Across the US, tech companies large and small are building data centers to handle generative AI, streaming, social media and myriad other activities that require massive amounts of data. In the past, Washington was a top destination for data centers, but data centers also require tremendous amounts of electricity. While there has been sufficient electricity so far, the scale of the expected growth of data centers and the difficulties with adding more electricity to the grid are reaching a point where there may soon be insufficient power. New solutions are critically needed.
Data Centers require Massive Amounts of Electricity
Data centers have so far been concentrated in locations where electricity is available, and local regulators allow or even encourage more data centers. The eight main North American data center markets, according to Reuters, are Northern Virginia, Dallas Fort Worth, Silicon Valley, Chicago, Phoenix, the New York Tri-State Area, Atlanta, and Hillsboro in Oregon.
The data center industry is entering a transformative era as artificial intelligence (AI) drives unprecedented energy demands, Cleantech Group explained. With advanced AI models requiring up to a thousand times the power of their predecessors, the power consumption of data centers is expected to accelerate dramatically. Indeed, Gartner forecasts that electricity consumption by data centers will grow 160 percent within two years, reaching 500 terawatt-hours per year in 2027. The number of new data centers and the expansion of generative AI may well be governed by the availability of power to run them, with 40 percent of existing AI data centers operationally constrained by power availability by 2027.
Renewables can Help Fill the Gap
Given the shortage of power for the industry, data center operators have begun constructing renewable energy facilities near enough to the data centers to meet the demand.
Indeed, Reuters said US power demand is creating new opportunities for solar and wind, with low costs making solar the primary alternative. For instance, Dominion Energy plans to install more than 20 GW of solar in Virginia over the next 25 years, representing almost two thirds of new power generation, mostly comprised of wind, battery storage and nuclear.
A large part of the demand is driven by Amazon, Apple, Google, Meta and Microsoft. SP Global noted. These five “hyperscalers”, large cloud service providers that offer computing and storage services at a massive scale, rely heavily on data centers as part of their core business. The energy demand from data centers and commitments to be 100 percent renewable have resulted in these five companies alone accounting for more than 45 GW of corporate renewable purchases worldwide - over half of the global corporate renewables market. And along with renewables, Cleantech Group opined, these hyperscalers are driving innovation such as modular designs and advanced cooling.
Both Amazon and Microsoft were founded in Washington and, SP Global said, are unsurprisingly investing in datacenter campuses across the region. Amazon leads with 17 facilities and Microsoft has 16. Meta and Google have 18 facilities between them. Planned new datacenters will add an estimated 900 MW of load in Washington and Oregon combined.
However, while these renewable energy sources will help, Siemens Smart Infrastructure Chief Executive Matthias Rebellius told the Wall Street Journal that he believes there currently isn’t enough green energy around the world to power data centers. Since energy sourcing is one of the main factors holding back the data-center market, some larger players are now considering nuclear power, and hydrogen could be talked about in the long run.
Construction Dive similarly found that tech giants are increasingly turning to nuclear power to meet the growing energy demands of data centers. Recent projects include Amazon’s funding of four small modular reactors in Washington state, Google’s agreement with Kairos Power to develop small modular reactors by 2030 and Microsoft’s power purchase agreement to restart Three Mile Island in Pennsylvania. These projects are, however, still awaiting regulatory approval.
Current Power Production in Washington is Not Enough
Washington state’s place in the data center world has waxed and waned over time. Ample hydropower and some of the lowest power rates made it a top destination with average power rates ranging between $0.028 and $0.035 per kW in the rural market compared to $0.08-$0.09 in Seattle and $0.126-$0.23 in Silicon Valley, CBRE explained.
Now, however, electricity is no longer as readily available. Washington also expects the electric load to nearly double. At the same time, the state plans to reduce fossil fuels by 28%, according to Washington’s 2021 Energy Strategy. To meet the new load, enormous amounts of new renewable generation requiring potentially millions of acres of land must be built. All that land will need permits, which have proven to be significant roadblocks to building new renewable energy supplies. Over 70% of projects are canceled due to public resistance.
A forecast by the Northwest Power and Conservation cautions that data centers could consume as much as 4,000 average megawatts of electricity by 2029, the Seattle Times wrote. If that prediction becomes a reality, the region faces serious risks, as data centers would require “an unprecedented level of coordination and pace of development to overcome bottlenecks” in transmission and distribution of power. Such a large shortfall in power could trigger emergency measures, such as purchases of expensive power from other markets or statewide conservation requirements.
In some places, that forecast of a shortage is already becoming a reality. In Grant County, for instance, Propublica said, the utility district owns two public dams that can power more than 1.5 million homes. For decades, the county had enough clean hydroelectricity to meet its own power needs. Data center companies attracted by cheap electricity built data centers and local officials welcomed the industry’s economic potential. With demand soaring and the power from dams being finite, however, Grant County has been forced to look to other sources of energy. The state Legislature encouraged similar growth of the data center industry through a massive tax break in 2019, and at least three utilities in other Washington state counties are similarly facing difficulties meeting the voracious demands of data centers.
In response to a Seattle Times-ProPublica investigation last year into the clean-energy and economic impacts of Washington's power-hungry data center industry, Governor Bob Ferguson recently signed an executive order that mandates a comprehensive evaluation of the effects of data centers on energy consumption, state tax revenue, and job creation. Additionally, it calls for an assessment of the state's substantial tax incentives for the data center industry, says ProPublica. The workgroup formed under this order will include representatives from state departments, electric utilities, environmental groups, labor organizations, and industry stakeholders who will collaborate to develop recommendations that address the energy demands of data centers while promoting economic growth and environmental responsibility
While renewables will take time to build, forward-looking data center operators are clearly exploring their options and solar is a key factor in their future.
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