The Energy Policy Lab, a new advocacy arm of Berkeley Energy & Resources Collaborative, seeks lower rates through regulations on data center development
Berkeley students are no strangers to entrepreneurship and technological innovation. According to the 2025 PitchBook university rankings, Berkeley students have launched the highest number of startups for a third year in a row.
Despite our aptitude for innovation, though, the rising costs to California’s economy and environment from expanding data centers remain a concern. As BERC launched its new legislative advocacy branch this year, our small team in the Energy Policy Lab therefore chose to focus our first campaign on rate reform and environmental regulations that can protect Californians from rising electricity prices, increased fossil fuel use, and worsening groundwater depletion from the data center building boom. With in-state data center construction and electricity demand forecasted to reach up to 18.7 gigawatts in coming years, enough to power 18 million homes, we have a narrow window to secure meaningful utility rate relief. Our goal is to ensure that this additional load on the grid pays its fair share toward upgrading transmission lines and reducing wildfire risk—rather than passing those costs onto households.
The problem with data centers
In recent decades, California has been instrumental in defining two consequential trends: world-changing advances in computing and pioneering environmental leadership. Today, however, these achievements are in direct conflict.
That’s because hyperscale data centers—facilities that can each consume as much electricity as a mid-sized city—are rapidly arriving to power the AI boom, with few guardrails to check their energy, water, social, and health impacts. These data centers require round-the-clock, enormous power draws and are often located where the grid isn’t equipped to handle them. Data centers, or the energy plants to power them, are also often sited in low-income, rural, or pollution-burdened communities and use vast quantities of water, a resource that California cannot afford to spare. Because many data centers are designed to run continuously and can’t afford outages, they are built with massive fleets of diesel generators that emit harmful particulate matter during electrical shutdowns.
To serve this rapidly growing industry, utilities are having to build new substations, lines, and backup power plants. Those infrastructure costs are spread across all ratepayers under the current utility model, meaning ordinary Californians, who already pay the country’s highest residential electricity rates (excluding Hawaii), end up with even higher bills for infrastructure that primarily benefits some of the world’s wealthiest private companies. Now that we’re witnessing energy demand spike faster than clean supply can grow, utilities are falling back on fossil gas plants or postponing their shuttering, driving up both costs and greenhouse gas emissions.
Figures: "An Assessment of California Data Centers' Environmental and Public Health Impacts". Next10. November 12, 2025. An Assessment of California Data Centers’ Environmental and Public Health Impacts | Next 10
Missed opportunities in 2025, hope for 2026
Earlier this year, state legislators introduced several bills to start setting basic rules for data center growth in California, including providing tax breaks for projects using renewable energy, mandating transparent reporting of resource use, and requiring developers to help finance the grid upgrades that their projects demand. But the renewable energy bill didn’t progress in the last legislative session, and AB 93—a simple transparency bill that required data center companies to report their water usage—was vetoed by Governor Newsom after heavy lobbying from the tech industry. Meanwhile, the corollary bill designed to ensure data centers pay their fair share was stripped down and reduced to a mere study. All this against a backdrop of the nation’s most rapid electricity price increases since 2020, and it’s clear that while other states ranging from New York to Oregon and Minnesota to Texas begin to legislate against these environmental and affordability injustices, California is falling behind.
Figure: Gabriel Petek. “Assessing California’s Climate Policies — Residential Electricity Rates in California”. Legislative Analyst’s Office. January 2025. https://lao.ca.gov/reports/2025/4950/Residential-Electricity-Rates-010725.pdf
We’re determined that Californians should not be powerless against these damages. In fact, we think that with equitable and environmentally conscious regulations in place, data centers could actually help bring electricity costs down. Big new electricity users like data centers could share the fixed costs of much-needed transmission and distribution upgrades, including wildfire protection measures, and ease cost pressures on households and small businesses.
Rather than risking a backslide on California’s climate commitments, data centers can also accelerate clean energy investment. With operations typically running 24/7, data centers can act as the “anchor tenant” for major renewable projects—providing stable demand that helps finance solar, wind, battery storage, nuclear, and geothermal energy.
But without clear rules, the growth of data centers could have the opposite effect. Poorly planned development can drive expensive grid upgrades in the wrong places, shift costs onto families, and increase reliance on fossil fuels when clean energy can’t keep up. If data centers are built without paying a reasonable contribution, everyday Californians could end up covering the tab. And while the benefits would be concentrated in the richest private tech companies, the costs to our climate, our utility bills, and our water resources would be borne by the public, especially already vulnerable communities
At the juncture where smart, protective rules matter most, California backed away from key rate-reform and grid-impact measures during the 2025 legislative session. We’re urging state leaders to stand with working Californians by adopting fair, responsible regulations that require data centers to pay for the grid upgrades they drive—lowering costs and strengthening reliability instead of shifting the burden onto households.
Ethan Taswell is a Master of Climate Solutions ‘26 candidate in the Rausser College of Natural Resources. He studies climate policy with a focus on justice and adaptation.
Sources
California Legislative Analyst’s Office. (2025, January). Assessing California’s climate policies: Residential electricity rates in California. https://lao.ca.gov/reports/2025/4950/Residential-Electricity-Rates-01072...
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Cooper, Mathew. “2025 IEPR: PreliminaryData Center Forecast.” California Energy Commission, 13 November 2025. 2025 IEPR- Preliminary Data Center Forecast | DocumentCloud
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Marrinan, Cecilia. "Data Center Boom Risks Health of Already Vulnerable Communities." Tech Policy Press, 12 June 2025, https://www.techpolicy.press/data-center-boom-risks-health-of-already-vu....
Next10. (2025, November 12). An assessment of California data centers’ environmental and public health impacts. https://www.next10.org/publications/data-centers
PitchBook. (2025). PitchBook university rankings 2025. PitchBook Data, Inc. https://pitchbook.com/news/articles/university-rankings-2025-startups-ve...
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Wolverton, Troy. "California data centers concentrated in polluted areas." The San Francisco Examiner, 30 June 2025, https://www.sfexaminer.com/news/technology/california-data-centers-conce....