As California AI data centers grow, so does dirty energy

Data center builders in California are using a shortcut in the state’s power plant regulations to construct facilities that use enormous amounts of energy with limited public input.

A process originally intended to speed up approvals for emergency power plants for residents and oil drilling and refining is being used to greenlight diesel generators to supply backup power for large computer servers. 

More than 1 gigawatt of diesel-based energy—enough to power at least 161,969 households for a year—has been approved as emergency power for California data centers since 2017. Diesel is a fossil fuel that, when burned, contributes to climate change and emits carcinogens that pose health risks to those in nearby communities.

With artificial intelligence pushing energy demands ever higher, a business group representing tech companies last year lobbied the state legislature to expand the Small Power Plant Exemption, which is administered by the California Energy Commission, from 100 megawatts to 150 megawatts a day. Though the effort failed, the quest for more energy to power data centers is intensifying.

Now vs. a decade ago

Currently no operating data center in the state uses more than 100 megawatts. A decade ago, a center of that scale would have been among the largest in the world. Now, however, companies in California and nationwide are pursuing permits to construct facilities many times that size.

Servers that drive AI use far more powerful chips than they did in the past, as they sift through vast amounts of data simultaneously to train language models in advanced pattern recognition, the basis for generative AI.

Annual global demand for data center capacity could grow from 60 to 219 gigawatts—enough to power more than 35 million homes—by 2030, according to an analysis from McKinsey. Data centers in California now consume more electricity than such centers in any state except Texas and Virginia.

But as the infrastructure needs have grown, Silicon Valley companies are striving to avoid regulations they see as burdensome. The environmental fallout is only starting to come into focus: The Center for Biological Diversity filed a lawsuit last December against the Bay Area city of Pittsburg and a developer over “fatal defects” in the city’s review of plans to build a 92 megawatt data center in an area that includes local wetlands.

“In terms of increasing the size of data centers—that increases the potential risks of everything, including the amount of water used [to cool servers], the amount of waste produced and the loads of pollution that go out,” said Betsy Popken, executive director of the Human Rights Center at the UC Berkeley School of Law.

Under the current rule, 11 of the 13 California data centers approved for the Small Power Plant Exemption are located in the Silicon Valley communities of Santa Clara and San Jose, some near homes and schools. They are among the largest in California. 

Accounting for the diesel generators and electricity they take from the state power grid—much of it generated by natural gas—the California Energy Commission estimated their total climate emissions will be roughly the equivalent of 284,390 gasoline-powered cars driven for a year.

At odds with renewable energy goals

And although the data centers primarily rely on electricity from the state’s grid to power their servers, the use of diesel in emergencies could be at odds with the state’s renewable energy goals. California hopes to slash greenhouse gas emissions 40% below 1990 levels by 2030, and to phase out fossil fuels entirely by 2045.

“We’ve asked [the California Energy Commission], can you look at cleaner alternatives, like requiring natural gas, backup batteries, things that emit less than diesel generators would?” said Alan Abbs, the legislative officer of the Bay Area Air Quality Management District. The commission has so far declined to do so.

The Silicon Valley Leadership Group, an industry association that sponsored a bill last year to expand the exemption, said concerns about the diesel generators are “overblown.”

“Data centers run on grid power and have to rely on their backup sources less than 0.07% of the time,” said Tim McCrae, the group’s then-senior vice president of sustainable growth, in a legislative hearing last June. The group “remains committed to finding solutions that expand data center capacity,” a spokesperson said by email.

Current regulations say power plants that use 50 megawatts or more for their operations must submit an application to the California Energy Commission that kick-starts a drawn-out approval process. The agency conducts outreach to the public, holds multiple evidentiary hearings and then votes on whether to approve a permit.

Who is responsible?

But under the Small Power Plant Exemption, the responsibility instead falls on cities and counties to notify residents about planned data centers. Some residents say this has left them in the dark.

On a plot of land the size of 13 football fields, across the street from homes in San Jose’s Santa Teresa neighborhood, the digital giant Equinix is now constructing three two-story office buildings to support servers using 99 megawatts of power. Companies such as Google or Meta would be able to rent server space in the buildings. Equinix declined to discuss its complex. 

