2026.09.23 | GP | Power | DC Power: Community Pushback

Purchases?

Associated:

BE

GEV

CAT

ENR:GR

CMI

GNRC

7011:JP

Viewpoint:

Customer

Moderator: Jay Malikowski (JM)

| Sep 23, 2026 | 40 Min Read

Joe Imparato (JI), Director - Critical Development Group

SU MMARY

Overview

The discussion focused on the data center power industry, particularly the challenges and implications of community pushback on power equipment purchases. The expert, a seasoned consultant in data center development, provided insights into the regulatory and logistical hurdles faced by the industry. The conversation touched on recent regulatory actions, such as the Texas Governor's halt on state permits for new data centers, and the broader implications for data center development.

Key Insights

The expert emphasized that the regulatory challenges in data center development, such as power procurement and environmental permitting, are longstanding issues. The recent regulatory actions are seen as reiterations of existing processes rather than new obstacles. Community opposition to data centers is multifaceted, involving concerns about zoning, noise, water usage, and grid reliability. These factors can lead to project delays, increased costs, or outright halts. The demand for power equipment remains strong despite regulatory pauses, with significant lead times for electrical gear and generators due to high demand.

Competitive Landscape

Aspect

Positive Aspects

Negative Aspects

Regulatory Environment

Reinforces existing processes

Can lead to delays and increased costs

Community Opposition

Can lead to clearer guidelines post- moratorium

Causes delays, increased costs, and project halts

Power Equipment Demand

High demand ensures robust market

Long lead times due to high demand

Behind-the-Meter Solutions

Increasingly favorable due to grid constraints

Complex and costly to implement

Quantitative Insights

Metric

Insight

Electrical Gear Lead Time

Up to 100 weeks

Project Moratoriums

12 to 18 months for regulatory review

Conclusion

The data center power industry is navigating complex regulatory and community landscapes, with significant demand for power equipment despite these challenges. The expert suggests that while current regulatory actions may seem disruptive, they largely reinforce existing processes and highlight the need for careful planning and compliance in data center development.

JM: Jay Malikowski with Guidepoint Insights. Thanks for joining us for a discussion today on the data center power industry where the community pushback might impact power equipment purchases. If you have any questions during the call, email those over to ask@guidepoint.com, again, ask@guidepoint.com. With that, I'm very pleased today to be joined by Joe Imparato. Joe, thanks for joining us. It's a pleasure to speak with you. Could you introduce yourself to the audience and tell them briefly about your background in the space? Thanks.

JI: Yeah, that sounds great, Jay. Nice to meet everybody. My name is Joe Imparato. I am the owner-founder of CDG, Critical Development Group. We're a small consulting and management firm that manages data center, life science, pharmaceutical manufacturing, and advanced manufacturing projects. We do advisory consulting. We do project management and owner's rep work. My background is way back. I actually worked in data centers on the construction side. They're very different back then than what they are now. I worked for BioMed Realty doing development in their life science and pharmaceutical manufacturing group, doing development, permitting, entitlements. And then after that, I was at GI Partners. I ran the development group there for a number of years. GI Partners is really the original investor in data centers as an asset class. Almost 25 years ago, they effectively started buying these things. They didn't really call them data centers back then, but they started buying them up in the wake of the dot-com bubble bursting. They took and piled them together and some of them out of bankruptcy and then they took it public as Digital Realty Trust, the largest publicly traded data center REIT. So they've been investing in that space for a long time, and I worked with them for a long time. So really my background is on all things development, permitting, power procurement. Spend most of my days working with utility companies, supporting groups to procure power, overseeing design, permitting, and construction of data centers, and we've worked on projects that are as small as a single-floor telecom center with 1,000 amps of power to working on multiple gigawatt-sized campuses all over the country. And so that's really our background. We sort of work on all sides of the market. We work directly with the hyperscalers, with co-location operators, and with investors, asset managers as well. So great to meet you all.

JM: Great. Joe, appreciate that intro. And just to confirm, we won't talk about anything confidential or proprietary, nor will we discuss stock prices during today's call.

JI: That's correct. Yep.

JM: Great. So look, yesterday, as I know clients are aware, the Texas Governor Greg Abbott halted all state permits for new data centers. A lot of things out there. How do you think this might impact data center development? How disruptive could it actually be?

