By Sarah Montalbano
Legislators in Denver are off to the races this session with a heavy-handed bill that will chase data center investment out of Colorado.
The bill, HB26-1030, creates a new bureaucracy, imposes burdensome labor and workforce requirements, and requires data centers to use 100% clean energy.
If lawmakers believe data centers are “essential critical infrastructure,” as the bill claims, then the legislature must allow them to use whatever electricity sources they need. If the goal is to drive developers to Wyoming, then lawmakers should continue down this path.
The worst part of HB 1030 is its requirement that data centers must be powered with 100% renewable and clean energy resources after 2040. Enterprise-level data centers need an uptime of 99.995 percent, which means being offline for only 26 minutes per year. They’ll prefer dispatchable power on demand, 24/7/365, and they need backup systems that will work no matter what the weather.
Before 2039, data centers must be powered with a 3-to-1 ratio of nameplate capacity between “clean” and thermal resources. That means that, for every 1 MW in nameplate capacity of natural gas or coal-fired energy, there will need to be 3 MW of wind, solar, or other clean energy sources.
The problem is that nameplate capacity means little next to actual energy delivered. In 2023, natural gas combined-cycle plants delivered reliable, dispatchable power 49.5 percent of the time, and can ramp up to meet energy needs. Solar photovoltaics ran at a capacity factor of only 24.7 percent, while wind turbines ran at 35.7 percent capacity factor. Batteries are worse because they don’t generate energy, they can only store it. Nameplate capacity doesn’t reflect the real needs of facilities that require constant, reliable power.
What’s more meaningful is accredited capacity, which the bill references once — requiring “sufficient accredited capacity” for reliability — but then calculates required ratios based on nameplate. This is like judging a car’s usefulness by its top speed rather than its actual fuel efficiency and reliability.
After 2040, HB 1030 will not allow fossil-fueled backup generators at all. Before 2039, data centers will need to build four to six times overcapacity to achieve reliable power from unreliable sources, massively increasing developer capital costs. The bill’s incentives for battery storage add complexity without adding generation, waste energy through round-trip efficiency losses, and still need natural gas for actual power generation when batteries run dry.
The bill is also a litigation nightmare. What qualifies as “standalone” battery systems isn’t defined, but the 2x multiplier is worth hundreds of millions to developers, which means projects will fight for the multiplier. Ditto for the measurement of hybrid storage exceeding solar capacity, which has 1.25x multipliers on the line.
The ambiguity most likely to hit ratepayers is the “fair share” of costs that can be assigned to utilities, which subsidizes the data center’s mandated overcapacity. That’s subjective, and ratepayers will still have to pay for whatever “partial reimbursement” is deemed fair, effectively forcing Colorado families and businesses to subsidize the massive excess generating capacity that data centers would be required to build under this mandate.
And if companies can’t comply, or decide it’s more economical to not comply, they can gain certification by funding “advanced clean carbon technologies via either a clean transition tariff or through utility-administrated funding programs” instead. That’s just a backdoor carbon offset requirement for the data center industry, letting companies buy environmental indulgences that helps government fund its favorite technologies.
Compliance with the law would be enough to steer developers away. HB 1030 creates a nine-member “data center development authority” within the Colorado Office of Economic Development with the power to certify data centers, making them eligible for a 100% state sales tax and use exemption.
It’s telling that the authority would have two appointees from the Governor, the Director of the Colorado Energy Office, a water management expert and a clean energy expert, and a trade worker representative and a contractors’ representative – but only two members with “experience in data center development.” Developers would have to submit annual compliance reports to maintain their certification, with the authority able to revoke certification for “failing to maintain compliance” and jeopardize billion-dollar projects.
Data centers would also have to comply with labor and prevailing wage requirements to become certified. This is a page right out of the Biden administration’s playbook, which attached similar wage requirements to infrastructure buildout in the Infrastructure Investment and Jobs Act (IIJA), which managed to deploy only eight EV chargers in 2.5 years. HB 1030’s requirements also subject private companies building private facilities to the same public works wage requirements as public projects.
Confused? Data center companies will be, too. The only companies that will be able to afford the bureaucracy and compliance headaches are hyperscalers owned by Amazon, Meta, Microsoft, and other multi-billion-dollar companies. No doubt complying with HB 1030 is a small price to pay to drive out smaller competitors.
The sponsors of HB 1030 say the bill is intended to attract data centers, but it’s more likely to deter them instead. Colorado’s neighbors, like Utah and Wyoming, aren’t imposing onerous requirements — Utah is actually giving them the chance to source their own generation. If Colorado wants to support the industry and bring jobs and tax revenue to the state, it should let data centers use the reliable power sources they need to serve their customers.
Sarah Montalbano is a policy analyst with Independence Institute’s Energy and Environmental Policy Center and a policy analyst at Always On Energy Research.
