New Data Center Proposals Would ‘Kill’ Michigan’s Strong New Climate Laws – Inside Climate News

The “offramp” provision in Michigan’s 2023 climate and clean energy laws allows utilities to keep running or building fossil fuel plants if renewable sources cannot handle the energy grid’s load. Now, newly proposed data centers could cause the offramp to be triggered, as DTE Energy executives say they are working on plans to power those centers and may need to build a new gas plant. 

DTE, the state’s largest utility, is in negotiations with big tech companies to provide 7 gigawatts of power for several proposed data centers. The capacity of the grid that DTE manages is about 11 GW. It already delivers a peak of at least 9.5 GW of power to its territory, meaning the 7 GW would cause DTE to exceed capacity. 

Similarly, Consumers Energy, the state’s second-largest utility, has 7.6 GW of capacity, and 15 GW of data center projects in the works. 

Advocates say the centers are also presenting a financial threat to residential ratepayers who may be on the hook for some or all of the electric-expansion costs, unless state regulators require tech companies to pay for the plants. 

Those who fought against late 2024 tax incentives for data centers that ultimately passed predicted this exact scenario would play out.

“Looking back to the fight over the incentives, this is absolutely what DTE wanted to happen,” said Chris Gilmer-Hill, policy associate with the Michigan Environmental Justice Coalition. “DTE’s theory is if they can find a way to easily jack up demand that has to be met no matter what, then they can build coal or methane or gas plants.”

Data centers, often built by or for tech giants like Google, Amazon and Microsoft, process the nation’s web traffic and are essential pieces of the artificial intelligence boom. They are also a threat to states’ climate goals. 

Virginia is unlikely to meet its targets because of the centers, Wisconsin is proposing a new gas plant to satisfy Microsoft’s needs, and Omaha, Nebraska, ratepayers are funding a gas plant being built largely to keep up with data-center-driven demand.

The facilities require up to 50 times more energy than the typical office building. The U.S. Department of Energy has called them “one of the most energy-intensive building types.” 

Michigan’s climate legislation, which largely requires 100 percent renewable energy by 2040, passed in late 2023. But soon after, the state House approved a package of bills that would extend tax incentives to tech companies building data centers. The legislation was approved by the House with little scrutiny, and environmental groups quickly realized they incentivized centers that would trigger the climate offramp. 

They mobilized in May 2024 and peeled off enough support to stall the bills, and an acrimonious fight dragged out for months among Democrats. Environmental groups and their allies in the Michigan Legislature argued for changes that would require tech companies to either build their own renewable-generation sources, or use clean-energy programs in place with local utilities.

The bills’ supporters, backed by Michigan Gov. Gretchen Whitmer, ultimately won the fight. Whitmer and the state Democratic party have received millions of dollars in campaign donations from DTE during her two terms, while the utility also contributes to the vast majority of legislators each session—a 2022 analysis found it donated to all but 10 out of 148. Whitmer’s office to did not respond to a request for comment. 

“There were multiple attempts made to protect our climate goals and ratepayers, and those did not move because DTE controls the state Legislature with its contributions,” said Christy McGillivray, executive director of Voters Not Politicians. In 2024, while at the Sierra Club’s Michigan Chapter, McGillivray helped lead the charge against tax incentives for data centers because she feared what it would mean for the climate and ratepayers. 

“It is not popular to hike up energy rates so Silicon Valley billionaires build out infrastructure to raid our entire government—no one voted for that,” McGillivray added. 

In a recent earnings call with investors, DTE Chief Operating Officer Joi Harris said, “Our intention is to get a [data center] deal done by the end of the year, and we are making nice progress.” Harris added that the utility would install more battery storage and gas infrastructure to meet demand. 

Deals are almost in place to provide 3 gigawatts for data centers that already have property and permits in place, and talks over an additional 4 GW are in the early stages, Harris said. 

Triggering the off ramp would still require the companies to try to meet the climate laws’ clean and renewable energy standards, said Douglas Jester, a partner at 5 Lakes Energy, an energy consulting firm and intervener in some rate cases. The utilities would need to demonstrate that they cannot reasonably build out clean or renewables to meet demand and avoid reliability problems. 

“There is a real risk that data center growth will delay compliance with the standards,” Jester said. 

The Michigan Public Service Commission, which regulates the state monopoly utilities, would determine whether the utilities could meet the standards, and enforce the laws, though it is unclear how it may act. 

In a statement, MPSC spokesperson Matt Helms said the commission would “judge filings as they come in based on provisions of the law.” The commission declined to comment further. 

In a statement, DTE noted that its plans will be reviewed by the MPSC.

“DTE Energy is confident that with our diverse generation mix – including our strong baseload facilities supported by our large and growing renewable energy portfolio – we can support data center growth and meet the state’s ambitious 2023 clean energy standard while working with the state to grow our economy to the benefit of all Michiganders,” spokesperson Jill Wilmot said.   

It is unclear who will pay for the centers. A case before the MPSC involving data centers proposed in Consumers Energy territory is requiring tech companies to pay a tariff for 15 years to fund the projects, which would protect residential ratepayers during that period. 

But advocates fear residential customers still may end up paying. Gas plants and other energy generation facilities typically have a lifespan of 30 years. If the data center winds down operations or closes after 15 years, then ratepayers would be on the hook to cover the remaining costs. 

The Citizens Utility Board of Michigan, which is an intervener in the Consumers Energy tariff case, is arguing that regulators should require a longer contract period for the tariff, among other protections, to ensure consumers won’t be charged more for data centers.

“Utilities build plants to meet the demand, but what if the data center goes away or isn’t built, or closes early?” CUB Executive Director Amy Bandyk asked.

It is unclear whether a similar tariff may be proposed in DTE territory and how, or if, regulators may shield residential customers. 

“We’re in uncharted territory,” Bandyk said.

State Sen. Kevin Hertel, a Democrat from St. Clair Shores outside Detroit, co-authored the data center bills and opposed proposals that would have added some consumer protections and required data centers to build their own clean energy. In a text message, he denied opposing “clean energy measures,” and noted that the bills have other environmental protections. 

“Michigan’s data center tax policy includes more environmental requirements and consumer protections than any of 30 plus states with similar policy,” Hertel said. 

A planned state ballot proposal that would go in front of voters in 2026 would bar utilities from donating to legislators, which McGillivray said is essential to addressing the situation. 

“We have to take a run at this because our democracy is on the ropes,” McGillivray said.