JI: Yeah, so there's a number of things that are working here. And before you get into what Abbott had to do, there are just natural constraints on development of data centers. The biggest one that everyone knows about is power procurement. There's only so much, not only generation, but the infrastructure to move electrons from the point of generation to these data centers and so that's already there. The amount of water and there's a little bit of a misnomer on water usage but you do need to get water to fill these things. A lot of times it's closed loop, but that's something you've got to solve for the construction lead times. There's so many things naturally that sort of stand in the way of building a data center tomorrow. And that has always required some type of permitting process review just to determine can these resources actually support these data centers that are being proposed. So I think what Abbott has done is kind of said something that's sort of already been in place. They're saying they're pausing environmental

permits subject to review and things like that. I think there's a few reasons that they can say that. 1 is they've got to do it anyways. You can't just stand up a data center, connect to the grid and off you go. You've got to go through extensive engineering studies. And so with them saying there's a pause on this, I mean, unless it's an indefinite pause, and I don't believe that it will be, but it will have to be something where applications have to run through ERCOT, through water resource planning that I think the Texas Water Development Board was what I saw. They have to do an audit. So it's something they have to do anyways. And I think Abbott is just sort of stating it there, and I think there is, and this is purely opinion, data centers are not polling well, they are not popular, and it is easy to sort of state something that you've got to do anyways and also kind of have it speak to the concerns that are out there in the communities and with constituents. So I think, I don't think it means that they are opposed to it. I think it just naturally has to go through this process anyways. They have to determine if there is sufficient water, power, etc. So even if they didn't issue this, the data center developers still have to go through this process anyways. And so I think this doesn't necessarily change what is already a known challenge to development, but it's just, I wouldn't call it grandstanding, but it's just sort of stating the obvious. So the challenges for development to your question, Jay, I think are already there. And so I don't think this changes anything from the day before they announced it.

JM: Interesting. So it's more of a, it sounds like evidence reminding voters and constituents that these regulatory guidelines are in place and need to be followed and they will not be skirted. And if they are skirted, the projects will be halted, but your contention is this is nothing new, sounds like.

JI: Yeah, exactly. And so let's take the biggest factor in there. ERCOT has to complete an audit. To be honest, an audit consists of: do we have the transmission capacity? And I don't know exactly what the audit is, so I can't speak to what it is, but I assume that it is, do we have the transmission to power all these requests and do we have the generation and is the grid... how are we protecting the grid? How are we protecting ourselves from a capital standpoint, meaning if we build out all this stuff and suddenly data centers go away, they have to address all those concerns. How is it paid for? All the things they've got to do anyways is effectively what the audit is going to do. It's just such a frenzied demand that, and rightly so, they have to figure it out. They can't just say yes to every application and all that. They've got to study it. And this isn't unique to Texas. This is every utility company has to do some form of load study, interconnect engineering studies. So you've got to do it anyways. Now, I would say that if it's just a flat indefinite stopping of all permits, well, that's an issue, but I'll be honest, I don't know if they put a time frame on it. That's a different story, but I would suspect that they're saying we're stopping this until we do the audit and then the audit is going to reveal the constraints, which they kind of already know there are, and then they'll have to say, okay, are we restarting the issuance of permits or is the issuance of permits subject to X, Y, Z, which we have discovered from this audit, meaning if it's going to take us a certain amount of time to build up this infrastructure, is that the caveat to issuing it that you'll get your permit, but your power is likely not delivered for some number of years? What other regulations do they put in? Do they require load shedding, different things like that. I'm speculating a bit, but I'm sort of saying what the practical results of this audit would be. And so, unless everyone is still just opposed to data centers and they say, OK, we've done the audit, we've determined what needs to... what caveats come with the issuance of permits. If they just refuse to issue permits, that's certainly, but that's a whole different can of worms.

JM: Yeah, and it sounds like they're pausing for the audit of the waitlist. So assuming the waitlist gets audited, then it can go back to normal, which is following the process.

JI: Yeah, exactly. You do the audit and you say, okay, here's the transmission that needs to be built out. Here's the grid infrastructure that needs to be planned and eventually installed. And then also, the regulatory side of it in terms of rate settings and requirements for large load developers for deposits, things like that, how is this getting paid for? They need to just sort all of that out. And at the end of the audit, if they understand what that is, they can either A, and again, this is speculation, they can say, okay, we're going to issue your permit, but it's subject to all these things that are caught in the Public Utilities Commission, et cetera, require, and then you can go ahead. That sort of seems like a

rational thing; they've analyzed the problem and they'll issue permits subject to these contingencies. That seems a rational way, but the irrational way would be like, okay, we figured out what the problem is and what the contingencies are, but are they really going to come back and say we're just refusing to build any more data centers? That may be lower probability of that happening. Yeah.

