Data centers are the building blocks of local economies. To stimulate economic growth, many states have created incentive programs to attract investments in new data centers. Three years ago, Connecticut initiated its own program. Yet, the construction of new data centers is far from complete in the state even though several innovative projects are in the early development stage.
Virginia is the state that has the most data centers in the country. Northern Virginia has some distinct advantages that led to the development of “Data Center Alley.” It is near Washington DC with its huge data processing requirements. In the late 1960s the Defense Department’s DARPANET project funded the construction of many data networking circuits. In addition, electrical power in Virginia is inexpensive; about 28% below the national average. Also, land is available in Loudan and Fairfax counties in Northern Virginia for the construction of large data centers. Virginia also was one of the first states to offer tax benefits to companies that built data centers in their state.
Public Act 21-1
The state of Connecticut would like to create its own data center boon. In 2021 Governor Lamont and his Economic and Community Development Council proposed legislation and the legislature passed it into law (House Bill No. 6514, Public Act 21-1). The “ACT CONCERNING INCENTIVES FOR QUALIFIED DATA CENTERS TO LOCATE IN THE STATE” offers some of the most favorable tax incentives in the country. Companies investing at least $200 million in a data center in the state will be able to waive property and sales taxes for 20 years. This waiver extends to 30 years for investments of $400 million. Data centers located in Connecticut Enterprise Zones require only half of the investment requirements.
Unfortunately, the program, now more than 3 years old, has not resulted in many new data centers in Connecticut. Though there are several projects underway, They are not complete yet.
Connecticut’s High Cost of Power
Even with a generous tax abatement program from the state, those interested in opening a new data center must overcome challenges that are particularly difficult in Connecticut. The cost of electrical power in our state is extremely high. In fact, Connecticut ranks as the fourth most costly state in the country for power. Since power is a large component of the cost of data center operations, most investors build new data centers in states where power is less expensive.
Several innovative approaches have tried to reduce the cost of electricity at new data centers in Connecticut. A former Stanley Black & Decker facility in New Britain large fuel cell installation. This project, under development for over 6 years, includes a data center which is about to go live.
A major data center is in the design stages that will take advantage of the state’s one remaining nuclear power plant to source lower cost energy. The Millstone Power Station in Waterford, owned by Dominion Energy, is negotiating to provide a long-term source of low-cost electrical power to a new 300MW data center. Local environmental groups and electrical industry regulators are raising questions about the impact on traditional consumers of the Millstone plant’s power output.
NIMBY
New hyper-scale data centers proposed for five other towns in eastern Connecticut are fending off objections from local town boards. Connecticut is a state with a powerful environmental lobby and a history of aggressively enforcing NIMBY (Not in My Back Yard).
Our state government has not yet figured out an effective way to stimulate new data center construction. Fortunately, CAPS’ data center in Shelton is available and ready to serve the colocation requirements of organizations throughout Connecticut.
