Why It Matters
Issue 5– August 2026
Data Center Risks
Review:
Why It Matters No. 3 featured an interview with Nate Boettcher, CEO of Pierce Pepin Cooperative Services (PPCS). In the interview, Nate defined a data center as the equipment used to provide servers for storage and computational analysis. It could provide support for AI or file backups. There are some data centers that do nothing else but back up other machines or computers throughout the world. Not all data centers are giant water-cooled computer systems. The Metered, LLC is a small data center that is one of PPCS’s customers. It is so small that it uses fans and venting to cool the servers. It is treated like any other commercial customer, paying a higher rate when it draws electricity during peak demand periods like anyone else.
We established that size matters. The type of AI also matters.
It doesn’t take a lot of energy consumption to do basic computing, or to store a lot of data for later retrieval. This kind of AI is useful for practical everyday applications such as banking, grocery shopping, sharing health records between specialists or any number of tasks that make everyday people’s lives easier.
Regenerative AI is what uses so much power. Regenerative AI is artificial intelligence that monitors outcomes, identifies inefficiencies and refines its own algorithms. This requires scanning through huge amounts of multiple sets of data all at the same time. This is why data centers require so much computing power.
In Why It Matters Issue 4 we established that hyperscale data centers pose a risk to communities’ tax base under various scenarios.
Now, let’s examine the unique risks to communities from hyperscale data centers.
What are the risks?
· Insurance coverage gaps
· Electric grid instability
· Water at risk – acid rain? Oh my!
· Noise pollution – and hearing loss
· Unfulfilled promises
· Lack of transparency
· Obsolescence
Insurance Coverage Gaps
Insurance companies are in the business of calculating risk. When Insurance companies are unable or unwilling to insure at full value, should we be concerned?
It used to be insurance policies were set up to cover full replacement value for commercial projects. Data center projects are so large Insurance companies refuse to assume that much risk. The insurance industry has shifted to Probable Maximum Loss (PML) policies. According to an article in the May 11 2026 edition of ENR magazine, “Hyperscale Risk Outpaces Insurers,” the insurance industry is having difficulty keeping pace with the demand for coverage.
According to Sedat Kunt of Marsh, a global insurance broker and risk advisory company, insurance coverage for data centers is falling short of project value. In other words, if a data center is worth $20 billion, it can’t get insurance for $20 billion. The policy limit of liability for mega data centers “tends to be anywhere between $1.5 billion and $3.5 billion.”
Forty percent of U.S. data center capacity is located in tornado-prone regions. One of the PML policies offered is a separate tornado PML alongside fire risk modeling.
Most policies only cover core and shell construction. But data centers are “highly integrated systems where you have power, cooling, hardware and software that all depend on each other” according to Jimmy Keime, head of engineering and nuclear at Swiss Re.
Contractors are attempting to cover the insurance gap. They are taking out their own risk policies. The article quoted Amy Iannone, insurance and risk management leader at Santa Clara, California-based DPR Construction as saying, “We’re also seeing a lot of policies with multiple carriers participating in a quota share so the insurers aren’t committing too much capacity to one project.”
The article concludes, “The industry is operating under a new risk model—one where full coverage is no longer the default; billions of dollars in exposure remain on balance sheets, and a capacity market drawing on layered programs and alternative capital has yet to face its first major test.”
Why It Matters -
If Microsoft’s AI data center in Mount Pleasant, WI, were to be largely destroyed by a tornado, would there be enough insurance to repair/replace the facility? If there is a fire, would there be any remediation funds for dealing with PFAS contamination? Has the community and local government asked Microsoft these questions?
Microsoft was contacted July 23rd via rapidresponse@wecommunications.com asking if they have PML’s in place for fire and tornado with remediation for PFAS contamination and if they are bonded in case the business venture fails regardless of reason. As of August 12, 2026 I have not received a response.
Impacts to the Electric Grid and Ratepayers
The risk of rising electrical costs is real even when data centers are required to build their own electrical power generation.
For the average customer, an electric bill “is really three bills combined. Roughly half is generation, or the cost of energy creation. The rest is delivery: transmission (the long lines across the region), and distribution (the local wires to your street.). A data center pays for its own connection, the distribution part. Generation and transmission costs are what spill over onto customers.”
