Denver is poised to halt the approval of new data centers as concerns mount over their substantial energy and water consumption, as well as the tax breaks offered to attract the booming industry. The proposed moratorium, announced Tuesday, reflects growing public and political pressure to address the environmental impact and resource strain caused by the influx of AI-driven data storage facilities.
The move comes as Colorado grapples with a drier-than-normal winter and increasing demand on its already stressed water resources. Data centers, which require significant amounts of electricity and water for cooling, have become a focal point of criticism, particularly as residents question whether the economic benefits outweigh the environmental costs. The debate centers on whether the tax incentives granted to these companies – designed to lure them to the state – are justified given the strain they place on local infrastructure and the environment.
Denver Mayor Mike Johnston is seeking the moratorium, citing the need for a comprehensive review of the city’s data center policies. “We need to pause and assess the long-term impacts of these facilities on our community,” Johnston stated, according to reporting from Westword. “This isn’t about stopping growth, it’s about ensuring that growth is sustainable and benefits all Denver residents.”
Growing Concerns Over Resource Use
The proposed moratorium follows increasing scrutiny of a planned data center that could consume more power than Denver International Airport (DIA). Denver7 reported that neighbors have expressed worries about potential increases in their power and water bills as a result of the facility’s demands. The facility’s potential energy usage has sparked a wider debate about the sustainability of attracting data centers without adequate infrastructure planning.
The issue extends beyond Denver. Colorado Public Radio noted the pause in AI data centers as part of a broader overview of Colorado’s political landscape on February 24, 2026. The state is facing a confluence of challenges, including the upcoming midterm elections, the return of Olympians, and the ongoing need for water conservation strategies.
Economic Benefits vs. Environmental Costs
Proponents of data centers argue they bring significant economic benefits, including job creation and increased tax revenue. Still, critics contend that the tax breaks offered to these companies often outweigh the long-term economic gains, especially when considering the environmental costs. The debate as well highlights the growing demand for data processing power driven by the rise of artificial intelligence (AI) and the need for sustainable solutions to meet that demand.
The moratorium is expected to allow Denver officials to develop a more comprehensive set of regulations governing data center development, potentially including stricter energy efficiency standards, water usage limits, and requirements for renewable energy sources. The city is also exploring options for incentivizing data centers to locate in areas with existing infrastructure capacity and lower environmental impact.
Impact on Energy Vault
The pause in data center approvals could indirectly impact companies like Energy Vault, which benefits from the increased energy demands of these facilities. The Los Angeles Business Journal recently reported that data centers are boosting Energy Vault’s business, highlighting the interconnectedness of the tech and energy sectors.
The moratorium is currently under consideration by the Denver City Council and is expected to be voted on in the coming weeks. If approved, it would remain in effect until the city can establish a new framework for evaluating and approving data center projects. The outcome of this debate will likely set a precedent for other cities and states grappling with the challenges and opportunities presented by the rapidly growing data center industry.
What comes next will depend on the City Council’s decision and the subsequent development of new regulations. Denver residents and stakeholders will be closely watching to see how the city balances economic development with environmental sustainability in the age of AI. Share your thoughts in the comments below.
