Data Center Site Selection in Alabama

Alabama has two very different paths to large-scale power. Most of the state is served by Alabama Power, a vertically integrated utility whose contracts with large customers, including data centers, are regulated by the Alabama Public Service Commission.¹ North Alabama is mostly Tennessee Valley Authority country, where TVA sells wholesale power to municipal utilities and cooperatives that serve end customers. Rural cooperatives and municipal systems also serve pockets elsewhere, so a parcel’s utility service territory should be confirmed before land terms are negotiated.

The TVA path has its own approval gates. Decatur Utilities has described the rules plainly: contracts larger than 5 MW are reviewed by TVA, and requests above 100 MW require approval from the TVA board.² On August 20, 2026, the TVA board approved a wholesale rate class for data centers; from October 1, 2026, new or expanding data center loads above 5 MW pay a capacity commitment charge, with an expected average bill impact of about 10% phased in over three fiscal years.⁷

Neither path is simply faster. Alabama Power offers one regulated counterparty but a new public review for the largest loads. TVA territory adds a federal board step and a new rate design, but sites near retired TVA plants can come with heavy transmission. Our Southeast regional guide compares these utility models across neighboring states.

The biggest regulatory change of 2026 is Act 2026-610, which took effect October 1, 2026. It defines “large load” data center customers as those expected to require at least 150 MW of peak demand at one or more contiguous parcels, and the PSC has opened a generic proceeding to set procedures and standards for contracts between Alabama Power and those customers, with comments due in August.³ As introduced, the Senate bill would have required the PSC to confirm that the utility recovers the incremental costs of serving such a load and that contracts produce benefits for other customers, such as lower system costs or local economic growth.¹⁰

The first contract is already public in part. In late July 2026, a contract for electric service between Alabama Power and Alabama ADC Holdings, LLC, which county property records tie to the proposed Nebius AI factory site in Birmingham’s Oxmoor Valley, was filed with the PSC; the public version withholds the provisions that could affect other customers’ bills.¹

For a developer, the practical effects are timing and disclosure. Build PSC review into the schedule for any load at or above 150 MW, expect questions about who pays for new generation, and read our guide to data centers and electricity ratepayers before public hearings. Contract structure is covered in large-load tariffs and electric service agreements.

Alabama Power told the PSC in October 2024 that it would need roughly 1,200 MW of new capacity by the end of the decade, partly because of data center growth, and that it expected surplus capacity only until 2028.⁶ Its answer, approved in August 2025, was to buy the 895 MW Lindsay Hill gas-fired plant in Autauga County from Tenaska for $622 million to address a projected shortfall by 2029.⁶

The scale of the proposed pipeline explains the regulatory attention. A 2026 analysis found that proposed data centers in Alabama could use more electricity than all of the state’s homes combined.¹¹ Proposed load is not built load, and many announced projects will shrink or stall, but the figure tells you how a utility will read a new request: as one more claim on capacity it still has to build. Ask early how your ramp schedule fits the generation plan, and whether a smaller first phase can be served from existing resources.

Alabama has offered data center tax abatements since 2012 legislation that lets eligible data processing centers abate certain sales and use taxes and property taxes, with property tax abatement terms of 10 to 30 years depending on the level and timing of investment.¹² Before the 2026 changes, projects investing at least $400 million and creating 20 jobs paying at least $40,000 a year could qualify for both sales tax and property tax relief, a combination few states offer.¹³

HB399, enacted April 17, 2026, changed the program in four ways:⁴

• The maximum abatement period falls from 30 years to 20 years.⁴
• Data processing centers with total peak demand of 100 MW or more must pay certain taxes on purchases from January 1, 2027, with exceptions for some equipment and infrastructure.⁴
• Qualifying centers must make community development investments, such as local utility or education upgrades.⁴
• The deadline to apply for an abatement moves from July 31, 2028, to July 31, 2032.⁴

The 100 MW line matters for hyperscale and AI campuses: their construction purchases may no longer escape state sales and use tax once in service, so model taxes both ways. Abatements are negotiated with local governments, so read our guides to property taxes on data center projects and sales tax exemptions by state, and confirm the current terms with a tax advisor.

Alabama’s data center map runs from former industrial sites to greenfield land. Google built a $600 million data center in Bridgeport, Jackson County, with up to 100 jobs, on the site of TVA’s retired Widows Creek coal plant, and it began operating in 2019.¹⁴¹⁵ It is a textbook case of repurposing a power plant site: transmission, water and industrial zoning were already in place. By 2025 Google was the largest contributor to Jackson County’s tax base.¹⁵

Meta runs a campus in Huntsville and announced an $800 million data center in Montgomery, later expanded to bring total Montgomery investment above $1.5 billion.¹⁶¹⁵ In Jefferson County, the Bessemer City Council voted 5–2 in November 2025 to rezone nearly 700 acres from agriculture to light industrial for a hyperscale campus its developers value at $14.5 billion, over objections about power rates, water supply and the number of permanent jobs.⁵ A lawsuit seeking more disclosure about the council’s decision was dismissed with prejudice on June 22, 2026.⁸

The Bessemer case shows that rezoning can be the critical path even where power is available. See our guide to community engagement for how local concerns tend to surface.

Alabama manages water use through registration more than allocation. Under the Alabama Water Resources Act of 1993, the Office of Water Resources within ADECA requires public water systems and anyone with the capacity to withdraw 100,000 gallons per day or more to register and obtain a Certificate of Use listing each surface or groundwater withdrawal point.⁹ That is a lighter process than the permit regimes in some western states, but it is not a capacity commitment: a certificate records a withdrawal, and it does not tell you whether the river, aquifer or municipal system can supply a campus through a drought.

Water also shows up in local politics. Bessemer residents raised water supply as a central objection to the hyperscale rezoning.⁵ For most Alabama projects the realistic options are a municipal supply contract, an on-site well or river intake registered with OWR, or a cooling design that uses little water. Our guides to water rights and groundwater and municipal water and sewer capacity cover how to test each option.

1. 01Confirm the serving utility. In TVA territory, model the capacity commitment charge and plan for the 100 MW board step.²⁷
2. 02If the load will reach 150 MW with Alabama Power, plan for the Act 2026-610 contract review and its disclosure rules.³¹
3. 03Model the HB399 tax terms, especially the 100 MW purchase tax rule from 2027 and the new community investment requirement.⁴
4. 04Check zoning and the local political temperature; many large sites need a rezoning from agricultural use.⁵
5. 05Confirm water supply and the OWR registration path for any withdrawal of 100,000 gallons per day or more.⁹
6. 06Run the usual physical screens: floodplain, wetlands, slope and buildable acreage.

Alabama competes most directly with Georgia, Tennessee and Mississippi. If you want an outside read on a specific parcel, you can get a site reviewed.