Source: Who Pays for Data Centers? Anyone with an Electric Bill
Our power grid system was designed to spread the cost among users to support a common pool of reliable electricity. When the grid grows slowly, rates remain predictable and upgrades to infrastructure can be planned out and managed.
When you have a single user that comes online with exponentially greater demand than the system was designed for, reserve power becomes scarce and the cost of additional transmission is shared across all customers even if the new customer (data center) is paying for additional supply generation.
This is why people like John Steinbach, a retiree living in Manassas, Virginia, saw his power bill triple almost overnight. “It’s just so far beyond any bill that I’ve ever had,” he told Consumer Reports.
With Pierce Pepin Co-op we are largely shielded from this type of risk precisely because it is a co-op beholden to its members.
Do we need to be concerned about Pierce Pepin Co-op being consolidated into a privately owned utility? I asked this question after reading about NextEra’s utility merger, NextEra’s Acquisition of Dominion Energy Would Result in Corporate Mega-Utility | Truthout
According to Nate Boettcher ,CEO of Pierce Pepin, that risk is low. He said “co-ops have probably been more active in purchasing investor-owned accounts than the other way around.”
Co-op members would have to vote to approve a sale.
That said, “if an outside entity came in and promised to purchase the outstanding equity owed to the members, co-ops who have higher amounts owed to its members may find themselves more likely to have their members take this option. For instance, if one co-op owes their members $60 million in allocations/patronage and a different co-op owes $30 million to its members, the members of the first co-op may be more likely to want their money than the latter co-op.”
We can be grateful for Pierce Pepin’s good stewardship to date.
Global climate change coupled with increases in demand for electricity is something to be concerned about.
Currently, data centers consume roughly 4.5 percent of the total electricity in the U.S. It is expected to reach 10 percent or more by 2030. When heat waves hit, the drain by data centers on electricity can have fatal consequences.
Back on July 1st Truthout reported that:
“Regional grid operators in the U.S. have said that they are expecting record electricity demands this week, which also carry risk of blackouts.
Blackouts in turn amplify mortality and morbidity rates, with one 2023 study concluding that blackouts combined with heat wave conditions can “more than double the estimated rate of heat-related mortality.”
As awareness grows around the threats of data centers, more people are opposing them, and campaigns are growing to stop their spread.”
Source: As Heat Wave Spreads Across the US, Data Centers Strain Electrical Grids | Truthout
The North American Electric Reliability Corporation (NERC) is also sounding an alarm. In a May 4 2026 alert, NERC asks that “Essential Actions” are taken by registered power companies to “address the risks posed” by data centers. (NERC is the federally designated entity that enforces reliability standards for the utilities that operate the nation’s bulk power system.)
“NERC found that entities generally did not have sufficient processes, procedures, or methods to address risks associated with computational loads. This contrasts with the robust historical experience with traditional non-power electronic non-computational load.”
In plain English , NERC is referring to large data centers whose electricity needs can fluctuate very rapidly and cause dangerous instability in the power system. Other industrial loads shift their power draws more slowly, allowing the electrical grid to adjust.
NERC recommends that large data centers generate their own electricity separate from the power grid to prevent sudden power grid collapse.
Source: NERC Alert
The question remains whether data centers that bring their own power source would be using established power grids as a backup. If they do, who pays for that backup service? And what impact might those data centers have on the power grid during the time they are using it as a backup source?
Will the power plants used exclusively for data centers be regulated like utilities? Apparently not, according to information in the next section.
Water At Risk
On Monday July 27, 2026, the Trump administration announced new guidelines regarding the Clean Air Act as it relates to power plants built exclusively for data center operations. The Environmental Protection Agency clarified that power plants that are not connected to the grid and used solely for data center operations are not utilities. Therefore, they are exempt from restricting emissions of acid rain precursors sulfur dioxide and nitrogen oxides.
Sulfur dioxide and nitrogen oxides, in addition to killing aquatic life, also can worsen respiratory issues in humans. Pollution does not recognize property boundaries.
