Massachusetts ties data center permits to clean power, grid costs

How EO 658 works

The electricity must qualify under the state's Clean Energy Standard. By Dec. 31, Massachusetts Department of Environmental Protection (MassDEP) must also establish an alternative payment fee for projects not producing incremental clean electricity. Money collected through that system will go into a Ratepayer Protection Fund to mitigate electricity supply costs for ratepayers, according to EO 658.

For a large data center operator, power procurement becomes another dependency that has to mature alongside the project, Osnato said.

"If you're contemplating a 100 MW, 300 MW or larger campus," he said, "the questions become: What resource backs that consumption? Is it actually new? When does it reach commercial operation? Is it deliverable into the relevant system?"

Those questions can affect financing, scheduling, contracting and site selection before the first server is brought online.

Developers will have to prove where the power comes from

The order builds on a June framework that Massachusetts called "Bring Your Own Clean Energy." The framework said new data centers should supply or directly procure clean-energy generation sufficient to meet 100% of their demand, with the resource on-site, connected or able to deliver into ISO New England, which provides much of the electric power system in New England.

EO 658 directs MassDEP to develop protocols for covered projects above 25 MW. Developers can satisfy the requirement by procuring sufficient incremental new clean electricity generation. EO 658 doesn't specify that the generation must come from a dedicated plant at the data center.

"Massachusetts is not necessarily telling a data center to build a dedicated power plant next to the facility or physically self-supply every hour," Osnato said.

The state still has to set the rules. EO 658 measures the requirement against annual electricity consumption rather than hourly matching of generation and load. A data center could satisfy the annual clean-energy requirement while still relying on the grid for physical capacity and reliability.

The state has yet to determine several specific requirements: What counts as genuinely new generation, when a project is real enough to qualify, what happens if a generation project is delayed, how electricity must be deliverable and how clean-energy attributes will be prevented from being counted twice.

MassDEP also must establish the alternative compliance payment system by Dec. 31. The order doesn't set the payment amount, leaving a key question for developers: whether the fee will function mainly as a fallback or provide a strong financial incentive to secure new generation.

Osnato said it's too early to assume the alternate compliance payment makes the clean-power requirement optional.

Grid costs and project credibility move together

The clean-power requirement is part of a broader effort to keep data center costs from increasing power costs for other electricity customers.

EO 658 directs the Massachusetts Department of Public Utilities (DPU) to continue developing large-load rate schedules designed to prevent other ratepayers from paying for distribution-grid upgrades or associated infrastructure needed to support data center demand.

The order also directs the DPU to establish fees, deposits or other requirements to remove speculative data center projects above 25 MW from utility interconnection queues.

A proposed data center can consume scarce interconnection study resources long before its actual load is certain to materialize.

"If a 25+ MW project must put up fees, deposits or other evidence demonstrating that it's legitimate before consuming utility study and interconnection resources, Massachusetts is implicitly recognizing something the industry is dealing with nationally: Announced load is not necessarily executable load, and executable load is not necessarily durable operating load," Osnato said.

The June Bring Your Own Clean Energy framework also said developers should bear the full cost of energy supply, infrastructure, system upgrades and interconnection required to serve their facilities rather than shifting those costs to other customers.

For operators and their prospective customers, that makes project maturity increasingly important. A large proposed load must be supported by a credible power strategy, financing, interconnection plan and development schedule.

Local approval becomes a permitting prerequisite

EO 658 requires covered projects to demonstrate conformance with the state's data center framework and submit a community benefits agreement before state permitting agencies can issue permits or authorizations.

Healey's administration described the policy more directly: Data centers will need local approval before seeking state permits, and the community benefits agreement must meet state standards. The order also prohibits state permitting agencies from using nondisclosure agreements with data center projects, except where otherwise provided by law.

The order allows the secretaries of energy, environmental affairs and economic development to jointly waive the requirements for a project under specified circumstances, including certain projects tied to accredited colleges or universities, medical care and state-sponsored programs.

The environmental requirements extend beyond electricity. EO 658 directs MassDEP to establish protocols addressing water quality and quantity for covered data centers. It also requires Mass DEP to evaluate data center greenhouse-gas emissions against the state's Clean Energy and Climate Plan.

Markley Group, a data center operator that has operated in Massachusetts for more than three decades, said it supports a statewide framework with consistent development standards.

"We support policies that bring clarity and consistency to how data centers are permitted and developed in the Commonwealth," Jeff Markley, the company's founder and CEO, said in a statement to TechTarget. The company expects to balance growing customer needs with state and local requirements, Markley said. The company did not specifically address the new clean-generation requirement.

Former U.S. Energy Secretary Jennifer Granholm also praised the framework in a LinkedIn post this week, calling it "one of the strongest frameworks" she has seen for supporting AI's economic opportunity while protecting communities and ratepayers.

Granholm highlighted the clean-energy requirement, developer responsibility for grid infrastructure, water and public-health protections, transparency and community benefits agreements. She also praised provisions encouraging data centers to use flexibility, storage, virtual power plants and other tools that can help the grid.

"Gov. Healey deserves real credit for this," Granholm wrote. "She isn't reflexively saying 'no' to data centers, and she isn't writing them a blank check either."

For Osnato, predictable rules will help developers determine whether a project can move forward.

"If a developer knows the evidence standard, cost responsibility and compliance path early enough, it can price them into the project," he said. "Uncertainty late in development is much harder to absorb."

For projects with committed customers, financing and a mature power strategy, Massachusetts' requirements might be manageable. Projects whose megawatt requirements remain primarily a development forecast will have a harder time turning an announced campus into a permitted load.

Shane Snider is a senior news writer at TechTarget, covering AI infrastructure, hyperscale data centers, cloud platforms, and the power and energy systems driving modern compute expansion. You can reach Shane at [email protected] or on LinkedIn.