American communities have begun to reject the construction of local data centers out of concern that they drive up electricity prices without returning durable and diversified job and other economic benefits. Jake Higdon writes that governments concerned about these risks should not only insulate consumers from higher prices, but also demand that data center investments be used to power reindustrialization efforts.
A few years ago, states were offering massive incentive packages to attract data centers. However, in 2026, access to power has become a universal constraint on the growth of American industry. With the confluence of aging transmission and distribution infrastructure, supply chain bottlenecks for critical grid components, and the accelerating replacement of fossil fuels with electricity, every available megawatt of capacity commands a high premium. As such, Americans have begun to reject the construction of data centers in their communities, concerned that they drive up electricity prices for all while offering few sustainable jobs and other economic benefits.
In response, states are prioritizing a swath of innovative frameworks and deals with hyperscalers, the Big Tech companies like Amazon, Google and Microsoft that run large data centers to power their cloud and artificial intelligence services, to protect ratepayers, promote new energy technologies, and provide other, localized, community benefits. Democrat and Republican governors alike are promoting new large load tariffs and mulling additional regulations on hyperscalers’ power use, even as they court their investment. And the Trump administration convened tech CEOs in March to sign a Ratepayer Protection Pledge—a bit ironic, as its ongoing “blockade” of new clean energy development is directly constraining the buildout of new electricity across the country.
So far, state efforts have focused on near-term consumer protection. This is necessary, but not sufficient. Tech giants are not just hiking up consumer electricity prices. They are gobbling up power and land at the expense of longer-term economic development plans built around strategic industries. However, rather than ban the construction of data centers, communities can leverage their investments. A recent Brookings paper presents an array of adaptive strategies to parlay data center investment into more durable economic opportunity. Novel proposals for smart artificial intelligence fast lanes and an American grid infrastructure fund offer more expansive views for leveraging data centers’ electricity demand to unlock broader public benefit.
I offer another proposal: Data center-anchored industrial zones. Under the data center-anchored industrial zone model, data center buildout can drive diversified economic development and job creation, not just a short-term construction boom.
The economic impact of data centers is decidedly mixed
There is early evidence to suggest data centers offer some near-term benefits for local economies. A 2024 study from the Virginia Joint Legislative Audit and Review Commission found significant local tax revenue and meaningful job creation from data center development, though the latter tends to taper off after the construction stage. This typeof economic development comes at a cost. While there are strategic justifications (in terms of economic and national security) to ensuring U.S. firms across tech, service, and industrial sectors have adequate compute to maintain their leadership, there are serious questions about whether data centers provide local long-term benefit that can justify their large-scale consumption of power and other economic development resources.
We are beginning to see the material impact of rising electricity prices on electricity-intensive industrial sectors, such as aluminum. Aluminum is deemed a critical mineral by the U.S. government for its energy and defense applications. However, despite both Biden and Trump imposing tariffs to save the few remaining domestic producers, U.S. capacity has continued to dwindle in the face of rising power prices. In February, the second-largest aluminum smelter permanently shuttered its doors and sold its Hawesville, KY site to Terawulf to redevelop into a data center. Now, aluminum producer Alcoa is selling off electricity-rich sites to data center developers. While it is easy to see why metal producers would choose the certainty of cash offers over the uncertain future of these sites, this emerging dynamic—in which data center speculation gobbles up the infrastructure underpinning our reindustrialization hopes—presents serious implications for U.S. competitiveness, local job creation, and the prospect of diversified regional economies. This is not to mention the second-order jobs impact of the AI services they enable, which is raising alarm bells and prompting backlash across the country.
This infrastructure sell-off would be nerve-wracking enough if we had certainty about the future of data centers, but there are reasons to believe many of these announced data center deals may not come to fruition on schedule, or ever. Recent analysis from Sightline Climate predicts as much as 30-50% of the data center pipeline for 2026 is unlikely to materialize before the end of the year. Utilities have sounded the alarm on phantom data centers: speculative reservations for power by data center projects that may never be built. And, should the boom go bust, the interlocking financial dependencies across the energy sector, chips producers, and tech giants could trigger cascading effects throughout the power sector and broader economy.
Parlaying data center speculation into broader reindustrialization
Unsurprisingly, the public increasingly sees data centers as a devil’s bargain. Morning Consult polling from late last year shows that a growing share of Americans—upwards of 40%—support an outright ban on data centers where they live. And this is not just generic NIMBY sentiment. Data for Progress polling in January 2026 found that more than two-thirds of voters support new manufacturing, housing, transportation, and clean energy projects in their communities; support for new data center development clocks in at 48%. Increased public support for manufacturing or transportation infrastructure is largely tied to the belief that these projects will deliver quality jobs and more durable local benefits.