The intent is to make it possible for data centers to be built more rapidly while also not increasing electric utility rates for customers.
“The administration has also previously sought to curtail environmental reviews of data centers and expedite approvals of new chemicals that are expected to be used for them.”
Source: Data center power plants avoid acid rain limits in new Trump EPA rule
On May 9 2026, Politico reported that a data center in Fayetteville, Georgia drained 30 million gallons of water. The water draw was unnoticed until residents complained about low water pressure.
“When the county utility investigated, officials discovered two industrial-scale water hookups feeding a data center campus located 20 miles south of downtown Atlanta. One water connection had been installed without the utility’s knowledge, and the other was not linked to the company’s account and therefore wasn’t being billed.”
The amount of water was “equivalent to 44 Olympic-size swimming pools and far exceeds the peak limit agreed to during the data center planning process.” At the time Politico reported on this story, the campus was only partially operational.
Eventually Quality Technology Services (QTS) paid the $147,474 that it owed to the utility and new meters were installed to track water usage.
This case is a warning for parts of the US where water systems have not been updated to monitor significant increases in usage. It is also a warning that what is agreed to in the planning stages may not equal the reality of how much water will be used during construction nor when the data center is operational.
The Fayetteville campus is one of the largest data center developments in the country, covering 615 acres with plans for up to 16 buildings. Georgia has more than 200 data center facilities. The entire state is experiencing moderate to high levels of drought, and Governor Brian Kemp declared a state of emergency last month in response to one of Georgia’s worst wildfire outbreaks in years.
Residents have been asked to cut their water usage while QTS is the number one water consumer in the county. The company, which is owned by the private equity firm Blackstone, says they will be using a “closed loop” cooling system, which it says does not consume water for cooling. The company said their “water consumption is high during construction-related activities, such as concrete work, dust control and site preparation.”
The drop in water usage is not expected to happen for three to five years as they are still actively building and expanding the Fayetteville data center campus.
Source:
There are many stories from all over the country that report similar findings.
The March edition of Engineering News-Record featured an interview with Xylem CEO Mathew Pine. Xylem, a Fortune 500 global water solutions company, and Global Water Intelligence released a report earlier this year said that “AI-related water use would rise 129% by 2050, adding 30 trillion liters of water needed per year.”
The rest of the interview describes how artificial Intelligence can be used to conserve water, identify leaks in systems, and find ways to reuse wastewater. Xylem has partnered with Amazon to assist Mexico City in deploying a digital platform to help the city identify leaks so they can be repaired, potentially saving the city “1.3 billion liters of water annually in a couple of different districts in Monterrey and Mexico City.”
What is unclear is whether these laudable efforts in Mexico are enough to justify massive water drawdowns in other places.
In a June 1 article in News From The States, Virginia, asks “What’s in the water?”
Data centers have to use cooling systems to prevent the computers from overheating. Some data center contracts allow water that isn’t evaporated to be discharged. Concerns over water being used at rates faster than our natural systems can replenish our aquifers is one concern that has been raised by individual communities.
“After a few cycles, the water has to be released. The system dechlorinates the water and manages pH balance before sending it into the creek.,” the article said. In these kinds of open systems, the water never touches IT equipment.
Larger, newer data centers are often designed with “closed loop” systems. Initially, hundreds of gallons of water are pumped into the system, much of which evaporates, and then it is topped off as needed on a daily basis. Once the system has been filled water usage drops significantly, but they take more energy to operate.
”Closed loop systems will often use what is described as mechanical cooling or liquid cooling, where the water is recycled through the system, cooled, and placed directly on chips to bring the temperature down. The heat from those systems still has to be expelled through an HVAC system,” the article said.
Even in closed loop systems, eventually the water in those systems needs to be replaced. What chemicals can we expect to be in the water that is discarded?
The water is pretreated before being released into the creek and has limits for certain metals and temperature set by Virginia’s DEQ. “But with recent reports showing the ubiquitous nature of per- and polyfluoroalkyl substances (PFAS) in everything from water to soil to household products, community members are increasingly worried about whether the data center’s discharge water contains them, too,” the article said.
