How Data Centers Can Drive Reindustrialization

Why Skeptics Are Missing the Bigger Picture

Much has been said about what data centers will produce. Medical breakthroughs, accelerated scientific progress, and rapid productivity growth are becoming real possibilities as AI models become more capable.

However, discussion of how data centers operate — namely, their consumption of water and electricity — has been overwhelmingly negative. This has obfuscated how they shape local economies and their potential role in driving American reindustrialization.

Concerns about data centers’ energy needs are reasonable. But managed correctly, their tendency to consume resources can become a surprising benefit. In Tennessee and Mississippi, xAI’s Colossus data centers have spurred the development of new natural gas turbines. In Virginia, home to the world’s densest concentration of data centers, power bills are lower than the national average.

In fact, a Cornell paper found data centers had caused electrical rates to fall between 2014 and 2024. By spreading fixed costs — like equipment, infrastructure, and facilities — over a larger amount of steady demand, utilities are able to charge lower rates.

Of course, these shifts aren’t happening everywhere. While theoretically, market forces should induce energy providers to increase capacity on a long enough time horizon, there’s an understandable reluctance on the part of communities to wait it out.

This is where ratepayer protection comes in. The Trump Administration has asked data center operators to build, buy, or bring whatever power they need. Not only does this avoid shifting the burden of new energy demand onto everyday consumers, it also incentivizes the creation of brand-new energy capacity.

Because energy is fungible, power generation facilities and grid upgrades can serve needs beyond the immediate demands of the data centers that funded them.

You can see this dynamic play out in New Albany, Ohio, where data centers have served as customers of last resort for the area’s growing energy capacity. Following delays to a planned Intel facility, Meta stepped up to purchase some of the temporarily unused capacity that had been developed for the project.

The reverse case is equally possible. One of the reasons New Albany seemed a natural place to locate the Intel plant in the first place was that the area’s data centers had driven aggressive grid upgrades. Manufacturing — along with every industry that’s dependent on machinery — requires exactly this type of capacity.

Research on China’s Ultra-High-Voltage (UHV) projects has found local investments in transmission infrastructure “significantly promote manufacturing agglomeration” and that these projects should be viewed as “strategic foundations” for economic development.

“As manufacturing activities are highly dependent on stable and efficient energy supply,” one paper reads, “energy infrastructure constitutes a fundamental condition shaping industrial spatial restructuring.”

Growing electrical capacity in turn stimulates demand for transmission equipment and grid components.

The Department of Energy noted in 2022 that more resilient energy supply chains would require significant investments in domestic manufacturing and the sourcing of raw materials. Among other policy recommendations, the DOE suggested that workforce development was a necessary precondition to securing these supply chains.

Indeed, earlier this year, the DOE attributed over a million jobs to energy infrastructure construction and maintenance and predicted that expanding this infrastructure will create “a whole new generation of good-paying jobs across the country.”

Unlike the huge number of construction jobs — and the admittedly smaller number of operational roles — data centers create the vast majority of associated activity in the energy and manufacturing sectors isn’t obvious at first glance when evaluating the economic impacts of data centers. That doesn’t make it any less real.

One talking point you often hear from data center critics is that billions of dollars in capital investment yield relatively few permanent jobs. This fails to account for the broader economic ecosystem in which data centers are built and operate.

Taking a more holistic view of data centers’ economic impacts, Virginia’s Joint Legislative Review and Audit Commission found the industry contributed $9.1 billion to the state’s annual GDP, of which $5.5 billion went toward labor.

Like all industries, data centers can produce negative externalities when left unchecked. But they can also produce massive positive externalities when allowed to thrive. Already, data centers are projected to create millions of jobs, many of them for blue-collar workers. And the AI revolution is still in its infancy.

A balanced but supportive policy approach can help computing infrastructure unlock an era of unprecedented prosperity for American workers and a second century of American dominance.

Michael Foster is the Executive Director of the American Compute Project.