As demand for artificial intelligence, cloud computing, and digital infrastructure continues to grow, Illinois lawmakers are considering legislation that could significantly impact data center development in the state. The proposed POWER Act (HB5513[i] and SB4016[ii]), short for the Protecting Our Water, Energy, and Ratepayers Act, seeks to address concerns about the energy and water demands of large-scale data centers.
If enacted, the POWER Act could affect a wide range of stakeholders, including real estate developers, technology companies, utilities, investors, municipalities, and businesses involved in infrastructure and industrial development.
Background: Data Center Growth in Illinois
Illinois has become an increasingly attractive market for data center development in recent years, aided in part by favorable tax incentives and the state’s central geographic location. At the same time, the rapid growth of AI technologies and cloud-based services has intensified concerns regarding the strain hyperscale data centers may place on electrical grids, water resources, and surrounding communities.
Supporters of the proposed legislation argue additional oversight is necessary to ensure these facilities don’t shift costs to Illinois residents. Opponents, however, contend that increased regulation could discourage investment and reduce Illinois’ competitiveness in attracting large-scale technology projects.
Key Provisions of the Proposed POWER Act
Although the POWER Act remains under consideration and subject to change, the current proposal includes several key components aimed at regulating the environmental and infrastructure impacts of new data centers.
Energy Use and Infrastructure Cost Requirements
The POWER Act would require some new data centers to bear the costs associated with the infrastructure necessary to support their energy demands. The proposal is intended to prevent Illinois residents from absorbing costs related to transmission or grid upgrades and increased electricity use.
The legislation also contemplates renewable energy procurement requirements, additional oversight relating to grid reliability, and long-term energy planning. For developers and operators, these proposals could increase upfront development costs and require more extensive coordination with utilities and energy providers during project planning.
Water Use and Environmental Compliance Requirements
The POWER Act would also impose reporting obligations relating to water use and discharge. The legislation may require AI data to obtain permits and comply with additional environmental standards designed to address concerns surrounding water consumption and sustainability.
Environmental review and permitting considerations will likely become increasingly significant during site selection and development as hyperscale data centers can consume substantial quantities of water for cooling.
Community Impact and Public Benefit Provisions
The proposed law further includes measures to address community impacts associated with large-scale infrastructure projects. Among other things, the legislation contemplates fees and funding mechanisms designed to support utility affordability programs, infrastructure improvements, and environmental monitoring initiatives.
These provisions may lead to additional negotiations between developers, municipalities, utilities, and local stakeholders as projects move through the approval process.
Current Status of the POWER Act
As of May 2026, the POWER Act remains pending before the Illinois General Assembly. While the legislation has not yet been enacted, it reflects a broader national trend toward increased scrutiny of the environmental and infrastructure impacts associated with large-scale data centers and AI-related development.
Given the growing demand for digital infrastructure, stakeholders should continue monitoring legislative developments closely, particularly as lawmakers, utilities, environmental groups, and industry representatives negotiate the bill’s scope and implementation.
Potential Impacts on Data Center Developers and Businesses
If enacted, the POWER Act could affect multiple aspects of data center development and operations in Illinois, including site selection, permitting, infrastructure planning, environmental compliance, operational costs, and long-term investment strategy.
Developers may need to place greater emphasis on:
- utility capacity and transmission access
- water availability and infrastructure
- local permitting requirements
- environmental review considerations
- community engagement strategies
These factors could influence site selection decisions, development timelines, and overall project feasibility.
Additional reporting, permitting, and infrastructure obligations could increase both development and operational costs for data center operators and related businesses. Companies pursuing projects in Illinois may need to account for evolving regulatory requirements earlier in the planning process. Rather than navigating the unique requirements of different municipalities and other smaller units of government, a uniform set of requirements and guidelines could benefit developers and investors,.
Implications for Local Governments
The proposed POWER Act may also have significant implications for municipalities evaluating existing or future data center developments.
For smaller municipalities with limited resources or technical expertise, a statewide regulatory framework could provide guidance and consistency when addressing increasingly complex infrastructure projects involving substantial energy demands, water use, and environmental considerations. Uniform statewide standards may help local governments evaluate projects more efficiently and establish clearer expectations for developers and operators.
At the same time, municipalities that have already invested significant resources into developing local ordinances, zoning regulations, and permitting frameworks may view statewide regulation differently. Questions may arise regarding the extent to which local governments will retain authority to impose additional requirements beyond those established under state law.
Although the current proposal does not appear to fully preempt municipal regulation, local governments will likely continue to play a significant role in land use approvals, zoning determinations, infrastructure planning, and permitting oversight. As a result, developers and operators may still need to navigate varying local requirements relating to issues such as noise, traffic, landscaping, emergency services, water infrastructure, and community impacts.
Accordingly, municipalities, developers, and investors alike should continue monitoring whether future versions of the legislation include additional provisions addressing local regulatory authority or potential preemption issues.
Regulatory Outlook
Although the final form of the POWER Act remains uncertain, the proposal highlights the increasing intersection of technology development, environmental regulation, energy policy, commercial real estate, as well as their impact on public policy concerns with AI data centers.
Businesses involved in data center development or infrastructure-intensive projects should continue evaluating how potential regulatory changes could affect project planning, permitting, financing, and long-term operations in Illinois. For now, stakeholders should remain attentive to further legislative activity and consider proactively assessing potential energy, water, and environmental compliance considerations associated with future projects.
[i] HB5513: https://www.ilga.gov/Legislation/BillStatus?GAID=18&DocNum=5513&DocTypeID=HB&LegId=0&SessionID=114
[ii] SB4016: https://www.ilga.gov/Legislation/BillStatus?DocNum=4016&GAID=18&DocTypeID=SB&SessionID=114&GA=104