AI Data Centers Aren’t the Problem—Outdated Policy Frameworks Are, New Report Finds

WASHINGTON-Concerns about the rapid growth of artificial intelligence (AI) data centers are widely misdiagnosed, leading to ineffective policy responses, according to a new report from the Center for Data Innovation. Rather than targeting the scale of AI infrastructure, policymakers should modernize how they measure, price, and manage its impact on energy systems and local resources.

As AI adoption accelerates, data centers have faced growing scrutiny over electricity use, grid capacity, energy prices, and water consumption. But this report finds these concerns are often overstated or based on flawed assumptions. Data centers are expected to account for less than 10 percent of global electricity demand growth through 2030-far less than sectors.

"Too often, policy responses target the scale of AI deployment rather than its systemic impact," said Hodan Omaar, lead author of the report. "The core challenge is not AI infrastructure per se, but the frameworks used to measure, price, and manage its impact."

The report analyzes five major concerns-energy use, grid access, electricity prices, reliability, and water-and finds that many stem from outdated policy frameworks rather than inherent risks from data centers. For example, electricity prices depend heavily on market design, and interconnection queue data often overstates actual demand.

To address these challenges, the report recommends that policymakers should:

• Develop standardized energy-per-unit-of-work metrics
• Improve grid interconnection processes using AI tools
• Support flexible energy use for large data center operators
• Strengthen incentives for grid reliability and load management
• Establish consistent water accounting standards

By focusing on outcomes rather than inputs, policymakers can support AI growth while protecting consumers and strengthening energy systems.

"Getting data centers right is not about capping AI," said Omaar. "It is about updating the institutions that govern how energy, water, and infrastructure performance are measured, priced, and managed in a digital economy."

Read the report.