Data center deal in Senate clears way for development

Senate Democrats struck a compromise Monday with Gov. Ned Lamont to fast-track incentives for data center development in Connecticut while also addressing environmental concerns over their operation.

The Senate overwhelmingly gave final approval Monday to the data center incentives measure, as well as a second bill that pledges roughly $110 million to $120 million in new general government aid to cities and towns — but doesn’t commit the funds right now.

Both bills cleared the House of Representatives last week and now head to Lamont, who is expected to sign both.

“There’s a recognition that with the new industry, particularly the data center industry, we need to have some environmental considerations in place,” said Sen. Christine Cohen, D-Guilford, who co-chairs the legislature’s Environment Committee.

Originally expected to approve the data center measure last Thursday, the Democrat-controlled Senate deferred action over concerns about how the program could affect air quality in future years.

Negotiations between the Senate Democratic caucus and the Lamont administration over the past few days concluded with the bill moving forward, along with a pledge from the governor to support new environmental standards that the legislature would adopt this spring, Cohen said.

The Senate passed the incentives bill Monday by a 29-5 margin.

“Governor Lamont’s administration is committed to working with the legislature to pass a bill later this session that augments the current data center legislation,” Paul Mounds Jr., Lamont’s chief of staff, said Monday. “The administration supports strengthening emissions standards for any new fossil fuel generators at data centers under this bill, as well as mandate new data center construction conforms to a certified green building standard. Governor Lamont remains committed to environmental leadership, while also focusing on high-growth industries and job creation.”

Data centers consume huge quantities of electricity, both to process data and to support heating, ventilation and air conditioning units that protect computer hardware.

Electricity generation, along with transportation, is one of the leading sources of greenhouse gas emissions. And Cohen said data centers usually rely heavily on diesel generators as a secondary power source after buying electricity from the regional grid.

The legislation still is being developed, but Cohen said she anticipates a limit that mirrors federal Environmental Protection Agency Standards for data centers’ diesel-related emissions involving emergency generation during power outages. And when diesel-powered generators are used for brief periods to level out peaks in energy usage, the limit would be even stricter than federal EPA standards.

Cohen added that this environmental legislation, which will be adopted this spring, is vital given the potential for the incentives to significantly expand data center development in Connecticut.

The incentive plan the Senate approved Monday would waive state sales tax obligations for 20 years for any data center that invests at least $200 million in the state — or just $50 million if the facility is located within a state-designated enterprise zone.

The sales tax exemption would be extended to 30 years if a $400 million investment is made, or a $200 million investment in an enterprise zone.