Milwaukee Chapter Key Take Aways!
Data Centers Will Significantly Increase Energy Demand
- Wisconsin already hosts more than 40 data centers, but newer hyperscale facilities are much larger than previous generations.
- Some proposed facilities could consume more than 1 gigawatt of power at peak demand, representing roughly 1.5% of the state’s total energy production.
- Data centers accounted for over 4% of U.S. electricity consumption in 2023, and federal projections estimate that could increase to 6.7%–12% by 2028.
Wisconsin’s Long-Term Utility Trends Are Reversing
- Statewide electricity sales have declined about 9% over the past two decades due to efficiency gains and industrial changes.
- Peak electrical demand also declined but is now projected to rise from 14.6 GW to 17.1 GW within five years, largely because of data center expansion.
- Utilities view data centers as a major source of future load growth after years of stagnant demand.
Water Use Concerns May Be Less Significant Than Commonly Perceived
- Wisconsin water utilities have experienced an 18% decline in statewide water sales since 1997.
- Industrial water consumption has fallen by 34% during that period.
- The presentation noted that the anticipated water use of Microsoft’s Mt. Pleasant data center is relatively small compared to historic declines in utility water sales.
Local Governments Play the Lead Role in Siting
- Municipalities control:
- Zoning and land use approvals
- Annexation decisions
- Property taxation
- Tax Increment District (TID) creation
- Water, sewer, road, police, and fire services.
- As a result, local governments remain the primary gatekeepers for data center development.
PSC Is Working to Protect Existing Ratepayers
- The Wisconsin Public Service Commission (PSC) has issued several major rulings designed to ensure large data centers bear the costs of the infrastructure they require.
- Recent actions include:
- Lowering the threshold for “Very Large Customer” tariffs from 500 MW to 100 MW.
- Extending required commitments from 10 to 15 years.
- Requiring data centers to pay the full costs of certain new generating facilities.
- Increasing transparency and reporting requirements.
Significant Economic Development Incentives Are Being Offered
- Wisconsin provides sales tax exemptions for data center equipment, including servers, networking equipment, and cooling systems.
- Current recipients include:
- Microsoft (Mt. Pleasant)
- Epic (Verona)
- Meta (Beaver Dam)
- Vantage (Port Washington).
- The Legislative Fiscal Bureau estimates Wisconsin could forgo approximately $1.5 billion in sales tax revenue between 2024 and 2028 as a result of these incentives.
Data Centers Are Reshaping TIF Policy
- Wisconsin recently enacted legislation allowing certain Tax Increment Districts supporting major data center projects to exceed traditional valuation limits.
- The scale of proposed projects is unprecedented:
- A Port Washington data center project could approach $15 billion in value.
- Existing TIF structures were not designed for projects of this magnitude.
Commercial Real Estate Implications
For CRE professionals, data centers represent one of the fastest-growing property sectors in the country. Key opportunities include:
- Land acquisition and entitlement work.
- Utility and infrastructure development.
- Industrial and technology-focused construction.
- Engineering and environmental consulting.
- Tax increment financing and economic development incentives.
- Power generation and transmission investments.
- Municipal planning and public-private partnerships.
Bottom Line
Wisconsin is positioning itself to compete aggressively for hyperscale data center investment while simultaneously developing regulatory safeguards to ensure infrastructure costs are appropriately allocated. The growth of data centers is expected to become one of the state’s most significant drivers of future utility demand, infrastructure investment, and economic development activity over the next decade.
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