The U.S. midterm elections yielded mixed signals for the data center industry. Incoming governors in Texas, Ohio and Georgia campaigned on restricting data center construction, while a new Congress could pursue bipartisan permitting reform to accelerate the energy infrastructure needed to serve growing AI electricity demand.
Either way, the potential political risk exposure for the data center industry following this week’s midterm elections is substantial. States where Democrats could pursue restrictions account for roughly 45% of planned U.S. data center capacity, according to Goldman Sachs estimates cited by Reuters. Texas alone represents about 25% of planned capacity.
The results create a more complicated development environment for an industry racing to build AI capacity. State and local governments are demanding greater accountability for electricity costs, infrastructure investments and community impacts. But at the federal level, Wood Mackenzie sees a potential legislative opening to speed approvals for natural gas, transmission and wind projects.
Texas moratorium raises immediate questions
Texas presents the most immediate uncertainty for data center developers. Democrat Gina Hinojosa defeated Republican Gov. Greg Abbott after promising a moratorium on new data center approvals.
In an October 22 video posted to X, Hinojosa said she would impose “a moratorium — a ban — on all data center approvals” until the Legislature passed laws to protect residents.
She wants the pause to remain in place until lawmakers meet in January and establish new safeguards. Hinojosa takes office Jan. 19, 2027.
Her proposals include protecting community water supplies, ending nondisclosure agreements, requiring union labor and ensuring existing electricity customers do not pay higher bills because of data center demand. She also wants to end tax subsidies for the industry.
Hinojosa inherits an existing review of large data center projects. Abbott directed state agencies to examine projects seeking grid connections and restricted certain environmental permitting while reviews proceeded.
The scope of a new moratorium remains unresolved, including how it would treat projects with existing permits, power agreements or construction underway. The incoming administration also must determine which agencies have authority to implement a broader pause.
George Varghese, head of investment at 0G Labs, expects the political response to delay some projects rather than stop the buildout.
“I think there’s a difference between what they campaigned on and what they’re going to govern on,” Varghese said in an interview.
He expects state and local governments to negotiate requirements for developers to cover electricity and water impacts, contribute to local infrastructure and provide more economic benefits to residents.
“It’s more likely the data center rollout will continue,” he said. “It’ll be delayed until they negotiate a lot of these value accrual mechanisms for the average residents of these locations.”
Varghese’s view reflects his investment perspective, but it highlights a central question for developers: whether they can meet new community and infrastructure requirements without making projects uneconomical.
Steven Dickens, CEO and principal analyst at HyperFrame Research, said the greater risk for developers may be delays rather than the direct cost of meeting new requirements.
“Paying a premium for cables, concrete, and grid interconnections stings, but it won’t kill a project. The real nightmare for the industry is bureaucratic inertia,” Dickens said in written comments .
He said AI hardware has a short competitive life, making lengthy approval processes particularly costly for developers.
“The cutting-edge chips powering modern AI have a competitive shelf-life of barely 18 to 24 months,” Dickens wrote. “If a facility gets bogged down in endless environmental challenges, planning appeals, and grid queues, the hardware risks becoming obsolete before anyone even flicks the power switch.”
Ohio and Georgia target development
Ohio’s incoming governor, Democrat Amy Acton, has called for a conditional moratorium on new facilities unless developers meet six requirements: cover 100% of utility costs, use union labor, operate transparently, meet environmental standards, support local communities and bring jobs to former industrial areas.
“Costs are too high, and Ohio families and businesses need protection from data centers driving up costs,” Acton said in a July campaign statement. “If you do not meet these conditions, we do not want you in Ohio.”
The utility-cost requirement remains undefined. A facility’s electricity bill is not necessarily equivalent to the full incremental cost of serving its load, which can include generation, transmission, distribution and reliability investments. The Public Utilities Commission of Ohio will have a central role in any changes to utility rates and cost allocation.
Georgia’s incoming governor, Democrat Keisha Lance Bottoms, called during an October 6 debate for “a pause on the construction of new data centers.” .” She said she wanted to pause construction until the state developed a policy that better served residents.
How Georgia would implement a statewide pause is unclear. Local governments control important aspects of zoning and land use, while state agencies oversee other permitting and infrastructure decisions.
Local votes add to development pressure
The gubernatorial races coincided with widespread local resistance to data center construction and expansion. On November 3, voters in 10 states considered 41 data center-related ballot measures. Ballotpedia reported that voters favored limiting development in 40 of the 41 contests.
Voters approved 27 measures that imposed restrictions or expressed opposition to development. Those included five full bans, 12 partial bans and three six-month moratoriums. Voters also rejected 13 measures that would have supported or facilitated development, including rezoning proposals and nonbinding measures expressing support.
The remaining measure was in Harwood, North Dakota, where voters rejected additional review requirements for certain industrial projects. Six additional data center-related measures had been decided earlier in 2026. All six favored limits on development, bringing the year-to-date total to 46 of 47 measures under Ballotpedia’s broader definition.
The results include both binding restrictions and advisory votes. They do not represent 40 newly enacted bans, but they demonstrate the range of local decisions that can complicate development.
Jennifer Granholm, who served as U.S. energy secretary from 2021 to 2025 and Michigan governor from 2003 to 2011, described the election in a LinkedIn post as another political wake-up call for the industry.
“The days of announcing billions in investment and assuming a grateful community will roll out the red carpet are over,” she wrote.
Granholm argued that developers need to demonstrate direct benefits for nearby residents, including lower utility bills, local jobs, cleaner power and a share of the economic upside. She also said data centers could help finance new generation, storage and grid modernization.
“But only if we change the bargain,” she wrote.
Project economics face closer scrutiny
Neil Osnato, founder of Persistence Analytics Group, said political and permitting risk are becoming development variables that companies must address before selecting sites.
“Developers can no longer treat community acceptance as a public-relations issue that can be addressed after site selection,” Osnato said in written comments . He said opposition can affect whether projects advance, approval timelines and the credibility of development schedules.
He also urged developers and investors to distinguish announced capacity from projects backed by secured customer commitments and deliverable power.
“The question is no longer simply how quickly developers can secure land and announce capacity,” Osnato wrote. “It is whether they can demonstrate that the power, infrastructure, economics, approvals, and community conditions supporting those commitments are durable.”
Congress could pursue faster energy permitting
Democrats won control of both chambers of Congress, according to the Associated Press. The new majority takes office January 3, 2027, but President Donald Trump retains veto authority.
Wood Mackenzie identified permitting reform as the likeliest area for bipartisan energy legislation. In a November 4 analysis, the research firm pointed to the Bipartisan American Affordability and Jobs Act as a potential vehicle for accelerating approvals for natural gas, transmission and wind infrastructure.
The proposed measures include deadlines for federal environmental reviews, protections against permit revocation and limits on litigation after project approvals. Faster permitting could help address infrastructure constraints affecting data center development, including natural gas pipelines and high-voltage transmission.
Wood Mackenzie also identified large-load cost allocation as a likely state-level issue. Federal mandates face legal and political resistance, the firm said, leaving states to determine how data centers pay for grid infrastructure.
That leaves developers facing two separate approval challenges: securing permission to build the data center and securing the energy infrastructure needed to serve it. Faster federal approvals for pipelines and transmission would not resolve the state and local decisions governing whether — and under what conditions — the facilities themselves can be built.
TechTarget has requested comment from the incoming governors’ campaign teams and will update this story with any responses.
