By Pat Miller • Co-Chair, Building Electrification Committee
Some people say we need a moratorium on new data centers because of the problems they are causing, such as rising energy costs, as described in the companion piece on data centers by Pat Hilliard on page 7 of this issue of The Jersey Sierran. In the 2024 PJM Interconnection power auction, utilities in the Mid-Atlantic and Midwest (PJM Interconnection) were forced to pay significantly more to secure electricity supplies. “Data centers were responsible for 63%” of those price increases,” according to a January 2026 paper on New Jersey’s energy crisis.
Whether or not we need a moratorium on data centers, we certainly need some rules and regulations in place around them. And fast! Or we can expect similarly steep cost increases in future.
In a document available on our website, the Sierra Club has summarized a number of policy options being implemented in states across the country that can help reduce the collateral cost of data centers for communities, ensure that clean energy objectives are met, improve transparency of data center development deals, protect air quality, and help in many other ways. These policies encompass four main categories of guardrails:
• Protect Residential Customers, by having data centers pay their fair share, such as with special tariffs on large-load users, separate rate classes for heavy users, and avoidance of shifting the cost burden to residential consumers (aka, “cross subsidies”).
• Clean Energy Comes First, meaning each data center must supply its own renewable energy in compliance with New Jersey’s Renewable Portfolio Standard. They could accomplish this by installing renewable power onsite or elsewhere or by buying renewable energy credits.
• Fair Rules for All, which means not offering data centers subsidies on local or state taxes or utility rates.
• Protect Public Health, which means considering the cumulative impact on regional air pollution that a data center would cause, or requiring onsite battery backup to avoid the need for dirty, onsite diesel generators during times of grid outages or other supply shortfalls.
In addition to introducing laws and regulations to mitigate data center impacts, New Jersey and all other PJM states are trying to ramp up our clean energy supply and modernize our grid. These measures are desperately needed to meet current and future levels of electricity demand by data centers and to throttle down the price increases for all customers. The loss of our anticipated installations of offshore wind has been a terrible blow to our needed grid supply and reliability. To make it worse, many applications to interconnect new renewable energy projects have been sidetracked by PJM in favor of more fossil fuel (primarily gas) electricity generation, which will take years longer to create and bring online.
We and other groups who want sensible data center development are advocating on many fronts. Adequate supplies of renewable energy can help ensure that data centers have a smaller CO2 footprint, and the Sierra Club is tracking the many legal actions across the country to reverse the federal administration’s roadblocks to renewable energy.
In January 2026, the 13 PJM state governors signed an agreement with the Federal Secretaries of Energy and Interior to 1) accelerate the speed at which new power comes online, 2) ensure data centers cover their share of the costs of any new resources, and 3) stem the increase in auction prices to bring affordability to the PJM region.
Also in January, NJ Gov. Mikie Sherrill issued Executive Orders 1 and 2 that stipulate many steps (with deadlines) the NJ Board of Public Utilities and other state agencies must take to generate more grid-scale solar energy, residential (“community”) solar, and grid-scale battery storage. The orders also require them to develop systems to monitor usage and enable energy supplied to the grid by potentially millions of individual sources, such as home solar, electric vehicle batteries, and other devices used by residential and business consumers.
These systems are known as Demand Response and Distributed Energy Resources Management; managed effectively, they would collectively add up to “virtual power plants” that could significantly help with New Jersey’s energy needs. These systems would increase grid capacity while making it more flexible and reliable.
Planning and project awards are underway for the various actions ordered by Gov. Sherrill and are already producing results. Furthermore, grid expansion will also provide the supply needed for the transition to energy saving heat pumps and electric vehicles. The incorporation of virtual power plants will add significantly more renewable energy to the grid than we have now and help us to achieve our clean energy goals in New Jersey.
On the legislative front, there are several bills under consideration to manage data centers:
• S680/A1170 would require data centers to bring their own clean energy, prioritizing onsite generation.
• S731/A796 would require special large load tariffs with front-loaded costs for data centers.
• S3379/A4096 would provide for transparency and reporting of electricity and water use.
• S1857/A177 would stipulate that data centers be built well away from homes, make efficient use of water, and not be situated in protected areas such as wetlands, forests, or farms.
More legislation is needed. We still need to rein in runaway tax incentives, as has already been done in Michigan, Minnesota, and Illinois. We also need noise and cumulative emissions mitigation. We are fighting the good-but-challenging fight.
Resources
Data Center Paper: https://shorturl.at/ShBsA
Policy Document: https://shorturl.at/sYvn7
Governors’ Letter: https://shorturl.at/POhNI