Commentary: SC can welcome data centers while minimizing their problems

In recent days, leading members of the South Carolina General Assembly have said bills denying data centers economic incentives available to other industries will be on the 2026 legislative agenda.

They argue that data centers use tremendous amounts of energy, placing burdens on the electrical grid and increasing utility bills, while consuming massive amounts of water for cooling. They also question why S.C. industries can’t simply rely on data centers in other states to meet their AI needs.

This approach is shortsighted. Enacting policies that display hostility toward data centers would send a damaging message to the rest of the world.

Artificial intelligence is rapidly reshaping health care, manufacturing and every major sector. The global AI competition is fundamentally a race for technological supremacy, with China investing hundreds of billions of dollars in AI infrastructure. Winning this race requires building domestic data center capacity.

If America cedes this infrastructure to competitors, we risk losing our technological edge. AI runs on data centers; they are the foundational infrastructure of the digital age, as essential to the 21st century economy as highways were to the 20th.

The economic stakes are staggering. Data center investments constituted approximately 80 percent of U.S. economic growth in the first half of 2025. Companies globally are projected to invest nearly $7 trillion in data-center infrastructure through 2030, with more than 40 percent in the United States. The sector's employment contribution grew from 2.9 million to 4.7 million jobs nationally between 2017 and 2023.

Critics may concede that AI is important but question why S.C. businesses cannot rely on data centers elsewhere. The answer is straightforward: Distance matters. While cloud services can technically operate from anywhere, milliseconds of data travel time create competitive disadvantages.

AI applications in telemedicine require minimal latency. Moreover, relying on out-of-state infrastructure creates vulnerability. When neighboring states control critical digital infrastructure, S.C. businesses face capacity constraints and other states' energy policies.

Data centers generate substantial property tax revenue. These facilities require capital investment from hundreds of millions to more than a billion dollars, and unlike residential developments that strain local services, they require minimal infrastructure support.

Data centers consume substantial electricity, but the cost of generating that electricity need not be subsidized by other ratepayers. Power purchase agreements can require data centers to fund new generation capacity directly, with utilities recovering infrastructure costs exclusively from the data center customer. Santee Cooper recently implemented special rates explicitly designed to prevent existing ratepayers from subsidizing data center power needs. Such equitable cost allocation should be mandatory statewide.

Historically, data centers’ cooling needs have strained water resources. However, the industry has developed solutions. Microsoft's closed-loop liquid cooling recirculates coolants without evaporative loss, saving more than 125 million gallons annually per facility. Direct-to-chip cooling reduces consumption by 80 percent. Immersion cooling eliminates water use entirely. South Carolina should mandate these technologies for all new facilities.

Thoughtful siting legislation is equally essential. South Carolina should pass laws requiring data centers to locate in areas with adequate infrastructure and away from ecologically sensitive regions. The recent proposal to build an 859-acre data center near Walterboro, adjacent to the ACE Basin, one of the largest undeveloped wetlands ecosystems on the Atlantic Coast, exemplifies inappropriate siting.

A siting law could establish buffer zones around protected areas, require environmental impact assessments and mandate infrastructure reviews. This would prevent controversies like Colleton County’s while still welcoming data centers in suitable locations.

Recent debates reveal a troubling trend: demonizing data centers themselves. On Thursday, one of our state’s gubernatorial candidates called them “death stars.” Such rhetoric is counterproductive. Data centers are infrastructure, not inherently evil. Characterizing them as villains transforms policy debates into ideological crusades that foreclose rational solutions. The proper response is addressing specific harms through regulation, not vilification.

The choice facing South Carolina is clear: Embrace data center development while implementing smart policies or cede this industry to other states.

By requiring data centers to pay the full cost of their energy needs, mandating advanced water-saving technologies and establishing clear siting criteria that protect sensitive areas such as the ACE Basin, South Carolina can capture economic opportunity while safeguarding our resources and winning the AI competition that will define American prosperity for decades to come.

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