San Francisco pauses data centres as power constraints reshape global buildout

On Tuesday, the San Francisco board of supervisors unanimously passed a measure to pause new data centre approvals for 45 days. The moratorium, which can be extended to 22 months, halts projects in the Bayview and Dogpatch districts, including a 49.5 MW waterfront development. This marks the first time a major U.S. tech hub has formally paused construction due to infrastructure concerns.

Power and Grid Bottlenecks

Officials will now study energy, water, and air quality impacts before issuing permits, according to The Next Web. The timing is significant. The Census Bureau reported that private data centre construction spending hit a record annual pace in August, up 73% year over year.

These facilities are becoming a significant portion of the electrical load. In Texas, the grid operator ERCOT saw its queue for new large customers balloon from 63 GW at the end of 2024 to 474 GW by June 2026. Ryan McEntush of a16z noted that approximately 90% of this demand comes from data centres, leading to a freeze on new permits in parts of the state. The strain is visible in utility bills and local opposition, with a Gallup poll finding that 71% of Americans oppose an AI data centre in their area.

Europe faces similar but distinct challenges. While the U.S. struggle is often about community backlash and grid interconnection queues, Europe’s constraint is the inability to build capacity fast enough to meet demand. Denmark’s grid operator, Energinet, halted all new connection agreements this year, facing a queue of roughly 60 GW against a national peak demand of just 7 GW.

Technological and Environmental Responses

In response to these constraints, the industry is shifting focus to efficiency and on-site power. McKinsey’s Global Energy Perspective 2026 projects data centre power demand will grow at a 24% compound annual rate through 2030, but warns that supply infrastructure will determine how much of this demand is met. To bridge the gap, operators are turning to gas engines, fuel cells, and battery storage. Sam DeFabrizio, a partner at McKinsey, told Data Center Knowledge that natural gas is often viewed as the fastest path to adding firm power, though competition for pipeline infrastructure could cause delays.

Cooling technology is also evolving to reduce water usage, a primary driver of local opposition. A recent study published in the Journal of Engineering Thermophysics details a new approach using phase-change materials that can reduce water consumption by up to 60% in high-density server rooms. This aligns with broader industry efforts to move away from evaporative cooling towers, which are increasingly restricted in drought-prone areas.

Regulators are also stepping in to ensure costs are not socialized. In Canada, Hydro-Québec asked its provincial regulator to hike energy rates for large data centres. The utility proposed a new rate that would double the cost of energy for facilities over 5 MW, raising it from an average of 6.82 cents per kWh to 13 cents. Sarah Trabelsi, chief of costs and pricing at Hydro-Québec, stated that the era of energy surpluses is behind us, and the utility must act to limit the impact on other customers.

Meanwhile, in Finland, authorities have ordered a halt to work on two Google data centres in Muhos and Kajaani. The Finnish Supervisory Agency (LVV) cited the clearance of more than 300 hectares of forest without a mandatory environmental impact assessment. Google, which announced a €13 billion investment in Finland last month, acknowledged it had "fallen short of our own high standards" and agreed to follow the agency's guidance. This incident highlights the growing tension between rapid AI infrastructure expansion and environmental regulations.

As the industry navigates these hurdles, the focus is shifting from simply building more capacity to building smarter. The coming years will likely see a consolidation of sites, a greater reliance on renewable energy procurement, and a more transparent dialogue with local communities. The pause in San Francisco is a signal that the era of unchecked expansion is ending, replaced by a more cautious approach that prioritizes grid stability and environmental responsibility.