Data centers guzzle Arizona's water and power. We calculated how much

Arizona residents, including people in the Tucson area, could be asked to help power the state’s expanding data center industry through rooftop solar, home batteries, heat pumps and energy efficiency upgrades. A new proposal argues that technology companies should redirect some of the money they would otherwise spend on private power plants toward subsidizing those household improvements. The idea could reduce pressure on utilities and limit the need for new fossil fuel plants, but experts caution that coordinating thousands of homes to serve data centers would be difficult, slow and untested at the necessary scale.

The debate matters as artificial intelligence companies and other technology firms seek enormous amounts of electricity for new facilities. Arizona Public Service has about 10 gigawatts of maximum supply capacity, yet data centers have submitted requests totaling roughly 30 gigawatts. The industry’s growth is expected to more than double current energy demand by the end of 2027. Utilities nationwide could spend $1.4 trillion on new power generation by 2030 if they respond primarily by building additional plants and transmission lines.

Those pressures are already fueling opposition to data center projects. Residents have raised concerns about higher household electricity bills, air pollution, noise and the prospect of new fossil fuel generation near their homes. In Surprise, a sign outside a home protested a proposed power plant intended to serve a data center. Nationally, a recent Gallup poll found that seven in 10 Americans oppose having a data center in their neighborhood. As companies increasingly pursue a “bring your own power” approach to avoid utility delays, some projects are considering their own gas turbines and other on site generation. SpaceX, for example, has committed $2.8 billion to purchase gas turbines for artificial intelligence hubs.

The report from Rewiring America, a nonprofit focused on electrification, proposes a different arrangement. Rather than spending that money on private generation, data center developers could help pay for residential solar panels, battery storage, heat pumps and efficiency improvements, especially for low income households. Those systems could reduce a home’s demand, produce electricity for the grid and store power for periods of heavy use. The report’s cofounder and chief executive, Ari Matusiak, described the concept as a way for data centers to obtain power from households rather than treating residents only as customers affected by the expansion.

The approach would rely on virtual power plants. These systems combine many small resources, such as rooftop solar, batteries, smart thermostats, electric vehicles and flexible appliances, and manage them as a coordinated network. During heat waves or winter cold snaps, a utility could draw on stored household electricity or temporarily adjust energy use to reduce strain. By pooling many small changes, a virtual power plant can provide some of the capacity associated with a traditional power plant without constructing one large facility.

Arizona already has a limited example through Arizona Public Service’s Cool Rewards program. Participants receive compensation for allowing the utility to adjust their air conditioning during the hottest summer periods, shifting some electricity use away from peak hours. In 2023, the program created 145 megawatts of grid capacity by moving cooling demand to less busy times. The proposal would expand that basic concept dramatically by pairing demand reduction with new residential generation and storage.

Rewiring America estimates that if every single family home in the country installed solar panels, a battery and a heat pump to replace inefficient air conditioning, the combined changes would create 140 gigawatts of grid capacity. That would exceed the projected electricity demand from all U.S. data centers expected to come online in 2035. The report says data center spending on on site power could instead help electrify 19 million American households that might otherwise be unable to afford the upgrades. In Arizona, subsidies, utility investment and streamlined regulations could nearly multiply the number of energy efficient, electrified homes by ten, while producing an estimated average of $28,600 in lifetime energy savings per household.

The proposal faces major practical and financial questions. A single data center can use as much electricity as more than 100,000 homes, and no decentralized power system has ever been asked to reliably meet that kind of concentrated demand. Existing demand response programs generally ask customers to reduce usage for only a few hours at a time. Asking households to make permanent changes, or to provide a dependable supply for a data center, would require compensation rules that have not yet been established. Kelly Barr of Arizona State University’s Global Futures Lab questioned whether homeowners would accept long term control over their thermostats in exchange for payment.

Gary Dirks, a senior director at the same laboratory who was not involved in the report, said the strategy is worthwhile but would not be simple or fast. Utilities and developers would need to coordinate thousands of homeowners, install large numbers of solar systems, batteries and heat pumps, and ensure there are enough trained workers to complete the work. Residents would also need the ability to leave the program, which could make it harder to guarantee the steady electricity supply data centers require. Even supporters acknowledge that distributed resources are unlikely to eliminate the need for new utility scale generation. For Tucson and the rest of Arizona, the proposal offers a possible way to make residents partners in the data center buildout, but it does not remove the central challenge of finding enough affordable, reliable power for an industry expanding faster than the grid.