As the data center industry continues to rapidly grow, with particular buzz around the proliferation of emerging technologies like Artificial Intelligence (AI), U.S. domestic and global power demands are surging past prior predictions. Consider this case in point:  According to a report from the International Energy Agency earlier this year, a ChatGPT search takes nearly 10x the amount of electricity demand (2.9 Wh) than a typical Google search (0.3 Wh).

Markets across the United States are struggling to come up with creative solutions to meet the needs of these new projects. Georgia Power recently updated their Integrated Resource Plan (IRP) in response to a staggering increase in the state’s load projections. In its 2022 filing, the projected load growth between 2024-2031 was under 400 MW; that projected load is now over 6,600 MW!

The influx of Data Centers and other industrial users has also drained many communities’ supplies of large, ready-to-develop sites, which, in turn, is inhibiting project location decisions. The sky-rocketing demand for sites and power has led political leaders to consider eliminating Georgia’s data center incentive program and banning them in Atlanta’s high-density areas or near transit hubs.

For data center providers, these constraints are making second tier markets like Columbus, Ohio increasingly popular, particularly for cloud service providers who are less driven by proximity to customers than colocation providers. The increased interest is proving to be too much for some second tier markets too, though, and some are looking for ways to cool things down. The demand in Ohio has grown to the point that AEP has filed with the state for permission to require “take-or-pay” service agreements with data center and crypto-currency projects.  If approved, new projects would be required to use 90% of their estimated demand and consumption, preventing them from reserving resources they aren’t using.

Yet, while some areas are feeling the need to put constraints on data center development, other areas are still eager and able to accommodate more, which is a good thing if we are to keep pace with the ever-expanding need for computing power. In July, Meta announced plans to develop a $800 million, 715,000 SF hyperscale data center in Cheyenne, Wyoming, a decision influenced by the area’s infrastructure and available energy. Black Hills Energy agreed to work with Meta to add new capacity including renewable sources.

When making their location decisions, data center providers can set themselves up for success by approaching projects in a way that engages utility providers as strategic partners. Establishing a relationship and mutual flow of information from the onset of the project can help set clear expectations and establish needs from both sides. These kinds of relationships can help both utility providers and communities strategize on ways to clearly meet ongoing energy demands.

An old industry adage is that economic development is a team sport. Today’s tight energy market makes a team approach more important than ever.  Data centers are increasingly dependent on strategic partnerships with utilities and communities, but opportunities still exist to create win-win solutions.  Our utility practice at BLS is focused on helping clients identify the right partners and build the right relationships for long-term success.

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