PFAS contamination is not to be ignored. When people are exposed to even small amounts, effects can include decreased fertility, higher risk of some cancers, and weakening of the immune system.
The Environmental Protection Agency does not have requirements for testing discharge water from data centers for PFAS.
What’s That Sound?
NOWCAST WISN 12 News reported on June 8 complaints from Mount Pleasant residents hearing a persistent hum.
“It’s just a high, kind of high-pitched drone sound,” said David Ricchio, who lives about one mile from the center. Another resident, Donald Briggs, who claims he is not “anti-data center” said, “I can hear it inside my house, and that’s what concerns me.”
Residents have reached out to Microsoft but did not receive a direct response. The company issued a statement to WISN 12: “We’re aware of the noise concerns raised about our Mount Pleasant facility, we’re investigating the root cause, and hope to share an update soon.”
Microsoft plans to build more than 15 centers in Mount Pleasant.
Source: What's that sound? It's Mount Pleasant's new AI data center
Cheryl Shadden of Granbury Texas described what it is like living next to a Bitcoin data center in an interview with Maximillian Alvarez of The Real News Network – Working People series:
“I’ve lived here in my home for 35 years. It was nice and quiet. I could walk outside of my home at any time of the day or night. You could hear birds chirping, you could see your animals outside, and it was just a quiet, peaceful environment. Now sitting here in my office, I can hear the crypto mine churning through my walls. I myself personally have had permanent conduction hearing loss. I will never get that hearing back. We have motion sickness, dizziness, nausea. We don’t sleep at night. Even trying to go to sleep with a TV on or a radio on and fans on high, you can’t go to sleep, you can’t stay asleep. This noise, sound and infrasound, it travels through your walls, through your windows. It shakes your home. And this is just the noise from the crypto mine that’s turning into a data center now adding two more hyperscale data centers.”
Cheryl goes on to reveal additional impacts to air and water quality from the gas-fired power plants built to run the data center. There are 2 gas plants there now, a third is in construction and a fourth has been approved.
Source: Data centers are not a 'red state' or 'blue state' problem; they’re a working-class problem
Unfulfilled Promises
Communities across the country have found that promises from data center developers must be taken with a few pounds of salt.
Canadian tech CEO Jason Bak has been courting rural New Mexico with promises to build a data center that would be powered by solar energy and use atmospheric generators to pull usable water from the air.
A report from the Source NM news site found that Bak’s company Green Data has yet to successfully build a data center. Another Bak company, Solar Alliance, proposed building a solar-powered cryptocurrency mining operation called NuYen in Murphysboro, Illinois. It was even endorsed by actor William Shatner of Star Trek fame. Two years after Bak met with Murphysboro Mayor Will Stephens to tout the project, nothing had been built. Stephens concluded that the big promises were “all style and no substance.”
(Source NM A Canadian developer’s New Mexico data center pitch may be dying. It wouldn't be the first time • Source New Mexico
“Politicians in Oregon have shelled out billions of dollars in incentives to lure data centers. But at one Google site in The Dalles, according to The Oregonian newspaper, an offer of $260 million in incentives and a third of the city’s 2024 water supply had resulted in just 200 full-time jobs – many of them off-site.”
Source – Mother Jones May June Power Hungry issue article entitled “Empire Builders.”
The article continues - What is being promised is that AI will make all our lives better. Sam Altman would have us believe that a utopia is on the horizon, “arguing that the compounding progress of AI could, if channeled properly, raise the global standard of living and usher in a new age of abundance.”
At one time, Altman had proposed that to stabilize our economy and society, he suggested we switch to a land value tax and have everyone receive a universal income. He later abandoned that idea and instead wants to offer everyone on earth “a slice of the world’s AI capacity,” because “I think what people really want is the agency to kind of co-create the future together.”
For those living in proximity to data centers, Altman’s musing may seem disconnected from planet Earth.
Lack of Transparency
In Ohio, citizens place little trust in data center developers’ promises. At a hearing of the Ohio Legislature’s Select Committee on Data Centers, one lawmaker said 90 percent of her constituents told her they don’t want data centers and don’t believe anything developers say.
