DENVER — Two competing bills from within the same Democratic caucus are exposing a fundamental fault line in Colorado’s economic strategy. One bill would impose sweeping renewable energy mandates on large data centers. The other would offer 20-year sales tax exemptions to lure billions in investment. Both were introduced in the current legislative session, and both claim to protect Colorado consumers and the environment. Yet they chart nearly opposite paths to get there.
The divide is not between parties. It is between Democrats who agree on climate goals but fundamentally disagree on whether mandates or incentives will achieve them. The outcome will shape whether Colorado competes for a share of what Wood Mackenzie estimated at 134 gigawatts of proposed data center capacity as of mid-2025, or watches that investment flow to neighboring states like Wyoming and Utah.
SB26-102, introduced February 11 by Sen. Kipp (D-Fort Collins) and Rep. Brown (D-Louisville), takes a regulatory approach. Its formal title is the “Measure to Ensure Accountability for Large-Load Data Centers,” and it applies to new facilities exceeding 30 megawatts of peak load or multiple facilities exceeding 60 megawatts collectively.
The bill’s centerpiece is a requirement that large data center operators build or purchase renewable energy covering their full annual electricity consumption beginning January 1, 2031. The Colorado Public Utilities Commission would determine the highest percentage of hourly renewable matching that is “technically and economically feasible,” according to the bill text.
Additional provisions include 15-year minimum contracts with utilities for infrastructure costs, a prohibition on utilities offering economic development rates to data centers, mandatory community benefit agreements in disadvantaged areas, annual energy and water usage reporting, and diesel backup testing limited to fewer than 50 hours per year.
“We tried to learn from what other states have experienced and build upon that,” Sen. Kipp told Colorado Public Radio.
Fifty-four climate and environmental justice organizations signed a coalition letter backing the bill. “With energy bills and other household expenses at an all-time high, it’s imperative that data center companies pay their way,” the letter stated, according to CPR.
HB26-1030, introduced January 14 by House Majority Leader Duran (D-Jefferson County), Rep. Valdez (D-Denver), and Sen. Mullica, takes the opposite approach. Its full title is the “Colorado Data Center Workforce, Clean Energy, Grid Modernization, and Consumer and Environmental Protection Act.”
The bill would create a nine-member Colorado Data Center Development Authority within the Office of Economic Development and offer a 100% state sales and use tax exemption on qualified purchases for 20 years, extendable for an additional 10 years if certain job creation thresholds are met.
To qualify, data centers would need to invest a minimum of $250 million in infrastructure within five years, break ground within two years of certification, pay wages at least 110% of the average local wage, use closed-loop cooling or water recycling systems, and source 75% noncarbon emitting energy for new operations through utility agreements. After 2040, 100% clean energy would be required.
“The future is technological. We’re trying to do it the right way,” Rep. Valdez told the Colorado Sun.
Rep. Valdez has also framed the competing mandates bill as a de facto ban, telling CPR that the other bill “seeks to ban this sort of industry from coming to Colorado.” “We believe we’ve struck the exact right balance between what is doable and what is best in terms of stewardship,” he said.
Sen. Kipp rejected that characterization. “They’re insisting on remaining with the huge incentives, and we’re like, ‘No, we just need to have guardrails around the future development so that we don’t have negative impacts,'” she told the Colorado Sun. She added bluntly: “These are big companies like Meta and Amazon. They can afford to freaking pay their own way.”
Supporters of HB26-1030 point to a stark competitive reality. At least 37 states already offer significant data center incentives ranging from sales tax exemptions to discounted property taxes, according to a Husch Blackwell survey cited in multiple reports. Colorado is among a minority of states without such incentives, and state lawmakers have repeatedly shut down data center subsidy legislation in recent years.
“We’re not getting the revenue currently, because the companies are going elsewhere,” Rep. Valdez told the Colorado Sun.
The Data Center Coalition, a membership association that describes itself as “the voice of the industry,” argues the investment is substantial. Dan Diorio, the coalition’s vice president of state policy, told CPR that “data centers are drivers of local tax revenue” and that they “support local jobs in those communities, and they allow those communities to reinvest in priorities that are important to them.”
Colorado currently hosts approximately 53 data center facilities statewide, according to Data Center Frontier, most of them smaller operations in the Denver metro area. The industry publication also reported that the average data center contributes $32.5 million annually to local economies and supports roughly 157 local jobs, citing U.S. Chamber Technology Engagement Center data.
