Why Tech Companies Can’t Just Build Data Centers Anywhere They Want

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Major tech companies including Meta, Google, Amazon, and Microsoft plan to spend somewhere between $660 billion and $690 billion in 2026. Amazon alone has committed $200 billion annually. Microsoft has confirmed plans for at least $37.5 billion in quarterly spending, suggesting annual commitments well over $100 billion. The vast majority of this spending is aimed at building massive facilities packed with specialized chips for artificial intelligence processing.

Microsoft disclosed this problem in the most direct way possible. The company had already spent $37.5 billion in a single quarter. The reason wasn’t competition or lack of engineering talent—it was power.

Tech companies have unlimited money but face real limits from regulations and aging infrastructure, and communities that have decided they don’t want industrial facilities the size of small cities built next door. The question isn’t whether these firms will eventually build what they’re planning. It’s where, when, and who pays the price.

The Grid Wasn’t Built for This

These facilities already represent about 4 percent of America’s total electricity consumption. The grid needs major upgrades to handle this demand.

Dominion Energy is spending $50.1 billion to upgrade its plants and electrical lines. Even with that spending, the utility says new plants won’t come online for years.

Interconnection Requirements and Delays

Hooking up a large facility to the grid requires extensive study by grid operators to make sure adding this demand won’t cause blackouts or hurt other customers. Under Federal Energy Regulatory Commission rules, new large loads must fund or contribute to the cost of any upgrades to lines and plants needed to serve them.

The process involves multiple study phases. First comes whether this project works: does it connect without requiring major network upgrades? Projects that pass move to a detailed impact study examining specific effects on the transmission system. Projects that clear that phase get a final facilities study specifying exact technical requirements for connection.

Throughout this process, the grid operator might ask for more money upfront as evidence of financial commitment. Projects that can’t pay upfront costs get dropped from the waiting list.

States Control the Actual Delivery

The federal government controls access to the interstate transmission system. But states exercise equally important authority over the local lines that deliver electricity to homes and businesses. State agencies control how much utilities charge customers and how much profit they make, and the equipment investments they approve.

Colorado is considering legislation that would require large operators to build or purchase enough renewable energy to cover their annual electricity usage beginning in 2031. Developers would also be required to enter formal contracts with utilities lasting at least fifteen years to cover the cost of any grid upgrades needed to deliver reliable electricity to the facilities.

The legislation was introduced in response to concerns that development could undermine Colorado’s climate goals and push utilities to delay coal plant retirements or construct new natural gas plants.

Water Consumption and Regulation

These facilities must cool their equipment using systems that rely heavily on water. Depending on the cooling approach and climate, a large facility consumes millions of gallons of water daily.

In regions experiencing drought or with competing agricultural demands, this consumption becomes politically contentious.

Colorado legislation would require detailed water resource availability and management plans as conditions of development. Virginia has proposed legislation requiring operators to disclose their projected water use with permitting applications.

Local Governments Have the Final Say

Despite the vastness of federal and state authority, local governments have the most direct power to decide where facilities are built, through zoning rules. They restrict facilities to specific districts, impose conditional use requirements that trigger public hearings, limit facility size, or create permitting burdens that make projects economically unviable.

States want the tax money and jobs, but local communities bear the impacts.

Community Opposition and Electoral Consequences

Local activists have successfully stopped or slowed numerous proposals across multiple states in 2025.

In Warrenton, Virginia, where Amazon proposed a large facility in a historic town of less than 10,000 people, community opposition was so strong that all council members who supported it lost their reelection in November 2024. The newly elected council, composed entirely of project opponents, now has a mandate to reconsider or block the proposal.

Residents express concerns about noise, particularly from backup diesel generators that would operate during peak demand periods. Environmental groups worry about water consumption. Advocates for electricity ratepayers argue that communities shouldn’t subsidize costs for large industrial users. Historical preservation organizations oppose facilities that would alter the character of rural communities.

Opposition has emerged from both environmental advocates and progressive communities concerned about energy consumption and climate impacts, as well as rural and conservative communities that see development as a threat to agricultural land, groundwater, rural character, and local autonomy. This makes it harder for tech companies to blame opposition on one political party.

Development Timeline Reality

Developers and policymakers often underestimate the time required from initial site selection through equipment operation. Building a facility typically takes three to six years.

