The hidden costs of North Carolina’s data center boom

The windowless buildings rising across North Carolina look more like warehouses than engines of climate change.

They have no smokestacks and no obvious emissions. But inside, thousands of servers run nonstop, generating heat that must be cooled and consuming electricity at a rate that can rival entire cities. As artificial intelligence accelerates a wave of massive new facilities across the state, utilities and regulators are confronting a growing reality: North Carolina’s race to power AI is colliding with its climate goals and could reshape water use, emissions and electricity costs for decades.

Across the state, proposals for hyperscale data centers built to support artificial intelligence and cloud computing are driving unprecedented demand for electricity and water. That surge is already reshaping long-term energy planning, delaying coal plant retirements and raising new questions about who bears the environmental and financial costs of keeping the grid running.

The issue comes down to scale

A single hyperscale data center can draw hundreds of megawatts of electricity and use enormous volumes of water during peak summer heat. A 300-megawatt data center can use as much electricity as roughly 200,000 North Carolina homes running nonstop, based on U.S. Energy Information Administration household consumption data.

Multiply that by dozens of facilities, some operating and many more proposed, and the cumulative impact becomes difficult to ignore.

“We’re talking about electricity use in the hundreds of megawatts for individual sites,” said Jackson Ewing, director of energy and climate policy at Duke University’s Nicholas Institute for Energy, Environment and Sustainability. “That kind of load growth changes everything about how you plan a grid.”

Yet North Carolina does not maintain a comprehensive inventory of data centers operating within its borders, according to state officials. Some facilities are intentionally undisclosed for security reasons. Others are evaluated individually through local zoning and state permitting processes, even as their combined effects extend far beyond municipal boundaries.

The North Carolina Department of Environmental Quality says environmental reviews are conducted on a permit-by-permit basis, covering specific components such as diesel generators, stormwater runoff and reclaimed water use. Those permits do not require developers to disclose total statewide water consumption, aggregate emissions tied to electricity generation, or how multiple facilities may collectively strain shared water supplies, air quality or the power grid.

The result is rapid expansion without a clear statewide accounting of what it means for emissions, water resources and long-term infrastructure.

A local fight with statewide implications

In New Hill, a rural community in southern Wake County, residents recently learned of a proposal for a sprawling digital campus along Shearon Harris Road, not far from the Harris Nuclear Plant. The plan calls for four data center buildings, each roughly the size of a Super Walmart, creating an industrial footprint that would span nearly 200 acres.

The developer, Natelli Holdings LLC, says on its project website that the campus would generate millions of dollars in tax revenue and create about 275 permanent jobs.

Project materials show the facility could use up to 1 million gallons of reclaimed water per day during peak summer heat to cool servers.

Residents say they were shocked by the size and scope of the project.

“We’re being asked to accept something industrial on a scale we’ve never seen here, without clear answers about the long-term impacts,” said Billy Dam, who lives nearby.

Ralph Ripper, a firefighter who lives about 3,200 feet from the proposed site, worries about diesel backup generators, emergency response capacity and what the development could mean for the area’s environmental footprint.

“This isn’t just about noise or traffic,” Ripper said. “It’s about water, air quality and energy costs, and once it’s built, there’s no undo button.”

Michael Natelli, president of Natelli Holdings, said in an email that average daily water use is expected to be significantly lower than peak estimates, roughly 300,000 to 450,000 gallons per day. About one-third of that water would evaporate during the cooling process and would not be returned to the Cape Fear River basin.

Natelli said peak water use would likely occur only on the hottest days of the year, with significantly lower use during cooler months and little to no water use at times in winter. He said current estimates are based on historical data from comparable facilities, not future climate projections, and that final water needs could change as the project design advances and an end user is identified.

Natelli added that the project remains in the rezoning phase with the Town of Apex, with a decision now expected in late summer or early fall.

Power demand collides with climate goals

Concerns like those in New Hill are playing out across the state, from rural counties west of Charlotte, now home to massive facilities operated by companies such as Apple, Google, Microsoft and Meta, to smaller, faster “edge” data centers proposed near urban centers like Raleigh.

What distinguishes the current wave, researchers say, is artificial intelligence.

Unlike traditional cloud computing, training and operating large AI models requires far more electricity and produces significantly more heat, intensifying both power and water demands.

“This is not business as usual,” Ewing said. “AI is the accelerant.”

