The US has entered a data center boom. Between 2023 and 2024, data center construction increased nearly 70 percent, with around 5 gigawatts of projects expected to be underway by the end of 2025. Now, a recent executive order aims to supercharge that growth even further.

The order outlines an array of provisions, from new funding opportunities and streamlined permitting, to novel development sites. For data center operators and developers, this promises two clear benefits: faster speed to market and greater financial viability.

Yet, these opportunities are not without their own obstacles. More projects in the pipeline may exacerbate challenges associated with data centers, be that water usage or energy consumption.

With federal permitting reform, owners will not only need to leverage new opportunities. They must also double down on managing the social and environmental externalities of data center growth. The order’s new provisions may enable them to do just that.

What’s changing?

Data centers require significant financial, environmental and technical resources. Developers must consider access to power and water while also contending with rising land costs and supply chain delays for components.

Amidst this crunch, the federal government’s permitting reform offers relief while enabling inventive approaches to data center delivery. Notably, the government’s expansive ‘covered components’ list extends these reforms to not only datacenters themselves, but also the broader ecosystem of infrastructure that supports them, including power generation, transmission, and critical supply chain inputs.

1. Financial incentives

Under the federal proposal, the Secretary of Commerce and Director of the Office of Science and Technology Policy (OSTP) would provide financial support for qualifying projects valued at more than $500 million in capital expenditures, 500 megawatts (MW) or of national security importance. The financial support would be diverse, ranging from grants and loan guarantees to tax incentives.

2. Streamlining environmental and permitting reviews

Federal agencies will be tasked with identifying ways to streamline the National Environmental Policy Act (NEPA) review for qualifying projects. Notably, NEPA review will not be triggered by federal funding for projects if that funding constitutes less than 50 percent of total project costs.

Compliance beyond NEPA would also see reform. The order tasks the EPA with augmenting regulations under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), Toxic Substances Control Act, and Clean Air and Water Acts to expedite qualifying projects. A separate proposal by the EPA would allow certain aspects of critical infrastructure construction for data centers to proceed prior to receiving Clean Air Act permits. Beyond the EPA, the Departments of Interior and Commerce have also been directed to engage in programmatic consultations under the Endangered Species Act to help develop programmatic permitting approvals for covered projects.

3. More sites for development

The EPA will identify brownfield and superfund sites for qualifying projects within 180 days and build out resources to conduct environmental reviews to prepare such sites for use. The proposal would also open federal lands, including military installations, to development pending review by the federal agencies.

Further federal institutions, including the Department of Energy (DOE), Department of Defense (DoD) and Department of Interior (DOI), have also been tasked to investigate development sites on their lands. To date, the DOE has already begun soliciting public input from industry and identified possible sites where they will support datacenter development on national laboratory property.

Bypassing bottlenecks

Predictions for data center expansion are staggering, with capacity forecasted to treble globally by 2030. While the executive order may help keep growth on track, numerous challenges remain. The key will be to leverage reform to resolve bottlenecks across the development cycle.

Community impacts and local permitting

It’s important to remember that federal reform does not overhaul the entire permitting regime. Various other levels of government also maintain complex, overlapping permitting requirements. Approvals for air and water, energy, and other considerations can take years to clear – even in states with accommodative regulatory frameworks. Beyond formal channels, developers must also engage communities to build buy-in and minimize local impacts.

Federal-level reform presents a solution to both permitting and engagement delays.

Locating data centers in brownfield sites may open up new development sites in preferred locations, while streamlining or simplifying what historically may have been perceived as more risky or complicated locations. Bringing derelict areas back into reuse can also address community concerns: a revitalized site minimizes impacts on residents and brings added economic value to a region.

Notably, brownfield sites often have two distinct advantages. They are frequently former manufacturing sites, which means they typically offer ample existing power supplies and infrastructure.

The concept of “infilling” urban cores by redeveloping these sites is especially beneficial to former manufacturing-based communities, supporting local revitalization and economic growth.

Water consumption

Permitting reform may provide greater certainty for developers, but it also raises a question: how will these investments be supplied with necessary water inputs?

Data center water consumption, though still a small portion of water usage overall, is growing rapidly. By 2030, global data center water needs are predicted to more than double, rising to around 1,200 billion liters annually.

Sourcing water has also become increasingly problematic. It’s common for US data centers to draw more than half of their water for cooling from potable sources and two-thirds of US facilities built since 2022 are in water-stressed areas.

Perhaps the most promising opportunity relates to remediation. Data centers developed on Superfund sites will almost certainly include clean-up provisions. This promises to direct significant investment toward national contamination priorities.

That begs the question, though, why develop a Superfund site at all?

Contaminated sites may seem a liability, but as greenfield land costs continue to rise, they have become more appealing. Government support with risk management and liability reduction can incentivize developers to shift investment toward contaminated sites – providing communities much-needed environmental relief in the process.

Energy

One of the greatest bottlenecks for US data centers is access to clean, consistent baseload power. Renewable energy remains too intermittent for baseload needs while sites with reliable grid infrastructure are scarce.

A crowded and strained grid is another barrier. Electrification, driven by a supply of new renewable power, has led to prolonged interconnection queues with grid operators to gain grid access. In response, many data centers have struck out on their own. Combined cycle gas turbines (CCGT) have become a common mode for efficient power generation independent from the surrounding grid.

Federal reform could accelerate this trend of ‘island’ power. Data center developers would have access to sites with fewer barriers to onsite power generation. This extends beyond CCGT to cleaner options like renewables, fission, small modular reactors, geothermal and, increasingly, battery energy storage systems.

On the other hand, brownfield access also opens opportunities to improve grid connections. Many brownfield sites once played host to fossil fuel power generation and already possess exceptional grid integration potential. Reactivating these sites can give developers easier connections to the grid, along with access to other critical infrastructure, including water, sewer and roadways.

Integrated capabilities

The latest federal reform places data centers at the heart of the nation’s economic trajectory. Yet, data center growth will impact more than the economic realm. Social and environmental externalities have become critical considerations – and key differentiators – for many projects.

Developers and operators must therefore deploy integrated project expertise. In addition to power and data infrastructure, they’ll need capabilities spanning state and local permitting, regenerative remediation, industrial water management, and community engagement.

Integrating these many practices can accelerate development and deliver cost efficiencies. But just as importantly, they can extend the functionality of data centers beyond owners and end users, benefiting communities and ecosystems in the process.