes consumers will end up paying the bulk of the cost for supplying data centers power.
'It's really unfair that people right now that can't afford to keep their homes and can't afford to pay their power bills, are now having increases on our bills in order to subsidize these data centers and the infrastructure they need to connect to the grid,' Inskeep said.
Residents are starting to push back against data centers coming to their own counties. In March, the Valparaiso mayor announced the city would stop exploring plans to allow a data center to purchase land after public outcry. In May, pushback among residents in Hancock County led a developer to withdraw a project that may have potentially housed a data center, though the developer plans to resubmit a zoning request.
Harvard electricity law fellow Eliza Martin, who coauthored a paper on the ways ratepayers are subsidizing data centers, said it's profitable for utilities to supply energy for data center customers because they need so much electricity. But huge investments can pose a risk for other ratepayers if data center deals fall through, Martin said.
'Indiana will have built all of this generation and all of this new infrastructure, and then you won't have the same customers to spread those costs about,' she said.
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Another emerging solution involves creating special requirements for large data centers in order to protect consumers.
In February, the IURC approved a settlement between data center companies and Indiana Michigan Power that would reduce the risk of costs being passed to ratepayers by having companies enter into long-term financial commitments.
But the settlement only applies to I&M, which is only one of five investor-owned utilities in Indiana.
Until more progress can be made, Hoosiers like Patricia Fullen will plan to keep the AC off again this summer. The cost of essentials like food, gas and medicine is just too much, she said — she can no longer afford to be cool.