Data Centers 2026 Look Ahead

The data center industry is a rapidly growing sector in the United States with record-high private equity involvement and new companies entering the market. Data centers are increasing in both number and capacity to meet growing global connectivity, and as demand rises, so do some of the challenges the industry faces.

In our Data Center segment of Look Ahead 2025, we described how data centers play a critical role in supporting the global economy and must maintain uninterrupted, 24/7 operations to ensure reliability and performance. To achieve this level of continuous functionality, reliable access to electrical power, high-capacity fiber optic connectivity, and effective cooling infrastructure are essential foundational requirements. In addition, provisions for on-site power generation serve as a vital contingency measure, particularly in scenarios where utility grid capacity or readiness is insufficient or delayed.

With the increase in data center size and the potential for on-site generation, community impacts such as the environment and natural resources, noise, and viewshed become significantly more pronounced and warrant greater attention. Data centers work hard to reduce impacts by following the applicable federal, state, and local processes and regulations; employing reputable companies to design, build, and operate; mitigating noise where possible; maximizing water efficiency and other resource use; minimizing the impact to viewshed; training to reduce potential environmental impacts during operation; and building strong relationships with the area as good community stewards.

This Look Ahead 2026 highlights changes and trends we’re seeing in air regulations, the data center sector’s intersection with the power sector, and other topics of interest.

Changes in Air Regulations

Air quality strategy and permitting is important for data centers, and it is a changing landscape to monitor. Below are some examples from 2025 and what could play out in 2026:

Attainment Status: Whether a data center is in an attainment area or a nonattainment area significantly impacts air permitting. Because attainment status is evaluated at established intervals, it changes. Over the last several years, key data center locations have been redesignated as nonattainment or reclassified to a higher nonattainment status, resulting in more stringent air quality requirements in these areas. These changes require data centers to evaluate their existing campuses to determine whether they want to become a major source or establish a strategy through air pollutant controls or reduced operational flexibility to decrease potential emissions and avoid being a major source. Such changes also impact proposed builds and expansions with lower thresholds that trigger Federal construction permitting. A few examples:

• Redesignation to serious nonattainment for Maricopa County, AZ has been expected for years; data centers permitted in the region have intentionally and proactively accepted a potential emissions threshold of less than 50 tons per year (tpy) of nitrogen oxides (NO_X) rather than 100 tpy NO_X given the anticipated reduction of the major source threshold to 50 tpy NO_X. On November 19, 2025, however, the United States Environmental Protection Agency (U.S. EPA) proposed a rule allowing the exclusion of international emissions from the area’s attainment status determination (the area would have attained the 2015 ozone standard by the required date but for international emissions). If this rule is finalized as proposed, Maricopa will remain a moderate nonattainment area with a major source threshold of 100 tpy NO_X.
• The Dallas/Fort Worth (DFW), TX area has been redesignated twice in three years, reducing the major source threshold from 100 tpy of NO_X to its current 25 tpy NO_X. The next milestone date to evaluate attainment status is 2027 but if the abovementioned proposed rule regarding Maricopa County is finalized, areas relatively near U.S. borders that could potentially be impacted by international emissions may be revisited to determine if they would be in attainment in the absence of these emissions.
• The Greater Chicago, IL area was redesignated in January 2025 to serious nonattainment, lowering the major source threshold from 100 tpy NO_X to 50 tpy NO_X.

Hourly Emissions Rates: Short-term emissions standards contained in applicable Federal rules (e.g., Federal engine and turbine rules) have also been adopted by many state or local environmental agencies; compliance with the Federal standards is also sufficient for their programs (e.g., U.S. Tier 2- or Tier 3-certified, engine size dependent, for emergency generators). However, these agencies are also able to establish their own short-term (hourly) emissions requirements, often referred to as Best Available Control Technology (BACT) or similar, and they can be more stringent than Federal rules. These are also subject to change, so data centers must monitor state and local regulatory activity to ensure they procure the appropriate equipment. Below are recent examples where state-specific hourly emissions rates may change or have changed:

• Virginia established its current presumptive BACT requirements for diesel-fired emergency and non-emergency generators in 2012. While multiple pollutants are addressed, the most impactful pollutant is NO_X, as it is the pollutant of greatest concern from diesel engines. The Virginia Department of Environmental Quality (VADEQ) established a 6.0 grams/horsepower-hour (g/hp-hr) NO_X emissions rate for emergency generators and a 0.6 g/hp-hr NO_X emissions rate for non-emergency generators. However, in late December 2025, VADEQ drafted updated presumptive BACT guidance that would require 0.6 g/hp-hr NO_X for future diesel-fired emergency and non-emergency generators specifically at data centers, along with lower limits for other pollutants. This draft guidance would require emergency generators to meet U.S. EPA Tier 4 equivalent emissions standards. This draft guidance has not yet been released for public comment, which is the next step, and no timeline for its release is available.
• As of January 8, 2026, Illinois will require many new diesel-fired emergency generators at data centers to meet U.S. EPA Tier 4 emissions standards. There is also a more stringent emissions requirement for new natural gas-fired engines. For facilities that require Federally Enforceable State Operating Permits (synthetic minor) or Clean Air Act Permit Program permits, which are common for data centers in IL, the Tier 4 requirements begin with air permit applications for new data center emergency generators submitted beginning December 1, 2026.