JM: So, Joe, when you and I talked before, you said you're out on the front lines talking with community leaders like mayors and the community overall. For the industry, in your opinion, is community opposition stopping projects or is it just adding costs, some kind of mitigation requirements or is it creating delays? So I guess what's happening? What's the impact?

JI: I think it's all of the above. Every place is different. Some things are just stopped dead. Right now, stopped dead. There's a couple of things, right? There's moratoriums, state of New York or counties everywhere are issuing moratoriums. And a lot of those are 12 or 18 months for the municipality to study these and understand the impacts. Just like the ERCOT audit. What are the impacts? They're trying to get their heads around it. And how should we change our zoning to mitigate issues that data centers may or may not create? So that's what the main thing has been. In those cases, if you're submitting an application after these moratoriums go in effect, you're going to have to wait to see what their rules are. And you'll know in 18 months, does your project comply with it? Does it add costs? Meaning, do you have to do infrastructure improvements? Are they going to require you to use a certain type of generator that is a tier 4, which is low emissions, things like that, that could add costs? Those are things they could come back to you with. And then there's other things, too. It may not be a moratorium, but there could be, if the zoning, if you need a change of use or if you need variances or things like that where you need a discretionary approval from the local elected officials, effectively from the community, if they just are opposed to data centers, it makes it very difficult because if it's not a by-right use or if you need a variance for a height or a setback, that's kind of how they've got you. They're going to say, well, no, we're not going to deviate from the current zoning to allow for a data center because we just don't like data centers. So that definitely is something that's happening out there. So it's a bit of all of the above.

JM: Are projects... do they still want to submit an application, even if it will take them 18 months to find out, or are some of them just choosing to wait to get the rules first?

JI: It's a good question. If they do submit it, what I believe is going to happen is that the county, the staff that has to review those applications and all of those things, they may say, no, we can't because we don't have guidelines to review your project against. So that is what I think is happening. If the municipality is saying, what standards do we hold data centers to... heights, setbacks, energy usage, noise? Well, the people that review those plans and those applications, they're kind of on pause for data centers because you can hand them a set of plans, but they don't know what those plans need to conform to while these moratoriums are in effect. And so I would say maybe some municipalities are willing to do some review of it with the caveat that we can't approve it, we're going to have to review it again, but I would suspect they're not going to waste their time reviewing something that they can't objectively judge.

JM: What are the early warning signs that a data center project might be becoming politically or socially difficult? Is it zoning, water, noise, grid reliability, tax incentives?

JI: Yep.

JM: Just a well-organized neighborhood opposition?

JI: Yeah, I mean, I think the early warning signs are kind of out there. You see the headlines. You can see other projects that, if you're looking at a particular area, what's going on there. And then the other thing is looking to see, is

development by right here? Do I need a change of use? Do I need a variance to fit this? So those are your first things to look at. What's happening in the neighborhood. And if you see that that's a thing, there's pushback or other projects have gotten rejected or if you can sort of check the temperature of the community, but then to what I was saying before. If you are going to need a change of use or some dimensional setback, height, some type of variance or some type of discretionary approval right there, there's your risk because you're going to have to get that approved. It's going to take time. It's going to take money. And there's certainly no guaranteed outcome that you'll get a positive approval. And so that's when developers' ears should be perked up and they should know that there's a risk here.

JM: Water is always in the headline. Is that a big concern or just something else on the list?

JI: Yeah, so water is an interesting one and there's a lot of not accurate information. So there's a couple of things with water. I won't speak to, like, generation behind the meter. I'll speak specifically to data centers, but you do evaporative cooling or you do air-cooled cooling, and I refer to refrigerant-based cooling. And it's not really refrigerant... I'll explain it to you. The evaporative is a cooling tower you see on buildings, not just data centers, that effectively disperses heat through evaporation, and with evaporation you lose water, so you've got to refill the system. With a closed-loop cooling system, you fill it and then it's in a loop. It's basically sealed in and you run it through a loop. You're not evaporating. And so with the closed loop, you have a lot of water to fill the system, but after that, you're done. You may have to drain it down sometimes for maintenance and things like that. But for that first fill, these data centers will actually use less water in a year than a cluster of single-family homes. Evaporative cooling does still exist for sure, but I see it less and less. I don't see it very often. Evaporative cooling is a bit more energy efficient; that's the interesting thing, and so it kind of depends on what the circumstances are, what part of the country, availability of water. Somewhere that is plenty of water, this isn't an issue, but somewhere that does not, it is an issue to work around. So that is something that needs to be considered in the design, your mechanical design. Like I said, both types of cooling are still done, but mostly it is a closed-loop system.

