Pennsylvania Governor Josh Shapiro signed Executive Order 2026-05 on August 18, fundamentally changing how the state reviews permits for data centers with peak demand exceeding 25 MW. According to reports from the state, the order takes effect immediately and creates two distinct review tracks based on developer compliance with state requirements. The new framework addresses an unprecedented surge in data center proposals, with DEP becoming aware of over 100 projects in publicly sourced databases, and 58 projects engaged with DEP to discuss permitting at some level of formality. Of those projects, only 5 have received all necessary permits required for their first phase of development, with 15 having applied for at least one DEP permit in the last year.
The order establishes the Governor's Responsible Infrastructure Development (GRID) Requirements, which developers must now sign as legally binding consent orders to access the state's permitting process. As Governor Shapiro emphasized during Tuesday's press conference, "If a developer refuses to comply with those requirements, they will have no pathway of getting the necessary approvals to build a data center in Pennsylvania." Developers who commit to these requirements can sign a consent order with the Department of Environmental Protection, receiving a rolling review of their applications. Alternatively, developers who decline this commitment must wait until all applications are filed and reviewed, and lose access to two state programs that guarantee permit turnaround times. The GRID Requirements stipulate that developers must pay the full cost of new electricity generation, transmission, and distribution infrastructure without shifting costs to Pennsylvania households and businesses, commit to open community engagement including detailed outreach plans, hire and train local workers, and meet strict environmental protection standards including water conservation requirements.
The order introduces strict penalties for non-compliance, with Governor Shapiro stating that developers who refuse to comply "will be disqualified from receiving the existing exemption on sales tax on data center equipment." This represents a significant shift from the current system, as the sales tax exemption was put in place two years prior to Shapiro being elected as governor. The penalties are designed to ensure developers meet all GRID requirements, which include bringing their own power and paying for all electricity costs, obtaining increasingly significant portions of power from clean energy sources like solar, advanced nuclear and battery storage, respecting local communities through transparency and community benefits agreements, and earning local legal approval before state approval. As Shapiro emphasized, "We will not be bullied by these developers. We will not be bulldozed by the lawyers for these big tech companies."
The Special Counsel for Energy Affordability will engage with the Pennsylvania Public Utility Commission to ensure data center development does not shift energy costs onto Pennsylvania households and businesses. Key initiatives include establishing protocols for data centers to lose electric service before other customers during grid stress events, working with PUC to charge data centers for reliability backstop auction costs rather than other customers, and supporting PUC development of transparent electricity demand forecasting protocols. As reported by the PJM Independent Market Monitor, data centers drove $29.4 billion in capacity charges to ratepayers across PJM Interconnection's last four base residual auctions, representing 46% of total auction costs. The Department of Revenue will also update the Computer Data Center Equipment Exemption Program Guidelines to ensure applicants comply with GRID Requirements.
The new framework has earned support from a broad coalition including environmental advocates, organized labor, industry leaders, and local government stakeholders. Rob Bair, President of the Pennsylvania State Building & Construction Trades Council, stated that the GRID principles outline a reasonable approach ensuring responsible data center developers have a path to build in Pennsylvania. Commissioner John Smith of Hampden Township noted that the order provides communities like Hampden another layer of protection while allowing local decision-making. Dave Sanko, Executive Director of PA State Association of Township Supervisors, praised the fundamental principle that land-use decisions are best made at the local level. Governor Shapiro emphasized that "This executive order represents the most stringent requirements in the entire country." The order also includes a third requirement that developers must meet the constitutional obligation under Article 1, Section 27, which guarantees each Pennsylvanian the right to clean air and pure water, representing the state's commitment to environmental protection standards.