Turbine Rules: U.S. EPA revised the Federal rules for combustion turbines, Standards of Performance for New Stationary Sources (NSPS) Subparts GG for pre-2005 turbines and KKKK for post-2005 turbines, in January 2026. NSPS Subpart KKKKa was added for turbines constructed, modified, or reconstructed after December 13, 2024, which will be the most applicable to data centers as interest in on-site generation increases. NSPS Subpart KKKKa establishes new subcategories of NO_X emissions standards for different turbines based on size, utilization, and design efficiency. Among other changes, the creation of a subcategory for temporary small turbines is of particular interest.

• According to the Rule preamble, the creation of this subcategory was an attempt to better align the NSPS for other equipment such as boilers and engines that serve a facility for a short time. NSPS Subpart KKKKa establishes this new subcategory for temporary turbines, up to 850 MMBtu/hr, used in a single location for up to 24 months, meeting certain NO_X The rule does not exempt these turbines but allows a streamlined compliance approach.
• The rule requires strict adherence to the 24-month limitation; there is no countdown reset if the unit relocates on property or another temporary turbine replaces the first, as long as the units continue performing the same function for the same site. If the unit remains on-site longer, U.S. EPA will retroactively apply the requirements of the rule as if the unit is now permanent, but beginning Day 1, which would likely result in noncompliance.

The establishment of this subcategory will benefit data centers looking to use subject turbines for less than 24 months to provide bridging power by reducing the compliance burden under the rule as compared to a permanent on-site power installation. However, each scenario will need to be reviewed with the state or local environmental agency as they may still require the turbine to be permitted; notably, U.S. EPA’s more general definition for temporary sources requires the unit to be on-site for no longer than 12 months and most states have adopted a similar interpretation. Prime power or non-emergency combustion sources may require an air permit by a state/local agency even if on-site for less than 12 months.

Power

Speaking of turbines, 2025 is known as the year of power, a moniker that will probably be assigned to each subsequent year for quite some time. There is dynamic discussion about power – how to generate and transmit enough, and who is going to pay for the expanded infrastructure necessary to meet demand, among other questions.

• Rates: Utility customers are worried about their electricity rates. In January 2026, the White House called upon data centers to shoulder the additional costs associated with the increase in energy production and transmission needed to serve the industry, and/or generate the power themselves. Some data centers have already issued statements that they plan to cover or offset a large portion of these costs to protect residents’ bills.
• On-site Generation: Developers and data centers are requesting on-site generation air permitting evaluations for a variety of sites. They need to understand how best to permit a combination of emergency generators and on-site generation equipment as site needs change. The balance is important ─ the need for power to bring buildings online but also the need to ensure that the underlying assumptions of the regulatory strategy (e.g., what data will be available from the engine and emissions controls if needed) can be achieved in a compliant manner during operations. There is also the question of source aggregation to consider – what needs to be true for the emissions from prime power generation and backup power generation to be considered separate, each with their own maximum allowable emissions threshold before Federal major source construction permitting kicks in.
• Emergency Demand Response: Data centers face mounting pressure to participate in utility programs using existing emergency generators to secure future power commitments. Programs such as emergency demand response to make use of emergency generators to stabilize the grid are not new, but the data center industry is engaging more than ever before to secure its place in the power queue. In the last year, with the power challenge top of mind and the White House prioritizing the U.S.’s lead in artificial intelligence (AI), there is hope across the data center industry that U.S. EPA could loosen its interpretation on how an emergency generator is allowed to operate if it complies with U.S. EPA Tier 4 emissions standards. U.S. EPA issued a May 2025 reply to Duke Energy’s request for concurrence that their PowerShare Mandatory 50 program met the five criteria for financial arrangement. However, this did not change how U.S. EPA interprets its regulations; it simply reminded the regulated community that such programs meeting U.S. EPA’s financial arrangement criteria exist. As of this article’s writing, U.S. EPA has not made a change to its interpretation; the 50 hours per year limit on non-emergency is still in effect, and the five criteria established by U.S. EPA to determine allowable financial arrangement operation for emergency generators still stand. That said, on January 20, 2025, U.S. EPA and the Data Center Coalition met “to discuss how the rapid growth of data centers can be harnessed to make the U.S. the AI capital of the world while keeping energy prices low and ensuring clean air, land, and water for all Americans.” The outcomes from the roundtable are yet to be determined but just days later, the Department of Energy issued a letter to utility grid Reliability Coordinators and Balancing Authorities in preparation for the January 24-25^th winter storm. The Department was prepared to issue, and has since issued, several 202(c) orders as needed and approved to “ensure that the tens of gigawatts of available backup generation, which would otherwise stand idle, is available during emergency conditions,” authorizing Coordinators/Authorities “to direct backup generation facilities to run as a last resort before declaring Energy Emergency Alert 3”. Such operation is expected to be considered emergency and if operation results in a permit exceedance, those could be waived. The White House stated in a call before the weekend that a 202(c) order will protect facilities from environmental exceedances.
• Nuclear: Every power conversation weaves through renewable sources and low carbon fuels, and inevitably lands again on nuclear. For the last 18 months, the nuclear power discussion has reached a new level. There are varied opinions on whether the Three Mile Island nuclear plant will ever be recommissioned, as announced by Microsoft in Fall 2024, but it is acknowledged as a bold step for power. Small modular reactors (SMR) are viewed as the ideal power source for the 2030s and several entities are taking steps towards this goal. Dominion Energy and Amazon announced a plan in the fall of 2024 to team up to advance SMR technology at Dominion’s North Anna Power Station in Louisa County, VA, an existing nuclear power plant two hours south of ALL4’s own WDC office.