JM: And then the topic of today's call, Joe, just like this level of opposition, because it's hard for me to totally get a handle on it because it seems somewhat widespread, but also anecdotal. But I mean, how do you expect this to impact the orders for power equipment like turbines and gas engines and natural gas gen sets, as well as diesel gen sets, transformers and just the entire electrical equipment space?

JI: Yeah, I think in all those spaces, and then we can kind of go into each, but the demand is insatiable right now. And I suppose, even with the projects that will move forward, just with that alone, that demand is crazy. And I know for a fact that you see electrical gear can be up to, I've heard it going up to 100 weeks in some cases. And so that's just on what's approved. If you have all these moratoriums and things like that, and it does pause a lot of projects, the demand isn't going anywhere near zero, that's for sure. So I think there's still a robust supply chain on all of those things. And that's generators, that's electrical switchgear, UPS systems, all of that. So I don't think it's going away. In fact, if you were to maybe all those projects that are getting shelved or paused or whatever, I suppose if you added those in, I don't think it, I mean, I think it would only extend the lead time so, yeah, safe to say that it's a pretty robust market for all those things, even with these delays. Now, you mentioned gas turbines and things like that, that's a different, that's a whole different type of project. If you're building something in a primary market, densely settled, you're not putting gas turbines in there, most likely, because good luck getting that approved. But that market itself is still very... the turbine market is very hot as well, and lead times on those are pretty extensive.

JM: What type of projects are most vulnerable to pushback? Is it hyperscaler campuses, projects that are tied to behind-the-meter, projects JI: Yeah.

JM: near residential areas or something else?

JI: Yeah. I think projects that are proximate to residential areas or, you know, certain, I guess there's a couple levels. 1, the immediate community level. So if you're going to build a data center next to a bunch of homes, that is a tough task. And I think you kind of know what you're going to get into if you approach that. And so I would say, first and foremost, that's hard to do. You may not be in a residential area, but if you're in a very populated area, city or otherwise, then it comes down to politics a little bit, too. Even if you want to put it into an industrial area, you still have people chiming in and whether they're correct or they're incorrect or misinformed, and all the headline things of power consumption and noise, or whatever, even if you're in the industrial part of the neighborhood. And I've been on projects like that; it has nothing to do with residential, it's just. Enough people in the community just don't like it and they're going to push their elected officials even though it literally has no impact to them and the developer will pay for 100% of all of it. Some people, they're just, that's just what they're going to do. They want to oppose these things. And so you will get that in the cities and things like that. So those markets are tough. And then zooming out more at the state level, New York put a moratorium in. The state of Maine put a moratorium... or I can't remember if it actually passed or not, I should know that, but if not, it was very headline and it was proposed. It either passed or it didn't, but Maine has no data centers. There were 2 data centers proposed for 2 aging, rusting shipyards. No one's building data centers in Maine, and so to put a moratorium statewide on there, you're addressing a problem that's not even there. So why are you doing it? If people looked at it practically, would they still do it? Maybe they would, just because that's, again, it goes back to public opinion and politics, so if you're in a state, their public opinion generally is opposed to that. That's going to be a risk and it is not a local level risk. Again, I use Maine as an example. It's a very sparsely populated state. No one's proposing to put something next to a bunch of houses, and yet it was still a hot topic there. So the state level is very much politically influenced and things like that. So that's that next level. And then, yeah, federal is kind of up in the air. That's, you know, who knows where that goes because you've had congressmen that have proposed national bans and then you've got people that are very vocally supportive of it. So that's, I don't think it's as much a national conversation as it is a state and local thing.

JM: How is time to power changing the technology decision between gas engines, turbines, and solid oxide fuel cells from companies like Bloom?

JI: How's that changing? You mean how is the availability of all these things?

JM: Yeah, is it driving developers towards one or the other? Well, I guess we could even take a step back and just talk about the importance of behind the meter and more projects going behind the meter, what the trajectory of that change is, and then we can talk about the technology selection.

