Ohio's Energy Overhaul: A Golden Opportunity for Data Center Investors

Ohio's recent energy reforms—codified in HB 15/SB 2—mark a pivotal shift toward fostering a competitive, resilient energy landscape. For data centers, this legislation creates a rare confluence of strategic advantages: streamlined microgrid development, tax incentives, accelerated permitting, and regulatory stability. These changes not only reduce operational costs but also ensure utilities can sustainably manage grid strain, making Ohio a prime destination for energy-intensive industries.

The Microgrid Advantage: Decentralized Power for Data Centers

HB 15/SB 2's microgrid provisions allow large commercial entities—like data centers—to form shared, behind-the-meter generation systems. This means companies can pool resources to build localized power networks, reducing reliance on the public grid. By leveraging these “mercantile customer self-power systems,” data centers can secure redundant power sources, mitigate outages, and avoid contributing to peak-demand strain on utilities.

The law further removes territorial restrictions, enabling data centers to operate within existing utility zones without triggering conflicts under the Certified Territory Act. This flexibility is critical for hyperscalers and colocation providers seeking to expand in Ohio's central corridor, a region already home to major cloud infrastructure hubs.

Tax Breaks: Reducing the Burden of Energy Intensity

The legislation slashes personal property taxes on energy assets, a lifeline for data centers that rely on high-capacity servers, cooling systems, and backup generators. For example, energy conversion equipment (e.g., solar panels) now faces a 7% assessment rate, down from 85%, while transmission assets see reductions to 25%. Combined with exemptions for projects in Priority Investment Areas (PIAs)—like repurposed coal sites—these cuts could lower annual operating costs by millions for large facilities.

Investors should note that Ohio's utilities, such as AEP and FirstEnergy, stand to benefit from stable revenue streams tied to the 85% minimum energy payment rule. This provision, part of a recent AEP settlement, requires large data center customers to pay for at least 85% of their declared energy needs monthly. This ensures utilities recover fixed costs, stabilizing rates for all customers and reducing the risk of price volatility—a critical factor for long-term data center investments.

Permitting Speed: Accelerating Project Timelines

The Ohio Power Siting Board (OPSB) now faces strict deadlines: applications for energy projects must be decided within 195 days, or they are automatically approved. For projects in PIAs or with long-term leases, decisions must be issued in 45–60 days. This eliminates regulatory bottlenecks, enabling data center developers to secure land and permits faster than in states with slower processes.

Ohio's focus on brownfield redevelopment further sweetens the deal. Former coal sites, now PIAs, offer low-cost land and fast-tracked approvals, ideal for data centers seeking scalable, sustainable campuses.

Why This Matters for Investors

Data centers are among the most energy-hungry industries globally, with power costs often exceeding 50% of total operational expenses. Ohio's reforms directly address these pain points:
1. Cost Efficiency: Tax cuts and shared microgrids reduce energy spend.
2. Resilience: Backup power systems and grid stability lower downtime risks.
3. Scalability: Fast permitting and PIAs enable rapid expansion.
4. Regulatory Safety: The 85% payment rule ensures utilities can invest in grid upgrades without hiking rates unpredictably.

Investment Playbook for Ohio's Data Center Boom

• Target REITs and Developers: Look for firms like CyrusOne or DigitalBridge expanding in Ohio, which may benefit from lower taxes and faster approvals.
• Utility Stocks: Ohio's regulated utilities (e.g., AEP) offer predictable earnings from stable rate cases and the 85% rule's revenue guarantees.
• Microgrid Technology Firms: Companies like PowerSecure or Siemens could see demand surge for behind-the-meter systems.

Conclusion: Ohio as a National Model

HB 15/SB 2 positions Ohio as a blueprint for balancing energy-intensive growth with grid resilience. By aligning utility cost recovery, tax incentives, and microgrid flexibility, the state is primed to attract billions in data center investments. For investors, this is no longer just a regional play—it's a strategic bet on a future where energy efficiency and regulatory foresight define winners.

The time to act is now. Ohio's reforms are too comprehensive to ignore, and the data center sector is ready to capitalize.