The newest buzzword in economic development is “data centers.” Economic development leaders are touting new data center projects almost daily, and it was one of the most talked-about items at IEDC’s Annual Conference in Detroit. Companies are investing billions of dollars to build and develop new data centers to support artificial intelligence (AI) and other large data needs—at levels far beyond anything we have seen before. These projects will bring tax revenue, a surge of short-term jobs, a smaller number of long-term job opportunities, and flashy media attention. But how are communities weighing the long-term aspects of data centers and the opportunity costs of landing one of these mega projects? Are the long-term energy and water demands being considered for not only a single data center project, but for current and future businesses that want to stay or relocate to the region? Are the transformative aspects of the project aligned with the needs and opportunities of your community and region?

These and many other questions were front and center in conversations across the economic development field in Detroit for IEDC’s Annual Conference. At first glance, data center projects look like a home run for any community that can get them to locate in their region. Billions of dollars in investment, tax revenue, and the innovation driven by these projects are all incredibly important to communities. At the same time, communities need to understand the long-term implications of the investments being made in data centers, and what it means for other business investments and economic development opportunities in the future.

Almost every community I visit or talk to has had conversations about data centers and artificial intelligence’s thirst for more power. These projects require, in some cases, 20x more power than the largest mega projects we have seen over the past decade, let alone the water usage needed to sustain these projects. To be clear, it is not just data centers requiring more energy; advanced manufacturing and other large projects are doing the same, and it is putting a strain on the energy grid and the rising energy costs needed to support these projects across the world.

Nearly three-quarters of the energy sought for large loads is associated with data centers, and by the end of the decade, the United States is set to consume more electricity for data centers than for the production of aluminum, steel, cement, chemicals, and all other energy-intensive goods combined. This makes them the single largest customer for energy utilities, both now and in the future, raising questions for every community about how to balance those costs between existing and new customers. In one region I recently visited, I was told that, if all the projects in their pipeline came to be, they would require more than eight gigawatts (GW) of energy, in a region where they could only generate 1.7 GW under current capacity. To put that in perspective, eight GW of energy could power as many as six million homes.

Why are the energy and water needs so high? Consider this: entering just five prompts into ChatGPT is the equivalent of fully charging your cell phone or drinking an entire 8-ounce glass of water. U.S. data centers consumed 17 billion gallons of water in 2023, with projections indicating this could quadruple to more than 68 billion gallons by 2028. AI’s growing demand for energy and water to support its functions is straining systems and supply chains, which fall further behind each week as countries across the world have fallen behind on major capital investments for grid enhancements, infrastructure investments, and the public policy implications that have yet to be considered.

Across the globe, policymakers are considering measures to address the needs of data centers on their electric systems. In Texas, for example, lawmakers are considering whether data centers should be forced to stop pulling power during major storms, and in Oregon, they recently passed a law focused on ensuring that data centers bear the costs of any upgrades needed to ensure that costs are not passed on to residential customers. In the EU, laws were passed to set global standards for data handling and waste heat management, and in Asia, they are focused on regulations that ensure data centers reduce their environmental impact.

While policymakers are scrambling to get their arms around these projects, economic developers are on the ground every day helping their communities make decisions on data center projects. More than 550 new data center projects have been announced in the U.S. alone so far in 2025, accounting for a projected 90 GW of power. Many communities have embraced these projects, but as more is learned, some are deciding not to pursue them, and in certain cases, city or county governments are precluding data centers from locating in their regions. Eighteen billion dollars' worth of data center projects have been blocked, with another $46 billion delayed over the last two years in the face of opposition from residents and activist groups.

Perhaps the most underappreciated aspect of this conversation is where these projects need to be located. Many of them require the type of land only available in rural places, creating an ever-increasing burden on small communities to support larger ones, and putting strain on energy and water utilities not equipped for such large demand.

A key consideration on these projects is also about their size and scope. There is a big difference between a hyper-scaler and a 40-50 megawatt data center, and the region needs to be aligned with what they are trying to attract and how it will support the businesses in the region.

The employment opportunities these projects create are not always aligned with community needs, as many required job skills must be sourced from outside the region. However, they also provide opportunities to upskill your local workforce, ensuring the community benefits from the good-paying jobs they can generate.

Finally, communities must assess the ancillary businesses that might be created or supported from the establishment of a data center, and make a determination of whether those opportunities are best utilized with the resources needed to support the project.

One alternative approach that is gaining some initial traction is looking at brownfield sites in more urban areas, where the impact on wildlife and the environment may not be as high as greenfield sites in more rural regions. This also points to another challenge and opportunity, adaptable reuse. By utilizing brownfield sites, developers can reuse sites that may not be suitable for other projects, while allowing other sites not yet developed to create more adaptable reuse opportunities as projects evolve.

So what does all of this mean for economic developers? Increasingly, economic developers are the ones on the ground making decisions on these projects, well before state, provincial, or federal government entities have come to grips with the policy impacts and outcomes needed to ensure the long-term sustainability of these projects. That means economic developers must get up to speed quickly on project requirements, work with utility partners to forecast demand and costs, and engage the community proactively to ensure your region’s priorities are met.

While there are absolute upsides to these projects that can mean big wins for a community, there are also complex and difficult tradeoffs that may need to be made, and every community will need to decide what outcomes and metrics they want to prioritize when looking at new projects and opportunities.

The growing energy needs of large projects, whether data centers or advanced manufacturing, will continue to make economic developers’ jobs more difficult. They will also give economic developers opportunities to build even deeper relationships across sectors and continue to elevate the importance of an economic developer’s role as a convener and the need for collaboration across the region.

Finally, IEDC is leading these discussions—both on data centers and on how economic developers can harness AI in their work. We recently piloted our first AI for Economic Developers course and will be launching new information on the Four Pillars of AI for Economic Development in the next year. If you are interested in engaging with other economic developers confronting similar decisions, IEDC is the place to meet and engage with your peers across the globe. Come join us at https://www.iedconline.org/pages/join/.