JI: Sure. Yeah. Well, I guess at a high level, it is real, the behind-the-meter solutions. And I had been advocating this years ago before this was a thing, and no one wanted to do it. The energy developers didn't. I always said, if you guys have extra land near your energy generation sites, I would think about data centers. No one wanted to do it. They just couldn't get their head around it. And the hyperscalers and everybody else, no one wanted to do it because everyone wanted to be, they liked the reliability of the grid. And yeah, that's great because if you're connected to the grid, as long as that immediate grid isn't damaged or cut off, you have multiple sources of generation and interconnect and all that stuff, and you have access to energy markets and pricing is more advantageous than all of that. So no one liked it. And then what happened was they started to go through these large load studies, interconnect studies, and the utility companies kept coming back saying, okay, here's your study. We're going to give you power in 8 years or 6 years. Well, now they kind of went back to this behind-the-meter stuff doesn't look so bad. And so now that's changed significantly, especially with the concept of the large campuses, AI, training, storage, inference, the hyperscale stuff. And so now it is not just favorable, but it is happening. And a lot of it is natural gas generation and you need to be proximate to a lot of gas with the appropriate pressures, but also to maybe where you have less access to gas you still need gas for hydrogen fuel cells. So it's not like, oh, there's no gas around here, let's go hydrogen. You still need gas. So, but there has been a push for that because noise and emissions, so hydrogen fuel cells have been looked at. Now

there's a few things there that, no one's really done these. No one built these things 10 years. I mean, they have had hydrogen fuel cell plants for a long time. But at the scale and for data centers, I don't think you can say, hey, let's look at the one they did 10 years ago and see how it's holding up. That doesn't exist. And so the long term, you're still figuring it out. It does work. You have different maintenance requirements, whether it's turbines or it's fuel cells, but you have to consider those factors and depreciation of the equipment and all that. So that is all now a very real thing. How is it... Jay, your other question... how is it impacting technology?

JM: And then, how is it impacting selection of using turbines versus using engines?

JI: Yeah.

JM: What are some other matters?

JI: I think there's a few things there. And I'm not enough of a turbine engineer expert, but you have different considerations for water consumption. And so you've got to sort of think about the factors there. You also have to think about emissions and noise. So, like I said, you're not going to do this in an area that's proximate to other people. Those are big. They're noisy areas. They're not small power plants. And so, getting a data center... you think that's hard? Try getting a power plant permitted... a private power plant, effectively. There's interconnect things, so if you want... and there's cost. It's very expensive. Your cost of power could be higher, if you don't have scale. The grid has that scale and that longevity, but there's cost implications to that as well. So those are all things that you have to take into account. I would say, first and foremost, how much space do you have, where are you, how much water do you need, how much gas do you need, what pressure do you need? So those are the things that you know you have to consider. And then what's the redundancy of these things? The grid has multiple sources of generation, you have 1. And so how do you design to accommodate all that? Those are the things you have to consider.

JM: What assumptions do you think developers are making around eventually connecting to the grid? Do they think that it's likely to be possible at some point? Is it?

JI: Yeah, I think developers see that as a long-term thing, if they can. Not all places is it practical to do so. And I guess maybe I should ask more specifically, do you mean like a data center developer and they're connecting to the grid like in a traditional manner or for, say, an energy developer trying to connect to the grid?

JM: Like a traditional data center, and maybe thinking of behind the meter as just a bridging solution or maybe they're even using the mobile turbine solutions and they'll at some point get rid of them. I mean, but there's a question of whether they view them truly as temporary or whether they will just stay there for, you know, forever.

JI: Yeah, that's a good question. I think a little bit of both. And I can't speak for everything, but the projects that we've worked on, I think they view it as permanent. But again, with certain things like hydrogen fuel cells, what is the useful life on those? And so do you have a plan to interconnect to the grid by the time that's done? Some groups do. Otherwise, you've got to figure out, okay, how do we service these or replace them down the road? So I think it's both. I think some will factor that in that, hey, this is just a temporary bridge solution and others will say, hey, no, this is permanent, or could we use these as, effectively use them as backup generators. I think groups will consider all of those different options.

JM: And then on the other way to talk about grid interconnection is selling power onto the grid. Do you think projects see that as? It seems like everybody talks about doing it, but then some people say that it's at the end of the day, it's just too much work and too much complexity. And it's an idea that sounds good, but in practicality, it's really difficult to pull off. Do you think that they will eventually become sources of power for the grid at certain times?

