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Plans for Massive Data Center Linked to Nuclear Power Spark Debate on Connecticut’s Energy Future

Thomas Quinn wants to build a hyperscale data center — what would be the single largest user of electricity in Connecticut — next to the Millstone Nuclear Power plant in Waterford.

The center would use more than 9% of the average power consumption in the state, enough to raise concerns among state lawmakers about the stability of the grid and serious questions about whether it’s the best use for electricity as the state transitions away from carbon-based energy.

A few weeks ago, Quinn, president of NE Edge, and his partners Christopher Regan and William DiBella spoke with CT Examiner about the project. Regan, like Quinn, is a real estate developer. In the 1990s, DiBella, a Democrat, served as the State Senate Majority Leader before leaving elected politics and becoming a lobbyist. None of the partners have prior experience with data center or technology projects, but Quinn was clear that the partners don’t plan to develop the project on their own.

“This is a big project. You have to bring in institutional money to do this,” Quinn said. “We have somebody lined up. It’s a very large company, multinational. We would be joint venture partners, but we wouldn’t run any of it. Once the big guys come in, they basically run the show.”

Quinn declined to provide further details about prospective outside investors or partners, but according to industry experts who spoke with CT Examiner on the condition of anonymity, most projects of this scale are operated by companies like Microsoft, Google, Amazon or Meta.

According to figures provided by NE Edge, the project would require a $1.6 billion in investment and would consume 300 megawatts of power once operating — the size of the largest-scale, next-generation data centers used for high-density AI computing.

Given that Connecticut has some of the highest energy  rates in the country, an agreement with Dominion Energy  to connect the data center directly to the Millstone reactors is critical to NE Edge. Quinn called this “behind the meter,” meaning the developers wouldn’t pay the same charges levied on users of the electrical grid. But according to Quinn, NE Edge is offering to contribute $1 billion over 30 years to the state’s Renewables and Energy Assistance Programs in lieu of those charges.

According to Quinn, the deal would benefit Connecticut because much of the power potentially used to power the data center is currently sent out of state and not subject to those fees.

NE Edge has also offered to make an additional $1,440,000 annual payment to the state’s Energy Assistance Program, with a 2.5% annual escalator, and offer data storage services to the state at a 27.5% discount.

None of those contributions are yet part of any written agreement, but they were outlined by Quinn at a public hearing in March and are explained in a fact sheet provided to CT Examiner by the NE Edge.

Quinn later said that these figures were proposed in writing in a meeting with Gov. Ned Lamont and would be formalized once the approval processes are concluded.

Locking in power

In an effort to prevent Dominion from closing Millstone, Connecticut agreed in 2019 to a 10-year purchase price for more than 50% of the energy produced at the plant

According to a Dominion spokesperson, the company is discussing a lease and a separate power agreement with NE Edge.

Quinn explained that his company is negotiating with Dominion to buy power currently sold on the open market, but declined to elaborate except to say that the price will be higher than in the 2019 agreement.

Jay Dietrich, research director on sustainability at Uptime Institute, told CT Examiner that an agreement between Dominion and NE Edge could be beneficial for the operation of the plant, given the stable demand promised by the center.

Dietrich said the main risk for nuclear power plants is being priced out of the market by cheaper sources of energy. The Millstone plant closure itself was on the table until the 2019 purchase agreement improved prospects.

“A data center locking up 300 megawatts of power will actually help keep the nuclear plant open, which will help grid stability,” Dietrich said. “And having that nuclear plant will reduce price volatility.”

Legislators move toward a study

The extraordinary scale of the energy required for the NE Edge project has prompted the state Legislature’s Energy and Technology Committee to approve legislation requiring a study of the impact on the grid. That report could be finished by July 1.

NE Edge opposed the study, which has yet to receive a vote from the entire State Senate and House, calling it a waste of taxpayer money. Quinn labeled the study an “opinion report” and said it may delay their project and result in a missed opportunity. Quinn argued that the data from ISO-New England, the organization managing New England’s electrical grid, showed more than enough capacity to supply the project, even during summertime peak demand.

“Missed opportunity for who?” replied State Rep. Aundré Bumgardner, D-Groton, a co-sponsor of the bill, later told CT Examiner.. “Lost opportunity for Google, for Microsoft? The beneficiaries are the world’s wealthiest corporations and their mega-billionaire owners.”

Bumgardner said data centers should be treated the same as any other industry in the state.

Tax incentives

The industry has benefited from tax incentives approved in 2021 as emergency legislation, without committee discussion or public hearings, in response to an alleged opportunity to attract millions of dollars of investment to the state.

At the same time, New Jersey lawmakers were debating a $0.0025 tax on each electronically processed financial transaction. Connecticut weighed the possibility that some of the Wall Street-related data center infrastructure could be moved to the state, but New Jersey eventually dropped the tax idea.

The tax incentives remained, however, making Connecticut the only state in New England offering incentives for data centers; more than 30 states across the country have some type of incentive for the sector.

Under current rules, developers in Connecticut can apply for a 20-year sales and property tax exemption on data center projects with at least $200 million in investment, or $50 million if the center is built in a state-designated enterprise zone. The benefit can be extended to 30 years if the investment reaches $400 million, or $200 million in an enterprise zone.

The centers would also be exempt from local taxes, but towns would be allowed to negotiate fees as part of a host municipality agreement.

Only one data center, developed by Cigna, has benefited from the legislation so far, according to the state Department of Economic and Community Development. The Waterford data center could be the second.

Picking winners?