Citizens are angry about tax exemptions and nondisclosure agreements and worry about the data centers’ water and power impacts. “A new report found that 14 states do not disclose how much revenue they lose to data center tax breaks.”
Yet Craig Sundstrom from Amazon Web Services defended nondisclosure agreements as “an important economic development tool,” and put the onus on local leaders.
“It’s a tool for local governments to use if they choose to use them or not,” he said, and encouraged the panel to ask local officials about NDAs when they testify.
“From our perspective,” he said, “they see it as a viable tool in order to foster the type of economic development discussions that they’re interested in having.”
Source: Big tech defends data centers before Ohio lawmakers • Ohio Capital Journal
In Arkansas, a similar fight is underway. Ted Swedenburg, a retired University of Arkansas professor emeritus of anthropology and Middle East Studies, filed a lawsuit arguing that Fayetteville had not complied with an Arkansas Freedom of Information Act request he filed in February.
Fayetteville officials disclosed emails from 2022 discussing plans to sign a nondisclosure agreement, but the agreement itself was not provided to Mr. Swedenburg. “The complaint asks the judge to force Fayetteville to produce a copy of the nondisclosure agreement and find the city violated state public records laws.”
“Frustrated residents in central Arkansas have argued the lack of transparency hampered the public’s opportunity to reject sweeping tax incentives or land agreements for the projects that were approved last year.” (There are five data center projects in various stages of development in Arkansas now).
Obsolescence?
In the May-June 202 edition of Big River, a magazine about the Driftless area, columnist Reggie McLeod suggests that “In five years, the computer chips in these data centers will be too slow and inefficient to be practical. Newer software will become more powerful and efficient and will require new hardware. The data centers will become obsolete and demand for much of the new electrical capacity will disappear.”
In five years. Many of the data centers currently under construction won’t be finished for five years.
In speaking with Nate Boettcher CEO of Pierce Pepin Cooperative Services (PPCS), he explained “In 10 years, a lot of the data center buildout will be done. We might need the same amount of horsepower or even more, but the machines will have less energy consumption but be able to do more. You might have 4 or 5 times the number of machines that use the same amount of energy as the machines use today.”
For very small data centers like The Metered LLC (one of PPCS’s customers) retrofitting the operation may not be a problem. The Metered LLC is air-cooled with fans instead of water cooled.
The hyperscale data centers’ interior construction consists of lots of long hallways with pipes in the walls. The interior walls are all load bearing. For hyperscale data centers it is cheaper to abandon the existing structure and build a new one than it is to tear down the existing structure. I have not read of any community data center offering bonding for the future demolition of their buildings nor of any restoration work.
Conclusion:
Data centers, like oil, gas and mining, are an extraction industry. The difference is that they are extracting your data, your community water supply, the air, the land and way of life and if you haven’t noticed, our collective wealth.
We are told that Artificial Intelligence is going to make our lives better. So far that has not panned out. I have read accounts of innocent people being pulled over by police right here in Wisconsin because a Flock license plate camera mistakenly flagged the driver as connected to a homicide investigation. AI was wrong, but police assumed AI was correct and didn’t verify first before surrounding the vehicle guns drawn.
Source: Flock system mix-up, Brookfield traffic stop of wrong person | FOX6 Milwaukee
I could write more,….
· Money, (elected officials and candidates bought by data center and utility companies)
· AI gone rogue, Source: OpenAI Accidentally Created a Machine Institution. The Agents Were Running the Asylum. | Forward Future
· Ongoing efforts by Silicon Valley figures to replace democracy with a dictatorship. Source: 'The Nerd Reich' tracks the 'unmasking of Silicon Valley's true politics' : NPR
I can also write about ways AI (when done at small scale) could be used to help solve many of our environmental and societal problems.
A couple books to consider reading – “Empire of AI – Dreams and Nightmares in Sam Altman’s Open AI” by Karen Hao. It’s a real page turner
And - "The Nerd Reich: Silicon Valley Fascism And The War On Democracy” by Gil Duran
Why does it matter that we be informed? So we can hold our elected officials accountable and know who to vote for.
The next issue will be focused on positive efforts by individuals and organizations that you can tap into and have a voice in rebuilding our community in a way that works for everyone.