JI: Yeah, that's a good question. I think you bring up a very good point that it is very difficult because to interconnect into the grid, there's all kinds of regulatory things. You can't just plug in and say, hey, guys, here it is. So there's an extensive study process and an application process that takes a long time to be a permanent interconnect because you're now effectively, basically saying I want to be a power plant. I'm a power producer. And so that's a very different game that a lot of data center developers are not interested in signing up for. But the energy companies could do it, and they would definitely think about that. But the developers, there's a lot to consider there. So it is both. I think some groups will want to and some groups do not want to touch that.

JM: And then on noise concerns, I mean, I wrote in the questions I sent you about gen set noise concerns, but I guess that there are turbines in there too. Are noise concerns overblown?

JI: It depends where you are. If you're in the middle of nowhere, it's not as much of an issue, but for sure it is very much an issue. And we have seen projects where that has been a real concern and you have to comply with whatever the local ordinances are, and so if you can't do that, then you don't have a project. And so, you can add cost to the project to implement different measures to mitigate that. It could be enclosures over equipment, or it could be acoustic screening, which can get expensive. How tight are you to your lot lines and to the surrounding buildings and neighbors? All those things definitely need to be considered, and noise is definitely a concern because you can have a whole array of chillers, air handlers, you've got generators, you've got all that stuff, and that stuff gets noisy, especially in a big clustering of equipment like that.

JM: Is it something that can be fixed, for instance, with generators having enclosures, as you mentioned, that they can just try and beef up the noise-proofing? I mean, I guess I'm just trying to figure out, is this becoming a deal-breaker or is it going to be super problematic or is it something that can be dealt with if they can otherwise get the project approved?

JI: Yeah, it's not a deal-breaker, but it definitely is something that is going to cost money because you've got to pay for all those things. That isn't cheap, right? You have to have these custom-made... they're not custom, but they're semi-custom, right? They have to get added to a generator, and then, if, let's say, you put equipment up on the roof, well, then you got to pay for all that equipment and the screening, and then... it has to comply with wind loads and then you're adding weight to the roof. So that's another thing, so you can have a domino effect of you're doing something in an attempt to mitigate sound and it leads to other consequences, structural, aesthetics. You also have... these things are tall. So does it comply with height, things like that? If you put this equipment on the ground, that can help. But then do you need a variance or do you have enough room to fit them? They need to be spaced apart properly. There's supposed to be certain clearances around the equipment. So, trying to solve for one problem can expose other issues that come from that solution.

JM: When you and I talked earlier, you thought that Bloom's solid oxide fuel cells were not a silver bullet for community acceptance. What do you think the objections would still be if a developer selects SOFCs?

JI: Yeah, if you put it in, it's still... it's not like they're invisible. So it may solve certain problems like emissions, right? The byproduct is supposed to be water. They can be, in and of themselves, the fuel cell can be; it's not super tall, so that helps. It's going to be power, it's not going to be a strain on the grid, all that type of stuff, so there's all kinds of solutions. But at the same time, you need a lot of them. And what you can just bring in from the grid and run it through a few transformers that sit next to the building, you can do that in a tight footprint. And so now if you're going about putting in a fuel cell array, you're going to need a lot of space, and same thing as before, those need clearances. You're going to need access, you're going to need to put a fence up around it for security, all of those things. So it's not a silver bullet. It's not going to solve all the problems. It can solve some. And is that the right choice for the project? It depends on the circumstances of what you're building, where you're building it, and also, too, what is the cost of that? Because now you're maintaining a very complex, complicated system. And so, if you amortize that

capex or just consider the upfront cost of it and all of that, that's going to have an impact on the project as well. So, something that I think definitely needs to be considered. A lot of people think it is a silver bullet, and they say, "Why don't you just do these fuel cells?" And sure, you could, but again, consider all the other consequences from doing that as well.

JM: And the space concerns are more onerous with fuel cells than turbines?

