Democrats passed HB 4906 on Wednesday, Nov. 13 by a 64-45 vote with support from Republicans in the first full week of the Legislature’s post-election lame duck session.
The bill exempts data centers which make at least $250 million in capital investment from sales and uses taxes on equipment through at least 2050.
The bill was introduced in May but stalled in September upon resistance from environmental groups, who claim the facilities undermine the state’s climate goals by using more energy than utilities can provide without resorting to fossil fuels.
A companion bill, SB 237, passed 56-41 on Sept. 25. The Senate must approve changes to the House bill before they can advance to Gov. Gretchen Whitmer, who is expected to sign them.
The bills aim to lure “enterprise” centers in which tech giants like Google, Meta and Microsoft house their own routers, switches, servers, firewalls, and other components.
Michigan already offers tax breaks to “colocation” data centers where businesses rent space for their computing equipment.
Companies would qualify for the tax exemptions if they invest at least $250 million on the project and create and maintain at least 30 jobs in Michigan which pay 150 percent or more of the local median wage. Data centers of that size are known as “hyperscale.”
The bill also extend existing data center tax exemptions from 2035 to 2050 and allow facilities that locate on a brownfield or a former power plant site to claims the exemptions though 2065.
Lawmakers say tech giants want to build enterprise data centers in Michigan but also want a subsidy to offset the cost of burning through servers that run nonstop.
Critics argue that electricity and water ratepayer protections in the bill aren’t adequate and that data demand will bring the facilities to Michigan eventually anyway. They say the facilities don’t actually create the number of jobs they claim to.
Subsidy critics point to the Switch data center near Grand Rapids, which promised to create 1,000 jobs in exchange for big tax breaks in 2015 but had only hired a fraction of that six years later, when the company came back seeking more tax breaks.
Supporters say Michigan stands to miss out on jobs, tax revenue and investment tied to the rise of artificial intelligence and cloud computing if the facilities are built in other states. Ohio, Wisconsin, and Illinois have passed similar legislation.
In Berrien County, Benton Harbor city leaders are angling to prop up their struggling water system by selling wholesale to a data center which developers are attempting to lure.
In Kent County, Switch says it’s expanding its facility at the former Steelcase pyramid in Gaines Township. Tech giant Microsoft also bought 316 acres of land nearby from Steelcase this year for a potential data center.
House bill sponsor, Rep. Joey Andrews, D-St. Joseph, said the bills are crucial to boosting economic development in Michigan.
“As technology continues to advance, it is imperative that legislation allows the state to remain competitive economically,” Andrews said. “Southwest Michigan’s abundant freshwater resources and reliable nuclear energy infrastructure make it an ideal destination for data centers, particularly with the growing demand for such facilities.”
The bills encourage data centers to use renewable energy and conserve water. Qualifying facilities would have to buy municipal water and could not pay utility rates that cause homeowners to subsidize energy needs through rate increases.
Nonetheless, environmental groups criticized the bills and said they don’t include their requests for stronger protections and commitments that energy generation needed to power data centers come from renewable sources.
“The legislation voted out today falls far short of ensuring our rates won’t go up and we won’t see the rush to build additional fossil fuel plants to power these data centers, said Bob Allison with the Michigan League of Conservation Voters.
“Because Michigan was unable to be a leader in setting out clearly how these large-scale projects operate, they will now face the same ‘not in my backyard’ opposition we’ve seen across this state in the past year, which is unfortunate and a major missed opportunity,” Allison said.
Data centers are being increasingly discussed alongside efforts to increase energy generation from nuclear power plants, which are defined as clean but not renewable under 2023 energy reform laws that require Michigan utility providers to source 100 percent of their energy generation from carbon-free sources by 2040.
The energy bills include “offramps” which allow utilities to keep gas or coal plants online if there isn’t enough clean generation to meet demand — a scenario that worries environmental groups because market forecasters project a massive increase in data energy demand by 2030, when data centers are projected to use up to 9 percent of all the electricity generated in the U.S., according to the Electric Power Research Institute.
According to a June S&P Global Market Intelligence report, tech giants like Amazon and Google may have to “reconsider decarbonization timelines” and retain fossil fuel generation longer than anticipated to keep pace with AI-driven demand.
In October, Andrews said the concern is “overblown” due to the potential return of 800 megawatts of carbon-free nuclear energy to the grid if the Palisades nuclear plant successfully restarts as its owner Holtec International, projects next year.
© 2024 Advance Local Media LLC. Distributed by Tribune Content Agency, LLC.