Julian Aguilar of IBEW Local Union 68 expressed support for the incentives approach. “We need to be looking at innovative ways to bring jobs to our state, and this is a great way to do it,” he told The Sum and Substance.
Proponents of SB26-102 counter that the competitiveness argument ignores serious risks to Colorado ratepayers, grid reliability, and water resources.
Xcel Energy, Colorado’s largest electric utility, currently operates 6.2 gigawatts of capacity in the state. Pending data center applications total 5.8 gigawatts, according to the Colorado Sun, enough to power more than 3 million homes. The utility has projected data center load could reach 8.5 gigawatts by 2040, requiring a proposed $22 billion investment in new generation and transmission.
“This is a really massive load forecast far in excess of what we’ve seen on the system,” PUC Commissioner Megan Gilman told the Colorado Sun.
PUC Chairman Eric Blank was more pointed. “We are bringing data centers that don’t fully cover the cost they impose on the system,” he said.
The rate impact is already a concern. Residential electricity rates could rise more than 25% by 2031, according to Western Slope Trellis. A Carnegie Mellon University and NC State study found that without policy changes, large power users could increase power bills by an average of 8% nationwide by 2030, and up to 25% in data center hubs like Virginia.
Alana Miller, a state policy director for the Natural Resources Defense Council (an organization that describes its mission as safeguarding “the earth, its people, its plants and animals, and the natural systems on which all life depends”), warned: “If there aren’t sufficient guardrails and you’re encouraging unconstrained data center development, we could lock in greenhouse gas emissions for decades. It could also threaten our grid reliability and raise energy prices.”
Sara Schueneman, state director of AARP Colorado (an organization focused on championing social change for Coloradans age 50 and older), put it simply: “Ratepayers of any age should not be footing the bill for big tech companies.”
The national experience offers warnings for both sides.
Virginia, the world’s largest data center market, has seen its data center tax incentive program grow from $1.5 million to $1.6 billion annually in foregone revenue, according to MultiState Insider. Nearly 100 bills addressing data center tax treatment have been introduced or carried over in Virginia’s legislature in 2026. Texas has similarly lost an estimated $1 billion in potential revenue from data center tax breaks, according to Colorado Politics.
“Data center tax breaks have exploded into runaway giveaways in other states,” said Kathy White, executive director of the Colorado Fiscal Institute, an organization that uses “innovative research, advocacy, strategic communications, and deep partnerships to advance equity-focused fiscal and economic policies.” She made the comment to Western Slope Trellis.
Virginia Gov. Spanberger herself acknowledged the tension. “I’m open to extending them philosophically, but I do think we need to comprehensively evaluate what they bring to communities,” she said, as reported by MultiState Insider.
Several states are now moving to limit incentives, including South Dakota, Georgia, and Maryland, according to the same report. Others, including New Mexico and Washington, are expanding them.
While the state legislature debates, several Colorado counties have already acted on their own.
Larimer County approved a 30-day moratorium on data center development in January 2026 so county staff could develop specific land-use regulations, and is considering a six-month extension. Logan County implemented a six-month moratorium in October 2025. Weld County has been actively drafting regulations since late 2025. Denver has formed a stakeholder workgroup but has not yet established a clear policy direction, according to the Brownstein analysis published via JD Supra.
Rep. Brown, co-sponsor of the mandates bill, acknowledged the pressure on local communities. “Massive data centers add incredible pressure to our power grid and water systems, challenges we can’t ignore,” he told Western Slope Trellis.
Not everyone fits neatly into the incentives versus mandates debate. The Independence Institute, a Colorado policy organization that describes itself as “an action tank” promoting “individual Freedom, economic Freedom and journalistic Freedom,” has raised concerns about HB26-1030’s regulatory requirements even though that bill is the incentives approach. Policy analyst Sarah Montalbano argued the bill’s energy mandates, including a requirement before 2039 for a 3-to-1 nameplate capacity ratio of clean energy per megawatt of thermal load, would make Colorado uncompetitive against neighbors like Utah and Wyoming that are not imposing similar requirements.
The Colorado Union of Taxpayers, a taxpayer advocacy organization, opposes HB26-1030 on different grounds. CUT argues the bill creates “another bureaucracy” and that existing data centers and taxpayers will subsidize the incentives through reduced TABOR refunds.
Sen. Kipp told the Colorado Sun that it is unlikely the two sides will find common ground, suggesting a compromise may be difficult to reach.
Gov. Polis has not endorsed either bill. His spokesperson, Eric Maruyama, said the governor’s “north star is ensuring that any data center development does not increase energy costs on Coloradans,” according to the Colorado Sun.
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