New Jersey has approved a $250 million tax incentive for a major artificial intelligence data center, even as residents face some of the steepest electricity bill increases in years.
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The tax break was awarded to CoreWeave for its 392,600-square-foot facility under construction in Kenilworth. The incentive was approved in November 2025 under former Gov. Phil Murphy through the New Jersey Economic Development Authority.
Now, under Gov. Mikie Sherrill, the state faces growing questions about how to balance AI-driven economic development with affordability concerns tied to rising energy demand.
The $250 million award is structured as $50 million annually over five years, tied to a 10-year commitment from CoreWeave to remain in the state and retain jobs. The project is valued at approximately $1.8 billion.
CoreWeave says it will create 143 jobs paying at least 120 percent of the county’s median salary. The incentive is performance-based, meaning the state can reduce or revoke credits if job or residency commitments are not met.
The subsidy falls under the state’s Next New Jersey AI program, signed into law in July 2024.
“AI will be a transformative industry that will change lives and grow our economy, and New Jersey is ready to take the lead,” Murphy said in a prepared statement as he signed the legislation.
Fully built, the Kenilworth campus could require up to 250 megawatts of electricity—roughly equivalent to the annual consumption of about 211,000 U.S. homes.
The data center’s development comes as electricity prices in the state have surged. Capacity market costs—set by PJM Interconnection, the grid operator serving 13 states and Washington, D.C.—have climbed due in part to increased power demand from data centers and delays in bringing new generation online.
Sherrill’s administration says it supports attracting new industries while protecting residents from bearing the financial burden of that growth.
“New Jersey has earned a strong reputation as a hub for innovation, and Gov. Sherrill welcomes new opportunities to attract businesses—such as data centers—to our state,” said Maggie Garbarino, the governor’s deputy press secretary.
She added: “At the same time, the governor supports strong policies that do not burden residents with covering additional costs resulting from data center energy demand.”
CoreWeave and the New Jersey Economic Development Authority declined to comment.
Policy analysts question whether a fast-growing, capital-rich AI industry requires public subsidies at all.
“If AI is a booming industry, and this is an area where companies are throwing hundreds of billions of dollars into AI capital investment, why exactly does the state need to subsidize it?” said Peter Chen, senior policy analyst at New Jersey Policy Perspective.
Chen also raised concerns about community oversight. Previous state incentive programs such as Aspire and Emerge required community benefits agreements for projects costing at least $10 million. Those agreements ensured local engagement and defined public returns.
The Next New Jersey AI program does not mandate similar agreements. Chen noted that CoreWeave is only required to meet “minimum environmental and sustainability standards.”
“And so the concern is, are we spending the state’s dollars, the state budget, on a program that actually benefits state residents? Or are we spending it on something that might actually have harms for state residents?” said Chen.
State Sen. Raj Mukherji, a primary sponsor of the AI legislation, argues that economic competitiveness and ratepayer protection are not mutually exclusive.
“I think that we have a responsibility to our ratepayers to make sure data centers are paying for the upgrades that they require. But that doesn’t mean that we shouldn’t be pro-growth or competitive,” Mukherji said.
The Legislature previously passed a bill that would have required large data centers to pay electricity tariffs to offset grid impacts, but Murphy pocket-vetoed the measure before leaving office in late 2025. The proposal has since been reintroduced in the new session.
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The debate unfolding in New Jersey mirrors a national reckoning over AI infrastructure. Data centers are increasingly seen as both economic engines and significant contributors to electricity demand growth.
As states compete to attract AI firms, they must also confront infrastructure constraints, grid reliability, and clean energy targets. In regions served by PJM, regulators are already grappling with how to expand generation capacity while managing costs for households.
For New Jersey, the question is whether the economic upside—job creation, tax revenue, and positioning as an AI hub—will outweigh the near-term strain on electricity markets and consumer bills.
Construction on the Kenilworth facility began in September 2025, with operations expected to begin in early 2027.
As Gov. Sherrill prioritizes affordability amid a broader cost-of-living crisis, the CoreWeave incentive is likely to remain a focal point in debates over how aggressively the state should court AI investment—and who ultimately pays for its power.
Originally reported by Rambo Talabong in Inside Climate News.
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