Site selection requires six to twelve months. Permitting and approvals, including zoning changes, building permits, environmental permits, and utility approvals, consume six to eighteen months depending on location complexity and local rules. Design and development require nine to eighteen months. Construction of the physical facility typically consumes twelve to thirty-six months depending on facility size. Energy procurement takes six to twelve months but may overlap with earlier phases.

These phases don’t always happen one after another. Some work proceeds in parallel. But delays in one phase cause delays in the next. If environmental review extends timelines, design can’t finalize. If utility interconnection study is delayed, electrical equipment can’t be installed. If zoning approval is protracted, other phases can’t commence.

The compressed timeline that many tech firms initially envision—building in two or three years—is realistic only for the smallest facilities in the most permissive jurisdictions.

Financial Costs of Delays

Unlike factories or offices, facilities lose value the moment they’re built, even if they’re not making money yet. An idle facility is losing money every month it sits empty.

When Microsoft sits on $37.5 billion in quarterly spending on equipment that can’t be activated due to constraints, each month of delay represents substantial financial loss.

If Amazon commits $200 billion to construction but only a fraction of planned capacity reaches revenue-generating operation in 2026, investors lose faith in the company. Amazon’s stock fell approximately 8-10 percent after announcing its $200 billion spending plan. Microsoft experienced more severe market reaction, with the stock declining approximately 18 percent after disclosing the Azure backlog—a loss representing approximately $357 billion in market capitalization.

Meta committed in February 2026 that it would cover 100 percent of grid costs needed to interconnect its facilities and work to ensure that consumer electricity prices don’t increase due to its demand. Anthropic made similar commitments.

Workarounds and Their Limitations

Tech firms and policymakers have begun exploring strategies to circumvent traditional regulatory processes. One approach is to build on federal land, which has fewer regulations. The Department of Energy and Trump administration want to allow facilities on federal sites—particularly the Idaho National Laboratory—where they could be developed with expedited approval processes.

Deep Atomic submitted a proposal in late 2025 for what it describes as “the nation’s first nuclear-powered AI and HPC datacenter campus” at Idaho National Laboratory, potentially starting operations within two to three years.

Another approach involves pairing facilities with on-site generation, particularly small modular reactors or renewable energy facilities. This approach avoids the normal grid approval process by making its own electricity, though it requires approval from the Nuclear Regulatory Commission, which takes time.

Some companies are building smaller facilities in multiple locations instead of massive campuses in single regions. This could make approvals faster and reduce strain on any one area. But it makes operations more complicated and slows data movement between sites—trade-offs that some applications can’t tolerate.

Cost Allocation and Consumer Impact

The Trump administration proposed new rules in February 2026 that would require tech firms to pay 100 percent of the costs for new generation and transmission equipment needed to serve their facilities. The proposal also called for firms to enter long-term electricity contracts to protect other consumers from bearing costs if the operator defaults or downsizes operations.

The question for ordinary electricity customers is straightforward: who pays for the upgrades that these facilities require? If tech firms pay the full cost, electricity rates for residential and commercial customers remain stable. If utilities spread those costs across all customers, everyone’s bill goes up to pay for equipment serving big companies that employ relatively few people and generate tax revenue that primarily benefits state governments rather than local communities bearing the impacts.

Execution Risk and Realistic Outcomes

The fundamental challenge facing the tech industry is that the regulatory and systems constraining development aren’t temporary or easily overcome through resource commitment. The waiting lists are long because utilities must do technical studies to make sure the grid won’t break. Environmental reviews are required by law to find and reduce environmental damage. Community opposition reflects real concerns that tech companies have downplayed.

Some projects will move forward relatively quickly, approved by eager state and local governments and connected to utilities with available capacity. Others will face years of delays, regulatory challenges, community opposition, and possibly outright rejection.

The result is unlikely to be the full $660-690 billion in spending that firms have announced, but rather a more measured expansion that operates within the constraints of America’s regulatory and systems.

Investors and policymakers should watch if companies reduce their spending announcements and how utilities report on their ability to serve projected demand. This will show whether these problems are temporary or permanent. The answer will determine not the pace of AI development, but who bears the costs and consequences of building the equipment that makes it possible.

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