AI data center buildout accelerates, but faces labor shortages, equipment constraints, and local permitting opposition despite big tech backing.

The U.S. data center boom has entered a new, contradictory phase. On one hand, both data center construction activity and credible forecasts for near-term capacity additions remain robust. The Electric Power Research Institute said in February that data centers will represent up to 17% of U.S. electricity demand in 2030 and as much as 20% in 2035.

On the other hand, data center and utility infrastructure projects face mounting challenges. These include physical constraints such as equipment and labor shortages, as well as public opposition driven by concerns about the impact of large-scale computing facilities on water supplies, the cost and reliability of power and natural gas supplies, and quality of life in host communities. The result is that even some data center development projects advanced enough to appear in utility load forecasts with a named hyperscaler attached are not certain to move forward.

A Microsoft data center near Grand Rapids, Michigan, touted by Consumers Energy, faces an uncertain future amid local permitting delays. A Microsoft-backed facility in Vineland, New Jersey, was recently hit with a $1 million fine for running dozens of gas-powered generators without proper permits, and ordered to obtain them within 45 days or shut down. A proposed Google data center interconnecting in Xcel Energy's Minnesota territory faces a court-ordered work stoppage for environmental review. Even projects designed to circumvent interconnection delays with off-grid generation have seen setbacks: Oracle moved to protect itself financially from delays or cancellation of Project Jupiter, a massive 2.5-gigawatt data center campus planned for Doña Ana County, New Mexico, after state regulators blocked a gas pipeline proposed to serve it.

"Data center opposition has reached a pitch I have never seen before in my 20-plus years in development," Blake Nixon, president and CEO of Geronimo Power, told Utility Dive. This spring, officials in Nobles County, Minnesota, shot down Geronimo's proposal to build a 400-megawatt data park there despite community outreach efforts. "[Data centers] are running into physical problems that are manifesting as market problems, political problems, regulatory problems and ultimately problems down on the ground," Nixon said.

In May, Goldman Sachs said only 50%-60% of planned data center capacity will come online as expected in the next two years amid delays and cancellations. While 36 gigawatts of capacity was added to the development pipeline in the first quarter of 2026, that figure is down 19% from the fourth quarter of 2025 as developers "continue to shift their focus to existing pipelines in the face of an increasingly challenging development and regulatory environment," said Caitlin Connelly, senior analyst with Wood Mackenzie.

Experts say these developments raise questions about how much data center load will come online in the near term, injecting unwelcome uncertainty into utility planning cycles that must look years or even decades ahead.

It is increasingly difficult for developers of large-scale data center campuses to find sites with hundreds of megawatts, let alone gigawatts, of spare grid capacity. In the PJM Interconnection, real or perceived power scarcity is a major driver of local opposition and political backlash. The independent market monitor blamed data centers for 38% of charges at the most recent capacity auction.

The Democratic governors of Pennsylvania, Virginia and New Jersey have taken action in recent months to push regulators to require data centers to bring more generation and transmission capacity online. Power scarcity and cost concerns have triggered organized opposition and political backlash in places developers believed were sympathetic, including Texas and Utah. Texas Governor Greg Abbott successfully pushed for a sweeping pause on data center grid interconnections that threatens up to 20% of the total U.S. development pipeline, according to BloombergNEF.

Utilities and data centers are responding through multiple strategies. The most straightforward involves "bring your own capacity" arrangements in which computing facilities colocate with new generation or finance local capacity additions. OpenAI agreed to take 8 gigawatts of capacity from a planned 10-gigawatt power generation project in Ohio that includes 9.2 gigawatts of gas assets. The facility, pursued by Japan's SoftBank Group and the U.S. Department of Energy, would be the country's largest generation source if built. Amazon's proposed 7.7-gigawatt gas-fired power plant in West Texas would be the second-largest, exceeding Washington state's 6.8-gigawatt Grand Coulee hydroelectric dam. Google secured a "first-of-its-kind" deal with Voltus for 100 megawatts of virtual power plant capacity in PJM.

Utilities and data centers are also pursuing asset-light alternatives using software to find untapped grid headroom or ramp down computing loads during peak demand periods. Portland General Electric said that by using GridCARE's AI-powered load modeling tool, it freed up 80 megawatts of interconnection headroom—about one-fifth of the 400 megawatts of data center load it expects to add by 2029. "We are seeing more interest from both data center developers and regional stakeholders to embrace flexible loads, which can accelerate the interconnection process," said Anuja Ratnayake, EPRI's emerging technologies executive, who leads the DCFlex initiative aimed at standardizing data center designs and utility programs around flexibility.

The United States still has load pockets with spare headroom, though they are increasingly rare. Data center developers and prospective tenants are looking past mature, power-constrained markets like Northern Virginia toward renewables-rich regions with relatively low wholesale power prices, such as the northern Plains states. Some utilities and developers are moving toward smaller data centers that could soak up spare capacity without requiring significant new generation. "Some co-ops are actively seeking these types of loads," said Louis Finkel, senior vice president of government relations for the National Rural Electric Cooperative Association. "A smaller-scale facility could be sited where there is excess capacity on the system, increasing grid utilization and potentially putting downward pressure on rates."

In places without sufficient grid headroom, some data centers are looking to avoid multiyear interconnection queues by powering up off-grid, at least temporarily. Cleanview, a grid data platform, counted more than 90 gigawatts of behind-the-meter capacity across 59 large-scale data center projects earlier this year, with as much as 13 gigawatts potentially coming online by the end of 2027. However, these projects remain at the mercy of stretched supply chains for power and electrical equipment. These backlogs, continuing years after the COVID-19 pandemic, affect both grid-connected and behind-the-meter projects. The typical customer now waits two to three years for standard power transformers—which must be custom-built—and generator step-up units, according to Fluxco, an electrical equipment marketplace. The situation is unlikely to improve before 20