IT Sustainability Think Tank: Rethinking energy, communities and accountability in the AI era

AI’s local footprint

Large datacentres bring real benefits to host communities. They support digital competitiveness of regions by attracting and lowering the barriers for further tech investments, expand local tax bases, and create construction and operations jobs.

But they also concentrate electricity demand, water use, noise and even risk of pollution, including thermal pollution, where heated cooling water is returned to local water systems, altering temperatures and stressing ecosystems.

Communities, utilities, and operators now face a shared planning challenge on how to expand AI infrastructure without shifting costs or environmental burdens onto nearby residents.

This tension is driving new approaches to location and operations. Microsoft’s recently announced Community First AI Infrastructure initiative, explicitly addresses local impact.

 Microsoft committed to paying its full power costs so residential electricity bills do not rise, increasing transparency and replenishment around water use, investing in local jobs and training, and, in some cases, forgoing local property tax incentives. The initiative reflects a broader recognition that community acceptance is becoming a prerequisite for continued expansion.

Understanding local impacts: soft and hard effects

The effects of datacentres on host communities are best understood by separating “soft” socioeconomic impacts from “hard” technical and environmental ones.

Soft impacts shape local economies, public finances, and perceptions of fairness. Because datacentres require large upfront investments in land, buildings, and equipment, they can generate substantial property and business tax revenue. Construction phases often bring short-term job growth, and the presence of advanced digital infrastructure can attract complementary businesses.

However, these benefits are uneven. Once operational, datacentres typically employ relatively few permanent jobs compared to their physical footprint. Large facilities may occupy prime land, raising questions about whether the economic return justifies the scale of development.

In regions facing housing shortages or competing land use priorities, this trade-off becomes especially contentious. Locking large parcels into single-purpose infrastructure also creates long-term opportunity costs that are difficult to reverse.

Hard impacts are more visible. On the positive side, datacentre development frequently brings major energy infrastructure upgrades. Operators often fund or co-fund new substations, transmission lines, fiber networks, roads, and utility connections. These investments modernise local infrastructure and benefit surrounding businesses and residents.

Datacentres also catalyse energy innovation. Their large, predictable electricity demand can justify investments in grid upgrades, renewable generation, and energy storage. Many operators now commit to renewable energy procurement and advanced efficiency measures, including improved cooling and power management, which can strengthen grid resilience over time.

However, the negative hard impacts dominate community debates. Energy consumption is the most prominent concern. Individual datacentres can draw as much power as small cities, and rapid clustering can overwhelm local grids if utility planning lags.

Without careful coordination, residents may face higher electricity costs, reliability issues, or delays in upgrades needed for other economic activity.

Water use is another flashpoint, particularly for facilities relying on water-intensive cooling. In water-stressed regions, large withdrawals can heighten competition with residential, agricultural, and ecological needs.

Even in water-rich areas, perceptions of waste or environmental risk fuels opposition. Facilities using evaporative or hybrid cooling consume water directly, while their electricity use embeds indirect water consumption at power plants.

New guidance from the American Water Works Association (AWWA) addresses this concern by emphasising early, joint planning around reclaimed water, infrastructure capacity, and seasonal constraints.

Quality-of-life impacts also matter. Backup generators and cooling systems can create persistent noise, large windowless buildings may alter neighborhood character, expelled heat can affect local microclimates, and on-site fuel storage raises safety and emergency preparedness questions.

Accountability must be shared and ongoing

An emerging principle is that those who create infrastructure costs should also pay for them. Traditional utility rate-making can shift grid upgrade expenses onto households, prompting growing pushbacks from regulators and communities.

Microsoft’s commitment to prevent electricity cost increases directly addresses this concern and signals a broader shift toward cost causation.

Datacentre operators are primarily responsible for community impacts because they control siting, design, power and water procurement, and operating practices. However, enterprises are secondarily responsible because their AI and cloud workloads drive the demand and must be accountable for efficient, carbon- and water-aware use of compute power.

Together, we must develop a transparent, end‑to‑end chain of accountability that allows communities to see that both operators and enterprise users are acting responsibly.