BY ALLISON HAMILTON
Data centers are the backbone of the internet. They store and manage everything from social media to cloud computing, artificial intelligence and our favorite streaming services. As more people and businesses transition to digital operations, the number of data centers is rapidly increasing. While many of these centers were once built near large cities, more are now being sited in rural areas.
Electric cooperatives are receiving regular requests from companies seeking to build large data centers within their service territories. These requests bring both significant opportunities and major challenges.
Why are data centers coming to rural areas?
There are several reasons why companies are choosing rural locations for their data centers:
- More land. Rural areas have plenty of space for large buildings.
- Resource diversity. Electric cooperatives own and operate reliable sources of energy.
- Lower costs. Land and labor are usually less expensive outside of cities.
- Tax breaks. Local and state governments may offer tax benefits to attract these businesses.
Data centers can be huge, sometimes requiring more electricity than all the co-op’s members combined. This increased demand for electricity brings several new opportunities for electric cooperatives.
New jobs and growth. Data centers can bring jobs and revenue to small communities.
Stable revenue. These centers require a lot of power and typically sign long-term contracts. This provides the co-op with steady income, which can help pay for system upgrades and keep rates lower for other members in the community.
Improved infrastructure. To serve a large data center, the co-op might need to build new power lines or substations. While this is expensive, it can also enhance service for all co-op members.
New potential challenges
While data centers create significant opportunities for electric co-ops by driving demand and investment, they also present new challenges in meeting increased electricity needs while maintaining reliable and resilient power delivery.
High upfront costs. Building the new infrastructure to power a data center can cost millions, which is why co-ops work diligently with data center customers to ensure upfront costs are covered.
Risk of losing a big customer. If the data center moves away or shuts down, the co-op could be left with expensive equipment it no longer needs. This could negatively impact the co-op’s finances.
Permitting and siting. Obtaining permission to construct new power lines and substations requires time. There may be zoning rules, environmental reviews and public meetings that slow things down.
Planning for the future
To manage both the risks and rewards that data centers present, electric co-op leaders are taking a careful and informed approach. They are working closely with their generation and transmission providers, economic development offices and financial experts to plan these projects.
Co-ops are also ensuring contracts with data center operators include protections for the co-op. For example, if the data center leaves early, the company may be liable for paying part of the infrastructure costs. Forecasting tools are also helping co-ops understand how the new load will impact the local system.
Serving large data centers could be a game-changer for many electric cooperatives. These projects can bring jobs, revenue and new technology to co-op communities. But they also come with financial risks and planning challenges. By asking the right questions and building smart partnerships, electric cooperatives are poised to make decisions that serve their members well – now and in the future.
Allison Hamilton writes for the National Rural Electric Cooperative Association.
