San Jose wants AI data centers. Residents are asking what they’ll cost

In Silicon Valley's biggest city, residents and environmental groups are organizing against a wave of proposed data center projects that officials have courted in a bid to position the city as a hub for AI infrastructure.

The clash highlights a challenge confronting policymakers nationwide: how to support an industry viewed by government and business leaders as critical to economic competitiveness while responding to growing public concerns about the electricity, water and pollution impacts of the infrastructure required to power it.

In California, that debate is particularly fraught because the state is home to many of the companies driving the AI boom, including Google, Meta, OpenAI and Anthropic.

San Jose, a city of nearly 1 million and California's third-largest, has embraced the industry's growth. Last year, city leaders announced an agreement with utility PG&E to speed delivery of power to large energy users such as data centers.

The city estimates each new facility could generate between $3 million and $6 million in tax income annually for services such as police, fire protection, libraries, roads and parks.

Despite Silicon Valley's wealth, however, many residents remain unconvinced that the benefits of the wave of tech-driven growth tied to AI-focused facilities will be broadly shared.

"The companies have to prove to us why they deserve our resources and how they're going to give back to the community,"

said Ellina Yin, a leader of the grassroots I Love San Jose coalition.

Yin and others are pushing for stricter public review, more transparency around energy and water use and studies of health and environmental impacts before more projects are approved.

Mayor Matt Mahan says the answer is not to halt data center development but to ensure it is done responsibly.

"People are right to question, 'Is this pushing up my energy costs? Is it using our clean water supplies? Will it degrade quality of life in my city?'" Mahan told Reuters. "These are very fair questions."

The fight comes as California Governor Gavin Newsom weighs a package of bills intended to protect state residents from the costs of powering data centers and increase transparency around their energy and water use.

PG&E said new large customers can help spread fixed grid costs across a broader customer base and help lower bills.

Air quality is a particular concern. In April, a coalition led by the Center for Biological Diversity petitioned the Bay Area Air Quality Management District to strengthen oversight of diesel backup generators used at data centers, arguing that existing regulations predate the recent expansion of AI-related facilities.

The district said it is exploring whether stronger protections are warranted.

New legislation pending

The concerns raised in San Jose have increasingly made their way to Sacramento, California's capital.

Lawmakers recently gave final approval in both the state Senate and Assembly to several bills addressing data centers, including measures intended to ensure large electricity users pay their share of grid-related costs and requirements aimed at increasing transparency around energy and water consumption.

State Senator Steve Padilla, who authored several of the measures, said California has an obligation to lead because it is home to many of the world's largest technology companies.

The Data Center Coalition, an industry trade group whose members include Google, Meta, OpenAI and Anthropic, said it supports responsible growth but argued the bills unfairly single out data centers rather than other large industrial and commercial electricity users. The group warned the measures could discourage investment and push jobs, tax revenue and projects to other states.

Newsom has until the end of the month to either sign or veto the legislation. His office declined to comment because the bills are pending before the governor.