JI: Well, with turbines, it's kind of different space concerns. A turbine, you can probably generate a particular amount of power, but you've got a big giant thing that has emissions and noise and is unpopular for those reasons. If you need the same amount of power from, say, a fuel cell array, it's shorter, it's quieter. But you're going to have to spread that out over a substantially bigger footprint just because it's a very different type of technology. So if you've got plenty of room, but you are more sensitive to noise, then, yeah, you could go with a fuel cell deployment because, great, we've got the space, but we have neighbors and so they're not going to let us do that. Also, too, the permitting is different for fuel cells than a gas generator. Their zoning is going to be different, that's a case-by-case, county-by- county, municipality-by-municipality, but the whole thing with turbines is that it's a giant combustion engine and so that comes with all those things that we said: noise, emissions, and that usually comes with a lot more zoning restrictions and ordinances that you cannot comply with, whereas the fuel cells, probably can comply with a lot of those easier, but you just got to factor in the other consequences of changing over to that.

JM: Is getting zoning changes becoming more difficult or is it still? It's just the same in most geographies where if it was difficult before, it's still difficult. And if it was easy before, it's still easy.

JI: I think generally it is more difficult because of the... for a couple of reasons. Data centers are large usually and so you're asking, traditionally getting any large thing approved in an area that has sensitivities has never been easy. So now just your typical ask is for something that's traditionally been hard to get approved. But there is also that sort of just general headline opposition out there to data centers. If you were to build a warehouse or something that's the exact same size and all that, people may not, but for the size thing or the views, they may not take issue, but because it's data centers and, whether people are concerned about AI or they're concerned about the energy consumption that makes these more of a hot topic. And so I think that has definitely been across the board, a new unique thing that the people that approve these, the city councilors, mayors, the local elected officials, they may have no problem with it. But if there's this general thing out there, they've got to... they're going to oppose it. And so there's a political thing that the way data centers are polling is, especially if you're near an election or something like that. It may generate so much benefit for the community and taxes and things like that. But they don't want to touch that issue because it's been such a hot button. And so the safe thing to do is defer, delay, vote against it, things like that. And that has certainly made things difficult.

JM: I mean, thinking big picture here, Joe, what do you think this means for 2027 and beyond? We are in an election year. How much of this is temporary? Is it going to recede in 2027 or will it still go strong? Could it get worse?

JI: I guess I can only speak to my experience in the past because I've had projects that have had to get approved right before, within months of an election. And after the election, there is a bit more things aren't as sensitive. So things do tend to get better. And that's just some of the things that I've observed projects have been on. Does it get better generally? Well, I think everyone does. It's okay for folks to have these concerns. It's very understandable. They consume a lot of power. They're very big. There's noise, there's all those things. That's all very understandable. And I don't think folks are wrong for it. So I don't think it's a knee-jerk reaction to say, hey, you're being unreasonable. I don't think that's right. And so, if these things do, it could be a positive. I mean, it's frustrating for a developer to have their project delayed a year or 18 months. But generally, if everybody comes out the other end with a set of guidelines and rules that says, okay, these are just the rules of the game, then you say, okay, you know what you have to do to move forward with it. And so, people may get a bit more comfortable. There's certain areas where you can't build

these things and there's certain things that you can't do and there's certain things it can comply with and if that gets people happy, the people that were opposed to it, if it satisfies their concerns and then, developers may have frustrations but in time you just know where you can and can't build these things and so I would think that people could find a way to make this all work over time. But, politics is not an exact science, so I could be completely off on all that.

JM: Yeah, it could definitely be volatile. You mentioned that some moratoriums are in place. We'll wait for rules to be updated and you had mentioned maybe requiring Tier 4 diesel emission standards. Could you, I guess, maybe elaborate on, do you think that's one of the requirements that might be adjusted or what other requirements might be put forth in the next 12 to 18 months.

JI: Yeah. So some of the projects that I've worked on, some of the things that have come out of that is Tier 4 generators, which are sort of low emission and have sound enclosures and all that type of stuff. It could require. It may prohibit it. What's happened in some counties is you can't build it within X number of feet of residential, right? So those are things that come out of it. They may put in requirements for clean energy. They may put in more stringent, maybe wouldn't change their noise ordinance because noise is noise. Noisy is noisy. And so you just can't. It's not like you have to be less noisy because why are you going to make the data center be quieter than the other industrial buildings or office buildings or schools or whatever? But I think the other thing certainly on energy usage, like some communities have pushed that it has to be, you have to purchase clean energy with it. But some of the other things are at not the local zoning level, they are sort of state mandated regulations that are happening with utility companies which dictate how new infrastructure is paid for, requiring security that is posted for. Developers have to post money or they have to front the cost of it or all this type of stuff, because there's been that concern that ordinary consumers get saddled with the cost, which is not really accurate, but the regulations may just firm that up and say, you're going to have to pay for all this and they may require other things. Who knows, municipalities and politicians get very creative spending other people's money. So, there could be things that are required that are unique to each community that a developer has to pay for or comply with.

