Page: Turn aging dams to AI powerhouses

By Timothy Page on February 13, 2026 • ( 1 Comment )

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Direct hydro for Vermont data farms: reliable, renewable, local

By Timothy Page

In an era where artificial intelligence and cloud computing are devouring electricity at an unprecedented rate—projected to triple national data center power demand to over 11% of the U.S. grid by the next decade—Vermont stands at a crossroads. The Green Mountain State, with its lush rivers and commitment to renewables, could pioneer a sustainable model by repurposing aging hydroelectric dams to directly power server farms, bypassing the grid for efficiency and resilience. This isn’t just about keeping the lights on for AI; it’s about revitalizing underutilized infrastructure, boosting local economies, and aligning with Vermont’s environmental ethos without the intermittency pitfalls of solar or wind. Drawing from real-world examples and Vermont’s own hydro assets, this commentary argues for dedicated hydro tie-ins as a pragmatic path forward.

Reliability meets renewability

Traditional grid-tied power for data centers often strains utilities, leading to higher rates and fossil fuel reliance—issues Vermont knows well, with its electricity already 92% carbon-free, largely thanks to hydro imports from Canada. But why not go direct? Dedicated hydroelectric setups offer baseload power that’s steady, unlike solar’s seasonal dips in Vermont’s cloudy winters. Hydropower converts up to 90% of water’s energy into electricity, far outpacing fossil fuels, and provides flexibility to ramp up or down based on server loads. For servers, this means 24/7 uptime without massive batteries or backups, reducing operational costs by avoiding grid transmission losses (up to 5-10%) and volatility.

Environmentally, hydro trumps alternatives: It emits near-zero greenhouse gases during operation, curbs air pollution, and supports Vermont’s goal of 100% renewables by enhancing grid stability for intermittent sources like solar. In Vermont, where hydro already supplies about 50% of in-state generation, direct tie-ins could minimize water use impacts—run-of-river designs maintain natural flows, preserving ecosystems better than large reservoirs. This aligns with the state’s push against fossil backups, as seen in warnings about AI-driven demand spiking costs across New England. Economically, it could generate 2-3x revenue over grid sales, per hydro-data center models, while creating jobs in rural areas.

Hydro-powered data centers in action

Look beyond Vermont: In Wisconsin, Consolidated Water Power Company’s collaboration with DPO deployed a 20 MW AI data center at a hydro facility, boosting revenues 257% over grid sales and rescuing a marginal asset. Washington’s CenturyLink facility taps Columbia River hydro for 30 MW of clean power, leveraging the region’s 85% hydroelectric supply for low-cost, reliable operations. Switzerland’s Data Center Light runs on 99.9% in-house hydro, producing 8 GWh annually from a basement turbine, showcasing micro-scale viability. Even Brazil’s renewable grids mix hydro with wind for hyperscale campuses, proving hybrid potential. These examples highlight hydro’s edge: In Hatfield, Wisconsin, flexible computing curtailed during dry spells, prioritizing grid needs while maintaining profitability. Vermont, with its riverine terrain, could replicate this, turning liabilities like aging dams into assets.

Vermont’s Prime Candidates: from dam decommissioning to data powerhouses

Vermont’s Dam Task Force eyes removing 47 structures for ecological restoration, but redevelopment for dedicated hydro could offer a win-win. Top contenders include the Green River Dam in Hyde Park (1.1 MW, supporting 200-400 mid-range servers), Wrightsville Hydro in Montpelier (0.8 MW, for 100-200 servers), Institute Pond Dam in Lyndon (0.5-1 MW potential), and Pownal Dam (0.4 MW). These aging sites—built pre-1950s, often uneconomic for grid use—face high removal costs ($1-4M each). Retrofitting with turbines for direct server tie-ins could cost half that, preserving reservoirs for recreation while powering edge computing or AI nodes.

Take Green River: Its reservoir ensures reliable flow, ideal for co-located servers in Vermont’s cold climate, which aids natural cooling and cuts energy overhead by 20-40% via PUE efficiencies. Wrightsville, near fiber optics in central Vermont, could offset grid strain from growing tech demands, as Microsoft’s regional AI surge warns of 600% demand growth by 2030. By dedicating output, these dams avoid FERC relicensing hassles for grid ties, focusing on private partnerships.

