Hochul Tells Data Centers to Pay Up as NYC Grid Faces Surge in Demand

As data centers’ hunger for power surges, New York confronts whether digital growth should short-circuit consumers’ wallets and the state’s climate ambitions.

In a city where the night sky is rarely dark, thanks to a constant buzz of electrons surging through delicately tangled wires, the prospect that New York’s digital arteries might soon overload is enough to raise eyebrows even in the jaded corridors of Albany. The demand for data storage and processing power—fuelled by a headlong rush into artificial intelligence, cloud computing, and cryptomining—has propelled the state toward a sobering milestone: requests for electric-grid connections totaling more than 11 gigawatts, enough to electrify every home in New York nearly twice over.

This month, Governor Kathy Hochul set a marker. In her latest State of the State address, she declared that tech companies, whose ravening server farms drive this surge, should foot the bill for their own energy appetites. Henceforth, the Public Service Commission (PSC) will scrutinise the costs associated with connecting energy-intensive industries—particularly data centers—to the state’s increasingly stretched grid. The initiative aims to ensure that the rapid expansion of these digital behemoths does not saddle everyday New Yorkers with higher electricity bills, or derail the state’s energy transition.

New York is hardly alone in confronting the swelling appetite of data centers. Nationwide, the Department of Energy forecasts that data-center consumption could triple by 2028, representing as much as 12% of all U.S. electricity. Yet the phenomenon has reached especially acute proportions in the Empire State. Of the more than 130 data centers in New York, almost half are squeezed into the metropolitan area. As grid operators process demand from 48 further projects—ranging from Manhattan to the bucolic banks of Seneca Lake—it is not just electrons that are under pressure, but also ratepayers and lawmakers.

At one end, facilities like the Greenidge Generation cryptomining plant on Seneca Lake, which has requested an additional 200 megawatts (almost double its current capacity), exemplify the scale of the challenge. In exchange for nearly 800,000 tons of carbon emissions—comparable to 170,000 cars—the plant employs fewer than 50 workers to run around 20,000 computers round-the-clock. The economic boom for host communities thus appears meagre compared to the environmental and infrastructure toll.

Governor Hochul’s plan, if realised, would make data centers bear the true price of plugging into the grid. Instead of socialising upgrades to power generation, transmission, and distribution, the initiative would require these high-wattage digital factories to fund the expansion necessary to accommodate their needs. Left unchecked, such demand could foist expensive utility improvements on everyday consumers, many of whom already groan under some of the country’s steepest energy prices.

The first-order implications for New Yorkers are straightforward, if not yet fully visible in their monthly Con Edison statements. Without state intervention, rising demand from outsized users could push up rates for all, as utilities attempt to recover the cost of new substations, thicker wires, and expanded power plants. Against the backdrop of New York’s ambitious decarbonisation law—the Climate Leadership and Community Protection Act, which requires a 70% renewable grid by 2030—the state finds itself caught between the drive to remain a magnet for technological investment and the need to insulate voters from the consequences of that largesse.

If data centers and cryptomining operations are forced to internalise the true costs of their expansions, as the Hochul administration proposes, the effects will ripple through the city’s economy and politics. Some developers may pause, re-evaluating the region’s attractions in light of pricier connections; others might choose to supply their own green power, seeking to sidestep both cost and controversy. The PSC’s review could set a precedent in energy regulation nationally, as states from Virginia to Texas grapple with similar strains.

For New York City, the calculus is multifaceted. While the growth of data centers is often trumpeted as evidence of a buoyant, future-proof economy, their puny headcount-to-power ratio means that the city sees little bang for its buck in direct employment. At the same time, city officials—no strangers to budget shortfalls—may eye the prospect of additional revenue streams by licensing or taxing these facilities more robustly, particularly if the largest users slip out of municipal reach by self-supplying.

A grid under siege and a political tightrope

The second-order ramifications are more complex, and touch on the intricate dance between energy, climate, and the economy. In the short term, state efforts to shift these costs onto tech giants may blunt local political fallout, sparing the city’s lower- and middle-income residents from unwelcome utility hikes. Yet innovation could also be dampened if New York earns a reputation for regulatory headwinds or steep connection charges. An exodus of data-center investment—unlikely, but not inconceivable—could see jobs and capital decamp to more lenient states, if only those offering equally robust infrastructure.

Globally, New York’s calculation mirrors dilemmas elsewhere. Ireland, the Netherlands, and Singapore have all imposed moratoria or tighter controls on new data centers, citing precisely the same concerns: mammoth electricity consumption, modest job creation, and emissions at odds with climate targets. In the United States, as regions compete for high-tech cachet, the current policy moment offers a litmus test for sustainable digital growth. It is a question of who pays, and who benefits.

For all the hand-wringing about tech-driven progress, the economic assumptions underpinning such expansion warrant scrutiny. It is no longer enough to trumpet the arrival of server racks as evidence of urban dynamism; rather, the calculus must account for the externalities imposed on communities, grids, and the planet. Governor Hochul’s approach, which would at least force digital giants to bear the marginal cost of their consumption, is less a silver bullet than a sensible realignment of incentives—not least given the modest trickle of local jobs that typically accompanies each installation.

New York’s wager—to remain both a bastion of technological innovation and a responsible steward of public resources—will not be settled by this latest round of regulation. But ensuring that digital growth does not come at the expense of fiscal prudence or environmental goals is surely the right place to start. In the shadow of ever-busier data centers, the city’s challenge is to ensure that its economic future is both bright and sustainable. ■