The Lamont administration has split, markedly, in its attitudes toward the data center industry and proposed study.

Facing criticism that the government was picking winners and losers, DECD communications director Jim Watson said in a written statement that there were also incentives for other industries, and that the agency considers data centers a “backbone for growth in both established industries as well as rapidly emerging tech sectors.”

Daniel O’Keefe, commissioner of DECD, criticized the proposed study, suggesting instead that legislators consider how to support data centers to take advantage of the “economic benefits they enable.”

In contrast, DEEP Commissioner Katie Dykes endorsed the study, but presented it as a way to encourage the construction of new data centers in the state.

“We see it as an enhancement to ensure that there is a clear path to be able to attract data center load in our state,” she said. “We don’t want to be unprepared, and we want to make sure that we are informed about ways to integrate this kind of load in a way that is reliable.”

The larger question

Underlying the data center controversy in Waterford are larger, global questions: Should the government incentivize these massive power-consuming projects? As Connecticut tries to refocus its energy infrastructure toward net-zero carbon by 2040, are data centers the smartest way of using green energy?

Not long ago, data centers were seen as an opportunity to raise revenues and create jobs, but more experts and government officials have been questioning the benefits and shifting focus to its impact.

In northern Europe, for example, there has been a reevaluation of whether the tax breaks given to data centers were wise policy, said Alex de Vries, a Dutch data scientist who founded Digiconomist, the research firm that created the Bitcoin Energy Consumption Index.

Among the countries that have reconsidered incentives is Sweden, which eliminated tax exemptions last year. Opposition to data centers is also growing in the Netherlands, where Meta suspended a project in 2022 due to political opposition over its high energy consumption.

According to his paper on artificial intelligence electricity consumption, Vries estimated that by 2027 the industry as a whole would require as much energy as the Netherlands.

“These facilities don’t create the number of jobs advertised and don’t pay that much taxes,” Vries said. “This is starting to be considered an opportunity cost. You don’t get extra business because you don’t need to be near a data center, and it consumes a massive amount of power that could be used for industries that are a growth engine for your local community.”

What’s in it for Waterford

NE Edge developers say the Waterford project would hire as many as 1,500 workers during construction, 190 permanent employees when operating, and 300 temporary personnel every three years for a year of refitting.

The figures are a small fraction of Connecticut’s labor market, however, compared to the amount of electricity the facility would consume.

Among the main supporters of the data center are construction unions and town officials who expect to raise millions of dollars from the project. NE Edge would be the second largest contributor to Waterford’s public coffers behind Dominion.

Waterford signed a host municipality fee agreement with NE Edge last year, committing the company to pay $231 million over 30 years in lieu of taxes.

After signing the agreement, Waterford First Selectman Robert Brule touted the benefits to the local community.

“This revenue will serve as a cushion to help us ease the tax burden for our property owners and help fund critical fire, police, school, public works, recreation and other human services our town relies upon,” Brule told The Day.

A group of Waterford neighbors, however, are determined to stop the project.

Resident Bryan Sayles, 63, said he first heard about the data center when he read a letter to the editor in the local newspaper in March 2023. By then, months had passed since the town’s first selectmen voted on the agreement with NE Edge.

After a few more months without any updates, Sayles decided to organize a meeting with locals to gather additional information. Thus was born the Concerned Citizens of Waterford and East Lyme, which divided into working groups to tackle what it claims are issues with the project.

Sayles said he spent months researching energy security and concluded that the data center would drive up the wholesale price of energy. He also raised doubts regarding who the real project investors are, as well as noise concerns. His biggest criticisms, however, are what he considers a lack of transparency from local representatives, Dominion and the developer.

“Dominion is not acting as a good neighbor,” he said. “I’m fine with nuclear power, but the senior leaders in the company lack any empathy toward neighbors and the town, as we expressed our concerns.”

Prior to the Waterford project, NE Edge proposed building a data center in Groton, drawn by the lower electricity rates offered by the town’s municipal utility. But neighbors objected due to noise concerns, and Groton’s Town Council ultimately voted against the NE Edge agreement.

Quinn and his partners learned from that experience.

The Waterford proposal eliminates the main sources of noise: backup diesel generators and the cooling system. Being directly connected to the nuclear reactors, the data center plans to use the grid as a backup, avoiding internal combustion engines. The cooling, according to NE Edge, would be accomplished with a closed air conditioning system, evacuating heat through fans on the roof.

Quinn claims that the facility would be designed to minimize noise and meet a state-mandated 54-decibel limit, and that water demand would be limited to staff consumption and would not be used to cool servers. Independent experts in the industry who spoke with CT Examiner confirmed that there are engineering solutions to meet these requirements, although it would depend on the building design. NE Edge plans to complete a sound study in the next five months to obtain a building permit; once completed, the company can apply to DECD for a tax exemption.

Waterford residents opposed to the data center received some good news in January when the Siting Council rejected Dominion’s request to change the boundaries of the Millstone nuclear power plant site, a necessary step to build the data center. The council justified the denial based on concerns about the impact on the environment and energy supply, saying it needed more time and information to assess them. The decision was made without prejudice, which means Dominion can resubmit the application.

Quinn and his partners considered the denial unjustified, but said they are confident that the council will eventually approve the application.

The Siting Council’s decision was celebrated by Sayles, who took it as a sign that neighbors’ concerns were being heard.

“I don’t think our pressure is going to matter to Dominion or our first selectman. They are indifferent,” he said.  “But we are hoping that the legal system, the state laws, will stop them.”

Source: CT Examiner