Policy and incentives for a hydro-data future

Challenges abound: Environmental groups prioritize removals for river connectivity, and Vermont currently lacks targeted tax incentives specifically for data centers, unlike 36+ other states that offer sales tax exemptions, property tax abatements, or credits tied to investment and job creation thresholds (as of 2025-2026 legislative trends). For instance, states like Virginia, Texas, and Nevada provide multi-year exemptions on equipment, electricity, and property taxes for qualifying large-scale facilities, often requiring minimum investments of $50-250 million and job creation. Vermont, by contrast, has no dedicated data center incentive program, which could deter hyperscale operators but suits smaller, hydro-dedicated edge or AI facilities.

However, Vermont offers flexible, performance-based tools that could be adapted or expanded for hydro-powered data centers. The Vermont Employment Growth Incentive (VEGI) program, administered by the Vermont Economic Progress Council (VEPC), provides discretionary cash grants to businesses that create net new full-time jobs and make qualifying capital investments in the state. VEGI awards are based on projected economic benefits, including payroll, capital spending, and multiplier effects—ideal for data center projects that bring high-wage tech roles (e.g., engineers, technicians) to rural areas near aging dams. Businesses apply for initial and final approval, with incentives paid out over time as milestones are met. Recent examples include manufacturing expansions, but the program applies broadly to information technology and energy-related projects, making it a strong fit for hydro-server co-location.

Complementing VEGI, Vermont’s Research and Development (R&D) Tax Credit offers a state credit equal to a percentage of federal R&D expenses (typically 27% of the federal amount), supporting innovation in AI, computing efficiency, or renewable integration—key for data centers optimizing hydro loads or developing demand-response tech. The Investment Tax Credit encourages investments in energy projects, including qualifying advanced energy initiatives, which could encompass hydro retrofits or efficiency upgrades at dam sites.

For renewables alignment, Vermont’s broader clean energy framework provides indirect boosts. The Small Scale Renewable Energy Incentive Program (SSREIP), funded by the Clean Energy Development Fund, offers rebates for micro-hydro and other small renewables (though scaled-down for larger hydro). Businesses could layer federal Investment Tax Credits (ITC) for hydro/storage additions (up to 30%+ with bonuses for domestic content or energy communities), plus Vermont’s accelerated depreciation options. Utility programs, like those from Green Mountain Power or Vermont Electric Cooperative, include energy transformation incentives and bill credits for efficiency or load management—potentially applicable to data centers with flexible, hydro-backed operations.

Pending legislation like H.727 (the “Vermont Sustainable Data Centers Act,” introduced in January 2026) could shape the future by regulating large facilities (>20 MW) via certificates of public good, assessing impacts on grid reliability, environment, and renewables goals. It proposes demand-side management, including potential renewable energy mandates, water conservation, and microgrid development—opening doors for hydro-dedicated setups to qualify under sustainability criteria. If passed or amended, it might incorporate incentives like renewable mandates or efficiency thresholds to maintain any future exemptions, mirroring trends in other states.

Vermont could build on these by expanding VEGI eligibility explicitly for hydro-data projects, offering streamlined permitting for dam retrofits, or creating pilot grants via the Agency of Commerce and Community Development. Partnerships with utilities like Green Mountain Power—already hydro-savvy—could facilitate, as seen in Burlington’s 100% renewable municipal utility model through local hydro procurement.

Critics may decry hydro’s past impacts, like ecosystem disruptions from large Quebec imports, but small-scale, run-of-river retrofits minimize these—enhancing habitats by stabilizing flows. With data centers guzzling water elsewhere (up to 5M gallons/day), Vermont’s hydro-cooling integration could slash consumption.

By leveraging and enhancing existing tools like VEGI and R&D credits, while advancing sustainable frameworks in bills like H.727, Vermont can attract responsible, hydro-powered data investment without broad tax giveaways. This targeted approach preserves fiscal caution while positioning the state as a leader in green, reliable computing.

A vision for Vermont’s tech renaissance

Vermont risks missing the AI boom if it defaults to dam removals without exploring hydro-data synergies. By dedicating power from sites like Green River and Wrightsville, the state could support thousands of servers sustainably, create tech jobs, and lead in green computing. This isn’t greenwashing—it’s pragmatic innovation, substantiated by global precedents and local potential. Policymakers, utilities, and entrepreneurs: Let’s dam the grid dependency and flow toward a hydro-powered, tech-forward future.

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