California Cities Diverged on Data Center Growth
As Santa Clara bolsters its server farm infrastructure, San Francisco has enacted a moratorium on new sites.
Updated on Sept. 18, 2026 in Data Centers
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Santa Clara has moved to expand its capacity for data centers, leveraging a $459 million power grid upgrade and recycled water for cooling. Meanwhile, San Francisco supervisors have introduced a 45-day moratorium on new facilities, citing environmental concerns in the Bayview neighborhood.
Why it matters
The split reflects a growing regional tension over balancing the massive power and water needs of data centers against local environmental and infrastructure constraints. Cities are now actively debating whether the tax revenue and industrial integration offered by server farms outweigh their heavy utility demands.
Santa Clara currently hosts 58 data centers, outstripping San Francisco's 15 and Alameda County's 14. The city subsidizes this density through an industrial power grid that is significantly cheaper than the 42.2 cents per kilowatt-hour charged by PG&E.
The players
Santa Clara
A city utilizing specialized municipal power and water recycling to establish itself as a primary hub for high-density compute infrastructure.
San Francisco
A municipality prioritizing localized environmental mitigation in the Bayview neighborhood over the expansion of industrial server capacity.
Intel
A semiconductor manufacturer and data center infrastructure partner that funds local utility grid enhancements in exchange for facility access.
Shamann Walton
A San Francisco supervisor who led the push for a pause on the development of new data centers within the city.
The details
Santa Clara leverages an industrial belt of office parks and existing chip manufacturing plants to cluster its facilities, which are cooled using treated, recycled wastewater. To maintain this growth, the city invested $459 million into its power grid, a move supported by private sector contributions like Intel, which funded a local substation expansion and paid $10 million in additional fees.
Timeline
September 14, 2026: Supervisor Shamann Walton held a press conference regarding the moratorium.
May 2025: Valley Water scheduled a briefing on recycled water usage.
May 2026: Gallup poll regarding public opposition to data centers.
The Tech Race
This divergence highlights how Silicon Valley is segmenting itself as power-intensive workloads struggle to find space. While Santa Clara follows a trajectory of deep integration into municipal utilities, San Francisco's moratorium signals a shift toward prioritizing urban environmental impacts.
Residents in the Bayview neighborhood may see fewer industrial zoning applications during the 45-day moratorium period. Conversely, businesses in Santa Clara will continue to benefit from cheaper, city-provided power rates compared to those relying on the broader PG&E grid.
The takeaway
The contrast between these two cities serves as a test case for how municipalities manage the physical footprint of the AI boom. Watch for the end of the 45-day window in San Francisco to see if the city transitions the temporary pause into permanent, stricter zoning mandates.
Further reading
For more on the infrastructure supporting these facilities, explore our Data Centers coverage.
Source note: This article includes information reported by New York Post.
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