Earth to Government: When Red Tape Sends Innovation to the Final Frontier
Elon Musk thinks he might have a solution to the ongoing clash between red tape and innovation: space. Earlier this month, the entrepreneur known for Tesla and his acquisition of X explained that he wants to launch solar powered data centers into orbit and, in doing so, sidestep the regulations and prohibitions that accompany data center construction and use.
Musk’s approach is certainly unique, but his frustrations are not. Those who rely on data centers the most, including hospitals, banks, AI, and research companies—as well as small communities eager for the economic boost that accompanies construction—are met with a collection of bureaucratic obstacles.
Data center skeptics create a false dichotomy between a robust digital infrastructure and a functioning grid with affordable power. This fallacy has far-reaching consequences.
Last month, the New Orleans city council voted to instate a one-year moratorium on data center developments. This regulatory backlash is not unique to Louisiana, though it is particularly concerning for a state that has been steadily attracting technology companies, investment, and innovators. Moratoria have been introduced across the country, with New York considering a three-year, state-wide ban.
Localized resistance to data centers is converging with a growing global demand. The proliferation of AI and leaps and bounds of innovation have resulted in a need for facilities to store and manage the accompanying data. The Goldwater Institute’s report on data centers asks that states acknowledge the realities of the digital age and respond accordingly, with the interests of their communities in mind.
Efforts to block or constrain data centers result in reduced access and higher prices for the very consumers such policies claim to protect. History testifies to the consequences of this pattern. Every major infrastructure expansion—from railroads to electrification to modern logistics—faced local resistance rooted in disruption and uncertainty. Demand persisted regardless, and investment simply relocated. Communities that said no paid more later.
Opportunities abound for lawmakers to embrace policies that ensure their states are prepared to meet the demands of data centers and leverage their presence to full potential. One promising approach is consumer regulated energy (CRE), wherein private companies build and operate electricity systems not connected to the main grid. By enabling competition between electricity providers, CRE promotes innovation and reduces risk to the main power grid and those who rely upon it.
Melissa Landry, director of the Pelican Institute’s Center for Energy Policy, makes the case for this free market solution in Louisiana’s Grid Gambit: Is it Time to Let Private Power Play? and concludes, “Louisiana has never been shy about making bold bets when the prize is big enough. Attracting the next wave of energy infrastructure investment, shielding families from rate increases and cost overruns, and proving that entrepreneurship, free markets and consumer choice work—even in electricity—seems prize enough.”
Data centers are a feature of modernity and a necessary component in securing America’s national security—and its economic and technological leadership. Innovators should not have to flee to space in order to avoid a headache of red tape and regulations. It’s time to be realistic about the promise of data centers and the policies that will make them work.
Links to Learn More
Data Centers: a Free Market Model for the Digital Future – Goldwater Institute