Yet, if all industrial development faces the same overarching physical constraint as do data centers—power—then policymakers need a plan to deliver that power. While side deals with hyperscalers for ratepayer protections, community benefits funds, and local schools can merit continued pursuit, they are indirect compensation for the costs that data centers impose on the power system, built environment, and the growth potential of other electricity-intensive industries.
To ensure that data centers do not undermine manufacturing and economic development priorities, policymakers should demand that hyperscalers contribute to broader industrial infrastructure, not compete with it. A data center-anchored industrial zones model leverages data centers—and their power demand—as a slingshot for regional reindustrialization, job creation, and economic diversification.
First, state and local governments would identify a geographic zone that is well-suited for next-generation industries. Many jurisdictions already have innovation campuses, site readiness funds, land banks, and other programs designed for this type of place-based economic development, and may simply need additional coordination and strategic focus.
Then, they would encourage the data center developer knocking on their door to serve as an “anchor tenant” for this broader industrial zone, park, or campus, under the condition that the data center provide capital to upgrade the industrial site for a broad array of uses, including support for site preparation efforts and by delivering more power to the industrial park than the data centers require. This power could be provided through a mix of clean energy resources and grid-side infrastructure upgrades.
Other industrial users located in the park will be able to access that clean electricity more rapidly, reducing each facility’s timeline for interconnection and their strain on the broader power system. Existing facilities in the area could accelerate retrofits to electrify their operations. For the community, a data center tucked within a broader industrial park can ameliorate some of the local burden, including noise pollution, traffic, and land use, while generating more sustainable and diversified job and tax base growth.
The creation of strategic manufacturing clusters has always been the work of decades of collaboration between communities, industry, states, and the federal government. Recent efforts like Illinois’s Quantum and Microelectronics Park (IQMP), Detroit’s Global Epicenter of Mobility, and Nevada’s Lithium Loop hold incredible promise. All stakeholders should see the appeal. Hyperscalers still earn a large return on their investments. Workers see opportunities for quality jobs and investments in their communities. China hawks see an opportunity to compete on semiconductors, energy, and defense. Climate advocates see an opportunity for clean tech deployment and supply chain security.
What is required
Data center-anchored industrial zones promise to help America reindustrialize but will not be possible without public and private action to unlock underutilized grid capacity. State and local governments must be empowered to proactively identify sites with suitable infrastructure and recruit other manufacturers. In most jurisdictions, regulatory structures limit the flexibility of private companies to deliver power to their neighbors, so regulatory reform may be necessary to enable data centers to serve as independent power producers, sources of load flexibility, or other ancillary service providers. If we can work out these types of policy nuances, we can unlock a symbiotic industrial ecosystem that provides an array of benefits to local workers, communities, and utilities, regardless of the data center’s long-term prospects.
Here’s how everyone would play their part:
•Governments: The local and state government facilitates a ready-made site for a high-tech industrial park that can generate new economic opportunities, good jobs, and local tax revenue for the community. Public officials will also need to play an active role in firm recruitment.
•Hyperscalers: The hyperscaler provides the capitalfor the grid-side power system upgrades to service the full industrial park with low-carbon generation and storage capacity. In return, they receive a site, interconnection, increased public buy-in, and potential demand flexibility and offtake for excess power.
•Utilities: The utility provides the physical grid upgrades required, funded by the hyperscaler. The utility benefits by being able to manage a large industrial load at a single node on the grid, thereby reducing financial risk tied to a single data center and mitigating price increases system-wide.
•Industrial tenants: Other industrial tenants provide diversified job creation for the region and offtake for clean power. In an ideal world, some manufacturers would produce strategic and relevant energy and electronics products, such as batteries, grid equipment, and semiconductors.
Today, AI’s hunger for power is forcing states and communities to choose between risky investment in a single boom sector, on one hand, and diversified opportunity and industrial strategy, on the other. If the AI boom goes bust, or if the power needs of data centers are overblown, we could end up only with scattered infrastructure, stranded or phantom assets, and a strained grid. Under the data center-anchored industrial zone model, data center buildout can amplify diverse economic development strategies centered around advanced industries and, in doing so, turn a boomtime infrastructure bonanza into durable economic opportunity.
Author’ note: The author thanks Will Toaspern, Daniel Goetzel, and the Center for Public Enterprise Energy Team, who contributed to the thinking behind this piece.
Author Disclosure: The author is the founding director of Advanced Industrial Zones, which receives in-kind and financial support from the Center for Public Enterprise and the Clean Economy Project. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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