By Patrick Lee
Back in July, the Montgomery County Council passed an eighteen-month moratorium that effectively put the brakes on all hyperscale data center development in the county, including the proposed Dickerson data center project. This pause gives us time to debate how data centers could possibly help or worsen our existing affordability and environmental woes.
If you’re a homeowner, then your most recent property tax bill probably clued you in to the fact that our county has a fiscal problem on its hands. On this issue, the experience of our neighbors across the Potomac River serves as a tantalizing counterexample. Loudon County has used the huge windfall of new data center tax revenues from the last few years to lower its residents’ property taxes, pay for new recreation centers, build new schools, expand emergency services, and upgrade roads and bridges. Given Montgomery County’s fiscal challenges and how they’ve worsened the affordability squeeze facing our residents, the possibility of a significant, new source of tax revenue that could provide at least some relief is something that our policymakers literally can’t afford to ignore; however, there is a reason we economists and policy analysts don’t just stop at counting up new jobs and tax revenues when considering the overall effects of a policy decision. That’s because a project can bring in new jobs and taxes but still impose a net negative cost on the community.
We already know from Loudon County and other parts of the country that data centers can and do bring negative affordability, environmental, and public
health impacts along with them too, namely: higher electricity bills, increased air pollution, and greater water scarcity. That’s because any new hyperscale data centers will require new electricity generation sources to power them—and that’s where the real costs of these projects are to be found.
We can use the proposed Dickerson project as an example to make this discussion more concrete. Right now, the plan is to build a 360-megawatt site. That’s massive, energy-wise. For context, that’s the amount of energy consumed by anywhere from 144,000 to 324,000 homes. For conventional generators, such as a coal plant, a megawatt of capacity will produce electricity that equates to about the same amount of electricity consumed by four hundred to nine hundred homes in a year. The local utility company, First Energy (Potomac Edison) can only meet the project’s energy demands by building new electrical generation capacity.
Readers should take note here: any new capacity built will be recouped through higher electricity rates on customers, i.e., residents of Poolesville and other areas served by First Energy. Notably, under the current policy framework, rates will go up once the new generation sources are built out, regardless of whether the Dickerson project stays in operation or not. That means that we could potentially be stuck with higher electricity prices to pay for excess capacity that we don’t need, if the demand for artificial intelligence (AI) and data centers eventually fizzles out.
In addition, the choice of new generation sources determines what the environmental effects will be. Currently, the majority of First Energy’s portfolio
consists of natural gas and nuclear sources (43.2% and 34.1%, respectively) with another roughly seventeen percent coming from coal. Renewable sources account for less than nine percent of the total mix. If the new generation facilities utilize natural gas and coal, that will lead to new emissions of greenhouse gases and pollutants, further worsening climate change and air quality. These impacts may not show up around here right away, but climate change and air pollution do not care about jurisdictional boundaries and will eventually reach Montgomery County’s residents.
Concerns have also been voiced about the water usage that the Dickerson campus will have. It’s important to note that while there will be local impacts on water, the bulk of the water impacts will come again from the new generation facilities, specifically the need for cooling and steam production. Given the growing stress on the region’s water supplies from increasing droughts in recent years, it’s worth considering how new water withdrawals could exacerbate the problem.
The main takeaway is this: Data centers could make affordability better through reduced taxes on residents, but they could also make affordability and
quality of life worse. As Montgomery County policymakers consider new rules for hyperscale data center development, they face a balancing act rather than a simple yes-or-no question. They must balance the potential for affordability relief that data center projects could potentially bring in versus the potential costs. Ultimately, the terms of any data center development should holistically incorporate what is best for the county’s residents and ensure that we will not be left on the hook with increased electricity prices and reduced environmental quality in the event that demand for AI and hyperscale data centers falls short of the developers’ forecasts.
N.B.: Patrick Lee is an economist with the U.S. Department of the Interior, and Poolesville Green Board Member. The views and opinions expressed in this article are the author’s own and do not necessarily reflect the official policy, position, or opinions of the U.S. Department of the Interior.