Opinion: Legislature can slow growth of electricity-guzzling data centers

The central focus of the legislative debate over how to meet South Carolina's growing electricity needs was a massive bill that was rushed through the House before crashing headlong into a wall of resistance in the Senate, where more members remember the thinking behind reforms they put in place following the V.C. Summer nuclear debacle.

Senators were wise to demand time to do a deep dive into just how much new generating capacity our state is likely to need and to thoroughly vet provisions in H.5118 that would roll back many of the post-Summer ratepayer protections. We look forward to their promised series of hearings later this year, and the remote but not inconceivable possibility that the Legislature could return to work in the fall to pass a heavily amended version of House Speaker Murrell Smith's bill.

But increasing the amount of electricity available to South Carolina is just one side of the coin. The other side is reducing the demand. All of us have a role to play, in finding more energy-efficient practices in our personal and professional lives. Our government also has a role to play, and another bill that still could become law next month makes an important statement - and could have a significant effect - on the demand side.

H.4087 phases out sales tax exemptions our state provides for new data centers, and it also would place a one-year moratorium on counties giving property tax or other incentives for new or expanded data centers.

County governments dole out tax incentives like candy to data centers, which require practically no government services but which - even with the extremely generous incentives - pay significant property taxes. But they have huge downsides for the rest of us: They produce precious few jobs. They suck up tremendous amounts of our water. And, to the point of the topic at hand, they are huge and growing energy hogs.

South Carolina already has at least nine large data centers, and four more are in the works, largely as a result of state and local economic development incentives. The S.C. Daily Gazette reports that those four under development are projected to use 800 megawatts of power daily; that's about the same amount it takes to power 500,000 of South Carolina's 2.4 million homes. Read that again: Those four data centers under development will consume more electricity than a fifth of the houses in our state.

And the data centers' appetite is only growing; the Gazette says their electricity consumption is expected to grow by 50% from 2022 to 2026.

That has gotten the attention of the same senators who are concerned about Dominion and Santee Cooper sticking ratepayers with another big bill to build a giant natural-gas plant near Canadys. As Senate Republican Leader Shane Massey told his colleagues, "We could probably get away without building any new generation if we didn't have more data centers" coming.

H.4087 started out as a run-of-the-mill tax giveaway bill, which made it easier for all sorts of businesses to claim property and income tax incentives, even when they provided precious few jobs to South Carolinians. When the Senate Finance Committee added a provision last month to expand an existing sales tax exemption for data centers, it gave critics of the centers' growing energy appetite an opportunity to scale back their government incentives.

Sen. Mike Johnson convinced the Senate to stop giving out new sales tax exemptions in the richest counties starting on July 1 and in the rest of the counties a year later. And Mr. Massey added the one-year moratorium on local incentives - although that would not start for another year and would not affect deals already being negotiated. The Senate then passed the bill unanimously, the House rejected the Senate's changes, and Mr. Massey and five other legislators were appointed to negotiate a compromise on the competing versions to present to the House and Senate next month.

There's no justification for sales tax exemptions for data centers, so the plan to stop giving out more of them is progress. And while we'd like to see the moratorium begin sooner and last longer, the one-year pause is a step in the right direction. In fact, it's probably worthwhile to go along with the rest of the giveaways just to get those provisions, which halt new state tax breaks and pause the county tax breaks while the Legislature decides how to handle our burgeoning electricity crisis.

If data centers want to locate in our state, we're not sure our state should stop them. But we definitely should ban any government subsidies to lure them here - certainly until we get a handle on our electricity needs, and probably even beyond that.

This editorial by Post and Courier was originally published May 21.