By RICK SHUMATE | For the Arkansas Advocate
The Fear of Missing Out (FOMO) has broken out across Arkansas, as elected officials, unelected economic developers, utility companies and their regulators fall all over themselves not to miss out on the AI-fueled data center boom, a competition characterized by hyperbole, secrecy and healthy doses of wishful thinking.
Gov. Sarah Huckabee Sanders and state legislators are fueling the campaign to turn Arkansas into a mecca for data centers, expanding a sales tax exemption for new projects and allowing Entergy Arkansas and other utilities to bill consumers for the expanded generating capacity needed to satiate data centers’ voracious appetite for electricity.
Yet, amid splashy announcements of projects, sort-of projects and maybe someday projects, and the handing out of tax breaks like a freewheeling Santa on Christmas Eve, some pesky questions are being ignored.
Do the relatively modest number of jobs generated by data centers justify the infrastructure improvements and tax breaks being offered to lure them to Arkansas? Is it fair for power customers who live far afield from data centers to foot the bill for expanding capacity?
Is it appropriate or wise for state and local governments to provide corporate welfare subsidies to some of the most profitable companies on the planet — and to negotiate those deals in secret to avoid appropriate public scrutiny? Is opening up the candy store really necessary to compete for these projects, or are state and local leaders — driven by their fear of missing out — getting played?
As we try to move away from our reliance on fossil fuels to combat climate change, should we really be encouraging environmentally unfriendly projects that undermine our renewable energy goals by driving up electricity demand beyond what renewable sources can possibly supply?
And, more basically, is indulging FOMO a responsible way to make decisions that could alter the state’s landscape, raise our electric bills and shackle state and local governments to tax incentives for decades to come?
The AI boom has led to exponential growth in the number of data centers sprouting up across the country, as high-tech behemoths such as Google, Meta, Amazon and Microsoft look to ramp up their server capacity. The number of U.S. data centers now tops 4,200, just nine of which are in Arkansas.
But the past year has seen a proliferation of projects across the state — a $4 billion Google data center in West Memphis and vague proposals for $1 billion data centers in Little Rock, Conway and Clarksville. Although Google is rumored to be behind all three of these projects, middlemen are being used to negotiate tax breaks, so the names remain a secret.
Of course, state and local governments offering tax breaks and infrastructure improvements to lure new businesses is nothing new — the entire economic development industry is built around the practice. The traditional justification is that the new facility will generate a large number of jobs that will provide stable long-term employment for local residents.
While that argument might hold water when it comes to a new factory or assembly plant, it falls flat with data centers — facilities with gigantic footprints that consume copious amounts of electricity and water but provide relatively few jobs.
For example, the prospective data centers in Little Rock and Conway would occupy 300,000 square feet — more than five football fields — but employ just 50 people, about as many as would be in a modest-sized high school marching band. Google’s center in West Memphis will have just 300 permanent employees, on a campus of 1,100 acres, although it’s projected to provide 5,000 temporary jobs during construction.
And companies operating data centers have also been loath to guarantee that even these modest numbers of jobs will go to locals; indeed, some of the more high-paying technical jobs are likely to go to outsiders with specialized skills.
Republicans in the legislature called their bill allowing utility infrastructure costs to be passed along to consumers the Generating Arkansas Jobs Act. But how many jobs? For whom? At what cost?
While the impact on employment may be modest, data centers’ effect on the power supply is not. Electricity demand for data centers is forecast to triple by 2028, from 4% of total U.S. demand to 12%. And an analysis from the Harvard Electricity Law Initiative found that this alliance between utilities and Big Tech will shift billions in costs onto the shoulders of consumers, a trend we’re seeing already in Arkansas.
Entergy Arkansas customers, from Texarkana to Pocahontas and points in between, would have had to pay on average $2 more a month to finance increased generating capacity to serve Google’s West Memphis data center, under an agreement approved this month by the Public Service Commission. Google, however, has agreed to pay rates at a level that would reduce the service costs for all other customers, according to an Entergy spokesperson.
A study from the University of Michigan also found that data center owners often negotiate sweetheart deals with utility companies for discounted rates, further shifting costs to consumers — and details of those deals are often kept secret.
We’ve also seen that in Arkansas: When Entergy presented details of its contract with Google to the PSC, the public was ordered to leave the hearing room so that “confidential” information could be discussed in secret.
The secrecy around data center recruitment is a feature, not a bug. And the primary beneficiaries are the tech companies who get public subsidies and discounted utility rates without subjecting themselves to the transparency or accountability we should expect in what’s left of our democracy.
If we want to see where all of this might lead, we might look to Virginia, which has been inundated with more than 660 data centers and where FOMO is giving way to regret.
Officials there are getting an earful from voters mad about noise and environmental impacts, higher utility rates and a paucity of new jobs. Legislation has been introduced to prevent utilities from passing along data center infrastructure costs to consumers. And a Democrat recently flipped a legislative seat that had been in Republican hands for decades by stressing the effect data centers were having on electricity prices.
As a Republican state senator put it, “People are now looking at this, going, ‘What the hell is going on?’”
Which of course, is the irony of FOMO: Sometimes missing out is really in your best interest.
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