JM: How much is this, the pausing of moratoriums that have either been enacted or proposed? I mean, how much do you think it's about just changing the way data centers are taxed? Is that a hot button issue?

JI: I have, well, there's a couple of things there. I have seen in some counties the taxes have exploded and everyone's different in how they calculate real estate taxes. And so it could be on the value of the equipment or things like that. It could be on the value of the property. Some places do it revenue-based, things like that. So I think, and then, so there's those things, right? If these are very expensive buildings or they generate revenue or something like that, that just... even if you don't change the rules of how things are taxed, it could just result in gross tax receipts going up. But I definitely could see it going a certain way, and I'm not as much of a tax expert where there are certain charges that are laid on data centers as that comes out of these things. That's entirely possible. Do they increase the rate on a data center versus residential or things like that? That's entirely possible. But for sure that they do generate a lot of revenue. They do not draw a lot of resources from the local cities and towns. So it's a very interesting thing. Very financially lucrative for these cities and towns and counties.

JM: On diesel backup power and just backup power more broadly, 2 questions. 1, have you seen any change in how backup power is used? Being implemented? Similar question, but have you seen efforts to move away from diesel entirely?

JI: No, it's really hard to, because battery, you only have so much time. I haven't seen anyone really moving away. If you're going to do backup power, diesel, it's there. It's in a tank. Natural gas just probably is hard to make work because there's a lot of generators there. If you're in a life science building, usually you do. I've done a ton of work on those. A lot of those are natural gas generators because you have a constant source of fuel, but for the size and the

hopefully lower probability of needing that much gas to build out a gas main and infrastructure and reserve that is very difficult. So for many reasons, diesel just remains the best choice.

JM: Joe, beyond just community pressure, what do you think the largest execution bottlenecks are for behind-the- meter data center projects? Is it gas supply, air permits, interconnection, other equipment availability, financing, labor, or something else like that?

JI: Yeah, I think some of the other big challenges out there, you brought up one, Jay, that's labor. Labor is, especially where some of these are being built in sort of secondary and tertiary markets. There's only so many people living out there and suddenly if you have a project where you need a daily headcount of 400, 500 workers a day, like where are they all coming from? And then by the way, 8 miles up the road, there's another one of these projects. So that is something... I am encouraged generally in the trades across the country, there's a resurgence in that interest. I come from a construction background and for many years it was like, who's going to do this stuff? And you've seen younger people go to that because it's there. You've got plenty of work. You don't have onerous student loan debt for a degree that's useless and college tuition is only getting more and more expensive. People are struggling to justify the cost and the return on the investment, not for everybody. Surgeons and lawyers and people like that need to go to college, but I do think folks see the ridiculous price tag of a college degree and not that college degrees are bad. I'm not saying that, but does it make sense? And can you actually pay back those loans and all that upfront cost? Whereas you go in the trades, you're going to get a good paying job. You're always going to be busy and you won't have all that debt. You're in demand. And so we are seeing that and I'm hopeful and I think that has helped the labor issue lately, add good skilled workers into the workforce, but for sure there could always be more. There is still a need for those workers. So that is one thing I think. The other thing, it really is, I think permitting and all that stuff is big and power is kind of the story that's been around for a long time. So the cost of materials and the lead times is certainly an issue. We touched base on that. That's very, very real. And that's not just generators and switchgear, that's steel. Things like that, that they go into data centers and everything else and with the amount of building going on, the steel mills are trying to keep up with it and is it challenging to bring steel in or other stuff from other countries or there are logistical or cost implications with that because they're building stuff over in those countries too. So... yeah... I think there's a little bit sprinkling of everything out there.

JM: Okay, we're going to leave it there. Joe, we're out of time today, but appreciate you taking 1 hour out to talk with us. Thank you.

JI: Certainly. Thank you. Thanks, Jay.

JM: Yeah, I enjoyed it. Thanks again. And thanks everybody for participating. Goodbye.

DISCLAIMER: The statements or opinions expressed today are those of the Advisor and not Guidepoint, who disclaims all liability for the content provided. The Advisor may not disclose material nonpublic or confidential information or any information that would cause the Advisor to breach any duty or obligations. Guidepoint is not a registered investment advisor and the information provided is not intended to constitute investment advice.