What does the data say about data centers?

People everywhere are talking about data centers, the high-tech facilities that house our nations growing digital infrastructure.

Illinois is a Top 10 state for data centers, with a history dating all the way back to the 1970s, initially as a central repository to meet the technology needs of state agencies.

More recently, however, data centers have become the foundation of a global technology race in the private sector, housing large computer servers, storage, and networking equipment necessary to support cloud computing and artificial intelligence (AI). In Illinois, they comprise 7% of total electricity demand (and climbing). Many rely on water for cooling. And new data centers often come seemingly out-of-nowhere, as major technology companies use of nondisclosure agreements (NDAs) with elected officials instead of committing to public transparency.

All of which has contributed to a public backlash against construction of these facilities that is playing out in statehouses and electoral campaigns around the country. Developments have been canceled or postponed, and Gov. JB Pritzker paused Illinois tax exemption for data centers.

But data centers now are a fixture of the modern economy. Understanding their costs and benefits and identifying the guardrails needed to mitigate risk to our communities is of paramount importance.

It is with these factors in mind that the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign recently undertook the most robust analysis of Illinois data centers to date. Specifically, we looked at 75 completed and ongoing projects and related reports culled from state, county, and industry data, and integrated industry-standard economic modeling to forecast potential impacts of $57 billion in planned data center projects across our state over the next decade.

Here’s what we found.

First, data centers mean jobs. More than 120,000 of them over the next 10 years, to be exact. About a third of these will be in skilled construction occupations or IT, engineering, and operations jobs that pay well into the six figures, and the other two-thirds in the supply chain or as a result of related increases in consumer spending across the economy. This investment will grow the Illinois economy by $5 billion a year during the construction phase, and about $2 billion per year thereafter. The facilities would also mean $300 million in new property tax revenue going to local communities each year nearly two-thirds of which will support public schools.

When it comes to protecting communities from potential costs, the picture is more complex. By 2035, new data centers could use the same electricity as 4.5 million Illinois homes. Without any sort of requirements that data centers produce or otherwise offset their power demands, this would increase average Illinois household electric bills by $12 per month. Water resources can also be strained, unless new data centers use the air-cooling or closed-loop systems which recycle water instead of constantly drawing on new resources that are becoming commonplace.

In both cases, there are tools available to policymakers to mitigate the risk and ensure responsible development of data centers. First, they can be required to pay for 100% of their energy, transmission, and interconnection costs and to use closed-loop or air-cooling systems to reduce water usage. The currently suspended sales tax exemption could be reformed to promote stronger energy and environmental standards, rewarding only those facilities that install Illinois-based clean energy. New data centers can be required to have battery storage. And policymakers can improve public disclosure around energy usage, water usage, and contact with elected officials.

Even though the data on data centers shows they can be a net positive for our economy and our communities, there is a trust deficit. With commonsense guardrails, Illinois can modernize our energy system, protect workers and ratepayers, and improve transparency around an industry that too many people believe has been operating in the dark.

Frank Manzo IV, MPP is an economist at the nonpartisan Illinois Economic Policy Institute.