The data center surge comes as Duke Energy, North Carolina’s largest utility, is revising long-term plans to meet rising electricity demand.

In a recent filing, Duke projects electricity demand will grow roughly eight times faster over the next 15 years than it did over the previous 15, driven by a mix of population growth, industrial development and large new customers such as data centers.

To meet that demand in the near term, Duke says it will rely more heavily on fossil fuels, including keeping some coal-fired power plants online longer than previously planned and building new natural gas plants, with one in Catawba County set to begin construction this year.

“The delayed retirement of some coal-fired power stations alone will add millions of tons of CO2 into the atmosphere,” Ewing said.

Those costs often land with customers.

Under North Carolina’s utility model, expenses for new power plants, transmission lines and grid upgrades are typically spread across ratepayers. While Duke Energy says large customers like data centers pay for the direct cost of connecting their facilities to the grid, broader system upgrades needed to meet rising demand are shared.

Duke Energy says data center customers are required to cover the cost of connecting their projects to the grid, pay substantial deposits, and meet minimum billing commitments to ensure costs tied to serving a specific project are not shifted to other customers. The utility says the North Carolina Utilities Commission oversees rates to ensure customers pay their fair share.

Duke Energy also says some of its newest large-load contracts, particularly for data centers, require customers to reduce or shift electricity use during peak demand if requested, a practice known as demand response. The utility says those provisions can help maintain grid reliability during extreme weather, though it has not disclosed how much load flexibility it expects from data centers in practice.

Recent legislation has shifted that balance further. Senate Bill 266, the same law that eliminated the state’s interim goal of reducing carbon emissions 70% by 2035, also changed how utilities allocate fuel and purchased power costs, shifting a larger share of volatility onto residential customers.

Independent analyses have found the change could move millions of dollars a year from industry to households.

“There’s a real fairness question here,” said Harrison Fell, a professor of agricultural and resource economics at North Carolina State University. “Why should households shoulder more of the burden for infrastructure built to serve some of the wealthiest companies in the world?”

Water, heat and the limits of planning

Beyond electricity, water is emerging as a central concern, especially as climate change intensifies heat waves and increases drought risk.

Many data centers rely on water-based cooling systems. While operators often emphasize the use of reclaimed wastewater rather than drinking water, the volume involved can still be significant.

In Apex, the town’s water resources director, Jonathan Jacobs, said a peak demand of about 1 million gallons per day, the level cited for the proposed New Hill campus, would equal roughly one-fifth of Apex’s average daily water use.

Even when reclaimed water is used, Jacobs said, evaporative cooling represents a net loss to the river basin.

“That water is not returned downstream after treatment,” Jacobs said. “Regardless of whether it’s reclaimed or domestic water, evaporation removes it from the system.”

Jacobs said Apex currently has enough capacity to serve a facility of that size, but adding a continuous large user would shorten the timeline for future water supply expansions and reduce flexibility as the region grows.

“If multiple significant users locate in the same service area, it becomes a regional question about water allocation and growth priorities,” Jacobs said. “Our water sources are finite.”

State environmental regulators say they review permits on a site-by-site basis, including air permits for generators and water permits for cooling and discharge. But without centralized tracking of data centers, critics argue it is difficult to assess cumulative impacts on water supplies, air quality and emissions statewide.

For now, much of the planning happens in silos, local zoning boards here, utility commissions there, even as the stakes extend far beyond individual communities.

“This is a statewide climate and infrastructure question,” Ewing said. “And it’s arriving faster than the regulatory framework designed to manage it.”

A crossroads moment

North Carolina’s data center boom reflects a broader national reckoning as artificial intelligence reshapes economies and energy systems simultaneously.

Proponents argue the technology could eventually help optimize power grids, reduce emissions and unlock efficiencies. Duke Energy says it still expects to meet its net-zero carbon goal by 2050, even as it relies on fossil fuels to meet near-term demand.

For now, the growth is forcing difficult tradeoffs between speed and planning, innovation and oversight, economic development and climate risk.

In New Hill, residents are urging officials to slow down.

“We’re not anti-technology,” Ripper said. “We’re asking for transparency and a plan that makes sense for the future we’re building.”

For a state betting its economic future on both clean energy and cutting-edge computing, the question is whether it can do both at once without quietly locking in higher emissions, heavier water use and higher power bills along the way.