Equinix received a small power plant exemption from the California Energy Commission in 2021, allowing its Great Oaks South Data Center to operate with 39 backup diesel generators. Nearby residents said the process was poorly publicized.

“They found a piece of land, they figured these people won’t complain, and they took advantage of this neighborhood,” said Mimi Patterson, who has lived in Santa Teresa with her family for 26 years.

It wasn’t until she called the city, Patterson said, that she learned about plans by Equinix and another company, China Mobile, to build several data centers within a mile of each other. PG&E also built a new substation to support the facilities.

An environmental impact review completed by the California Energy Commission found that the diesel generators, operating for only 20 hours a year for maintenance and testing, would still emit as much pollution as 428 gas-powered cars driven for a year. That’s on top of what running the data center on grid power emits, equal to an additional 18,902 annual car trips.

But the most immediate impact for local residents has been industrial noise from testing the generators, which happens from 10 minutes to an hour each week. If the center lost power, running the emergency generators could create as much noise as 45 locomotive engines, though they could be slightly muffled since they are housed in large steel structures.

Speaking out

Recruiting neighbors to speak out was difficult, Patterson said, because few were aware how the facilities operate. Some incorrectly believed that the new data center would mean their home internet would run faster.

Across the world, companies are rapidly proposing and erecting projects while lawmakers and the public remain mostly unaware of their environmental impact.

“The rise of huge data centers, the realization that this is a big issue, that maybe happened in the last year or two,” said Iris Stewart-Frey, a professor of environmental studies and sciences at Santa Clara University who spoke  at a Nov. 1 conference focused on AI and the environment.

Emerging research is showing alarming risks from backup diesel generators.

A paper published in December by researchers at UC Riverside and Caltech found that an increase in permits for diesel generators at data centers in Virginia since 2023 may have resulted in 14,000 asthma symptom cases and caused as much as $300 million in health care costs. By 2030 and accounting for impacts from fossil fuel-generated electricity and domestic chip manufacturing, the health burdens of data centers could amount to $20 billion by 2030, researchers found.

Besides permitting requirements, there are few regulations on data centers in California or at the federal level, and companies do not have to report much. A bill introduced in Congress last February to create “voluntary” reporting guidelines for data centers and other equipment did not advance in the House.

In California, information about electricity consumption for data centers is collected by the California Energy Commission but is confidential. Some state legislators have tried to change that.

Advancing legislation

This past summer, as lawmakers considered whether to advance legislation to expand the Small Power Plant Exemption to 150 megawatts, the bill’s author, Sen. David Cortese (D-San Jose), rebuffed a proposed amendment to require that California Energy Commission publicize information about annual data center electricity use.

“Load usage we don’t believe is a good indicator of what you’re looking for, projecting power usage and power load on the entire state,” Cortese said at a June 19 hearing of the Assembly Standing Committee on Utilities and Energy.

Brendan Twohig, a representative from the California Air Pollution Control Officers Association, told lawmakers that “much of the health risks” of data centers could be avoided by using natural gas fuel cells or batteries for backup power. A data center under construction by Microsoft in northern San Jose, for instance, will use natural gas generators instead of diesel.

Cortese dismissed the idea, stating that diesel was necessary “for continuous operation.” He warned that if his bill did not advance, “We fundamentally risk collapsing the California economy,” in which tech has long been a key sector.

But the bill stalled and never made it to a floor vote. Cortese didn’t respond to a request for an interview.

Meanwhile, the push for AI data centers is charging ahead. Proponents say the buildout can happen in a way that is not destructive for the climate.

At a conference convened by PG&E in November, the utility, the mayor of San Jose, Matt Mahan, and developer Ian Gillespie announced aspirations to build a 200 megawatt AI data center “campus” in downtown San Jose, which would route excess energy from the data servers to neighboring residential buildings for heat and hot water.

The data centers could “produce not only a lower-carbon community, but we actually help produce a tight-knit community,” said Gillespie, the founder of Westbank Projects Corps., which hopes to develop the campus.

The developer has submitted “several rezoning applications” to the city, according to a spokesperson for PG&E. No plans or applications have been sent to the city or the California Energy Commission for a data center, so its potential sources of energy are unclear. But Gillepsie emphasized that, “for the next 30 years, we’re going to need fossil fuels. There is no way out of it, but we just have to know how to use it.”

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