What Else?

In addition to changing air regulations and the hot topic of power, data centers are navigating additional challenges such as zoning changes, sophisticated and vocal public interest, and new water requirements.

• Zoning: With the significant increase in data center construction, data centers are frequently requesting counties (or other localities) change a zoning designation or re-zone a plot of land to allow the facility to be built. There is often an opportunity for the public to provide input on whether land is re-zoned, and it’s now an effective avenue for public opposition to be expressed. If a data center project is withdrawn or declined, most of the time it occurs during the rezoning process. If the property is already zoned to allow for the construction of the data center and the land is purchased for that purpose, historically, these projects could move forward under “by-right” development if they complied with all the codes and regulations. In the spring of 2025 many localities across the U.S., including Loudoun County, VA, however, have eliminated “by-right” development for data centers. Even if the data center has purchased the land and does not require a change in zoning or other special provisions, the projects must be considered and approved individually by the local authorities through a process including public hearings before construction.
• Public Interest: While there have always been residents who oppose development in their community, or oppose data centers specifically, the resistance to data centers has not only grown in number, but it has also become more sophisticated and organized. Environmental organizations and anti-data center development social media groups publish talking points and update residents on the latest news from local counties; these posts reach millions more people than any government website, flyer, or newspaper advertisement ever could. Their key concerns tend to be environmental impacts such as air pollution or water use, power needs and an anticipated increase in utility bills because of it, the confidential nature of several data center transactions, and quality of life concerns including noise, light pollution, traffic during construction, proximity to homes or schools, building aesthetics, tree and wildlife impacts, and general loss of rural nature.
• Water: The recent water regulatory landscape has been more dynamic related to data centers. For example, some localities are limiting water use by data centers or restricting construction projects that propose to draw a large quantity of water. At the state level, Ohio Environmental Protection Agency (OEPA) is looking at discharges, proposing a new type of NPDES general permit for both wastewater and stormwater discharges from data centers. The “NPDES General Permit for Discharges from Data Center Facilities” would cover data center facility operations that discharge to waters of the state. The draft permit is undergoing public review, but comments are expected to include pushback. More states may draft similar data center-specific NPDES permits if OEPA’s is approved.

Conclusion

Data centers carry the responsibility of housing data for the modern economy and the advancement of AI while also not only complying with existing requirements but keeping an eye on what the future brings. ALL4 is proud to partner with data centers all over the U.S. to support: site decisions, budget and equipment planning through air permit strategies, construction schedules through comprehensive and turnkey permitting efforts, noise monitoring and modeling, sustainability goals and reporting, health and safety needs, and compliance with environmental requirements through diligent reporting, training, tool development (including digital solutions), auditing, and more.

Need an air permit strategy mapping the interplay of turbines, fuel cells, and generators?

Need support with environmental talking points ahead of a public hearing?

Need noise modeling?

Check out our weekly newsletter and our Data Center page for more content from ALL4 this year.

Please reach out: Sharon Sadler, WDC Office Leader and ALL4 Data Center Sector Lead, at ssadler@all4inc.com or 571-392-2595.