Overview
Delaware does not offer data center-specific incentives but has general business development programs that large projects may qualify for. The state’s policy landscape is being shaped by controversy over a proposed 1.2-gigawatt campus near Delaware City, which has prompted New Castle County to draft new land use rules requiring special permits, residential setbacks, and water use controls for large data centers.[1][2] State legislators are also discussing a separate utility rate class to prevent cost-shifting to residential customers.[2]
Incentives
Delaware Strategic Fund and Site Readiness Fund
The Delaware Division of Small Business administers two infrastructure and expansion programs that could apply to qualifying data center projects. The Delaware Strategic Fund provides grants and loans for business retention and expansion. The Site Readiness Fund covers infrastructure improvements for commercial and industrial sites.[1]
Economic Development Tax Credits
Delaware offers several tax credits administered by the Division of Revenue that are not industry-specific but could apply to data centers:
- New Business Facility Tax Credit — available for new capital investment in qualifying facilities
- New Economy Jobs Tax Credit — available for job creation in targeted industries
- Research and Development Tax Credit — available for qualifying R&D expenditures[1]
Transportation Infrastructure Investment Fund (TIIF)
TIIF grants support infrastructure needs for job-generating projects. Data centers that meet job creation thresholds could apply for funding to upgrade roads, utilities, or other public infrastructure needed to support facility development.[1]
Requirements and Conditions
New Castle County Proposed Special-Use Permit
New Castle County is drafting an ordinance that would create a separate land use category for data centers and require a special-use permit for any new facility or expansion over 20,000 square feet. The proposal includes these restrictions:
- Data centers would be allowed only in industrial and heavy industrial zones
- 1,000-foot buffer from residential areas required
- Mandatory battery energy storage systems for grid stability
- Noise, traffic, and water use standards to be set through project review
- Open-loop cooling prohibited unless wastewater is used as the water source
- Applicants must demonstrate sufficient grid capacity or provide onsite generation[2]
The ordinance is under development as of late 2025 and has not been enacted.
Zoning Constraints Near Delaware City
The proposed 1.2-gigawatt campus near Delaware City spans two parcels with different zoning designations. Zoning currently allows data centers on one parcel but not the other, requiring a rezoning action before the full project could proceed.[3]
Utility and Grid Rules
State Representative Frank Burns announced plans to introduce legislation creating a separate utility rate class for large energy-use facilities such as data centers. The goal is to prevent the cost of serving these high-demand customers from being shifted to residential and small business ratepayers.[2] No formal bill text has been introduced as of January 2026.
Water and Environmental Rules
Coastal Zone Act
Delaware’s Coastal Zone Act regulates manufacturing, heavy industry, and bulk product transfer activities in the state’s coastal zone. The law prohibits new heavy industrial development in the coastal zone except at 14 grandfathered sites that may seek conversion permits.[4]
The Delaware Department of Natural Resources and Environmental Control (DNREC) must determine whether a proposed activity is prohibited, unregulated, or requires a permit. If large data centers are classified as heavy industry, any coastal zone project would need to demonstrate eligibility under the Act’s conversion permit process or secure a determination that the activity is unregulated.[4]
Water Use Conditions (Proposed County Ordinance)
The draft New Castle County ordinance would prohibit open-loop cooling systems unless the facility uses wastewater as its water source. This restriction would require most data centers to use closed-loop or hybrid cooling systems, limiting freshwater withdrawals for direct cooling.[2]
What to Watch
- New Castle County special-use permit ordinance — County Council has not scheduled a final vote as of January 2026. The ordinance could set precedent for Delaware’s approach to data center siting.
- Utility rate classification legislation — Rep. Burns’ proposal for a separate rate class has not been introduced. Watch for bill text and public hearings in the 2026 legislative session.
- Coastal Zone Act applicability — DNREC has not issued a formal determination on whether data centers are heavy industry under the Coastal Zone Act. A ruling on the Delaware City project would clarify the regulatory pathway for future coastal zone proposals.
Sources
[1] Delaware Division of Small Business, “Incentives & Credits,” State of Delaware, Division of Small Business, n.d., https://business.delaware.gov/incentives/ (accessed January 7, 2026).
[2] Sarah Mueller, “Delaware data center proposal continues to face public opposition as state and local officials propose new regulations,” WHYY, September 5, 2025, https://whyy.org/articles/delaware-city-data-center/ (accessed January 7, 2026).
[3] Olivia Marble, “Proposed Delaware data center’s energy needs would dwarf all state households,” Spotlight Delaware, July 21, 2025, https://spotlightdelaware.org/2025/07/20/proposed-delaware-data-center-energy/ (accessed January 7, 2026).
[4] Delaware Department of Natural Resources and Environmental Control (DNREC), “Coastal Zone Act Program,” State of Delaware, n.d., https://dnrec.delaware.gov/coastal-zone-act/ (accessed January 7, 2026).