Chandrakumara: Data Centers
Editor’s note: Opposition to data centers was voiced at this year’s state conference of the NAACP in Fort Wayne. The director of its Center for Environmental and Climate Justice has stated that black and brown communities bear the cost of the new technology.
By Shashank Chandrakumara
One midwest rust-belt state thinks it can put old energy to work attracting new technology. For decades, coal has served as the backbone of Indiana’s energy system. In 2023, the state ranked as the second-largest coal consumer in the United States, using nearly 21 million tons of coal for electricity generation and accounting for roughly 40 percent of Indiana’s total energy mix.
This long-standing reliance on coal has kept energy costs low here because coal plants can be built and brought online faster and with less infrastructure investment than alternative energy sources. Moreover, coal remains the most abundant and reliable source of dispatchable power for both households and industries across Indiana.
Over the past decade, though, coal’s share of Indiana’s energy mix has steadily declined. Between 2012 and 2024, Indiana retired 5.7 gigawatts of coal capacity as utilities turned to higher-cost energy infrastructure such as solar and wind farms. Consequently, household electricity bills have begun to rise. Another 9 gigawatts of coal capacity is scheduled to retire between 2025 and 2038, which suggests an even steeper decline in the supply of low-cost, dispatchable power.
At the same time, data center proposals in Indiana are estimated to require 9.7 gigawatts of electricity to connect to the public grid, which exceeds the 9 gigawatts of capacity being retired from coal-fired power plants. This convergence of declining coal capacity and soaring energy demand from data centers, combined with already rising household utility bills, underscores a pressing challenge for policymakers: How can Indiana meet the power needs of a digitizing economy without transferring the financial burden to families?
Tanner Bouchie, a candidate for the state senate from Vincennes, is one of several young primary challengers prioritizing this as a campaign issue in advance of the midterm elections. “We need to expand AI capabilities here, but families and businesses already struggle to pay their electricity bills,” Bouchie says. “Our community needs affordable and reliable electricity to thrive. And there is nothing more affordable or reliable than coal..”
This is tangential to a movement at the Statehouse to require data centers to directly fund the redevelopment of coal plants nearing retirement or closure. Legislators hope to encourage a model known as “colocation” where coal plants are converted to serve data centers on the same site. These projects can be financed through private capital. Colocation has these advantages:
- It replaces retiring generation capacity while attracting data-center investment — all without shifting costs to households because the project can be privately financed.
- Coal plant sites already have industrial-scale infrastructure in place, particularly for water supply. By colocating new data centers at these sites, companies can avoid placing additional stress on community water supplies.
- The sites are already zoned for heavy industrial use, thereby reducing the risk of disruption to residential neighborhoods.
States such as Indiana are at a crossroads. They see the opportunity that data centers offer for economic growth at the same time that households are experiencing the highest electricity rate increases in decades. There is a growing “not in my backyard” backlash regarding energy-gobbling data centers.
They will need a strategy that requires those who create new demand to finance their own energy requirements.
Shashank Chandrakumara is an undergraduate student at Indiana University pursuing a major in finance and a minor in law and public policy. This essay is a summary of a larger article to be published in the winter Indiana Policy Review. It is now accessible in draft form as a white paper at www.inpolicy.org.
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