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The rapid growth of data centers is transforming small towns and power networks more quickly than local governments are prepared for. Data centers worldwide already consume substantial electricity, and the industry expects this consumption to double over the next 10 years. This jump is so big that a single new data center can have as significant an impact on a local power grid as a big steel factory used to. This prompts consideration of the role data centers will play in communities. Will they be like factories in the past, providing many jobs and helping local businesses prosper? Or will they consume substantial power with only a few jobs, giving little back to the community? Right now, they'll mostly do the latter. Whether they become a positive force depends on the rules and deals made, such as tax breaks, and on whether they have to build their own power or help the community through power programs. Without such agreements, the idea of data centers as 21st-century factories falls apart, leading to a short-lived construction boom but long-term costs for local communities.

Why Data Centers Seem Like Factories, But Aren't

At first glance, data centers seem like factories. They need land, roads, cooling systems, and, most importantly, a vast amount of reliable power. They look like a factory campus, with new buildings, trucks, contractors, and money coming into the town through construction and property taxes. Local officials often sell the project as a great thing, such as quick construction jobs, higher tax income, and the chance to attract more tech companies. These short-term benefits are real. Construction can employ hundreds or thousands of workers for months or years. Local businesses also get a boost. Town budgets see a quick increase in money from permits and payments. This is why people compare them to factories: large, visible employers that shape local life.

However, the similarities end once the data centers are operational. Unlike factories, which require large numbers of local workers for daily operations, modern data centers are largely automated and managed remotely. Once built, the number of permanent employees is usually small compared to the site's value and the energy it consumes. Studies show a trend: large infrastructure and energy needs, but few jobs. This means the old idea that factories create local jobs and help local businesses doesn't necessarily hold for data centers. The lesson is clear: if a town thinks a data center is just like a factory, it will likely end up with a big power bill and only a few jobs, not the widespread benefits they hoped for.

The Hidden Cost of Energy in the Data Center Boom

Power is key here. Data centers consume a lot of electricity, and experts say this use will continue to grow. This increase has a significant local impact because upgrades to the power grid and backup power systems cost money. Utility companies and data center developers have to decide who bears the cost. If these costs are spread out to everyone through higher rates, local people could end up paying more for power while the data center gets cheap, reliable energy. So, the benefit of having a data center becomes a cost for the public if deals aren't made properly.

This isn't just a hypothetical situation. In areas with many data centers, utility companies have warned that these new power demands require new power stations, new transmission lines, or even backup fossil-fuel power plants. These investments are usually paid for through rate increases that affect every home and business. People then start to complain because they see new data centers and end up with higher bills. This can cause political problems. It goes against expectations because, for many small towns, it reverses the social contract. The solution is to change the agreements, such as requiring data centers to use community-benefiting power sources, demanding lower rates for residents, or linking grid upgrades to community pricing programs. Otherwise, the data center boom becomes an energy parasite, consuming significant power, making it less affordable for locals, and providing few jobs.

The Empty Promise of Jobs and Taxes

Claims about job creation are a big reason why many towns approve data center projects. The industry often gives projections that include jobs in the supply chain, and some studies report numbers that look amazing at first. But these estimates often include jobs across the entire country and one-time construction jobs. The number of direct, permanent employees at a data center is often small, ranging from a few dozen to a couple of hundred, not thousands. This is important because communities make decisions about schools and zoning based on expectations of lasting jobs and tax income.

Audits and state studies show that this isn't always the case. These reviews show that while building data centers creates short-term jobs and increases local income, the ongoing operations don't create as many local jobs as promised. Also, tax breaks can reduce financial benefits because when data centers receive significant tax breaks to locate in an area, long-term income may decline, and local budgets must cover the costs of infrastructure and services. Critics say this is a bad deal for the public, while supporters argue that the benefits to the national supply chain and corporate tax incentives make the incentives worth it. The best way to address this is to count direct, permanent jobs separately from construction jobs and to create incentive packages that increase as the data center provides more permanent benefits to the community. If this isn't done, the data center boom will provide only a short-term boost from construction and a small amount of long-lasting benefits, which is not as good as the mass employment factories once offered.

A Fair Deal: New Power Sources and Community Power

If data centers aren't going to create many local jobs, then communities need to ask for something different: shared, affordable, and reliable energy. Small, compact reactors and other local power options are becoming viable, and major cloud providers have announced deals to pair data centers with advanced nuclear power. These arrangements can protect power networks, reduce costs for local customers, and generate revenue for public services. The important thing is to require every new data center to demonstrate how it will benefit the community by reducing power consumption and helping lower household rates.

This can be done in a few practical ways, such as a small modular reactor owned by the utility company, which can provide cheaper power to residents. Another idea is a community benefit agreement that locks in long-term payments for a data center to help low-income households with their electricity bills. A third option is to sell a percentage of off-peak power back to local businesses at cost. Each of these ideas requires explicit guidelines and independent audits to ensure fairness. The goal is not to stop data centers, but to ensure their massive energy use benefits the local community.

Making the Data Center Boom Work for the People

The data center boom won't automatically bring widespread benefits. It usually involves significant investment, short-term construction jobs, and a few long-term jobs, while also putting pressure on energy systems and making it harder for locals to afford power. Communities can either accept this or create a different agreement that includes requiring data centers to commit to local power generation and community-priced electricity. These aren't just ideas; some companies are already testing ways to pair data centers with new power sources. If these ideas are implemented with public oversight and community benefits, they could create something closer to the role factories once played. The test for the following decisions about where to put data centers is whether a community can negotiate a deal that turns the power used into local wealth rather than local costs. If not, then the towns that host these data centers will have traded a short boom for a long-term problem. It's time for the data center boom to pay off for the people it affects.

The views expressed in this article are those of the author(s) and do not necessarily reflect the official position of the Swiss Institute of Artificial Intelligence (SIAI) or its affiliates.

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