This article was originally posted by South Dakota Searchlight.

Massive data centers used for cloud computing and artificial intelligence are consuming enormous amounts of energy, and developers are eyeing South Dakota as a potential location, regulators say.

These “hyperscale data centers,” or “hyperscalers,” are designed to handle immense computing demands and are often operated by tech giants. The centers are characterized by their large size — often tens of thousands of square feet — and thousands of computer servers that require significant energy to operate.

Nick Phillips with Applied Digital in Texas, a developer of the centers, highlighted South Dakota’s appeal: a cold climate that cuts down on cooling a room full of hot servers, and abundant wind energy that’s considered one of the most cost-effective renewable energy sources, which can help keep operating costs down.

State regulators are not aware of any hyperscale data centers currently operating in South Dakota. 

“There isn’t a requirement to report hyperscale data centers to the commission, so we don’t have a formal method to track that information,” said Leah Mohr with the Public Utilities Commission. 

Commissioner Kristie Fiegen noted that the state’s largest proposed data center is a 50-megawatt facility in Leola.

“We don’t know what’s coming,” she said. “But the utilities are getting calls every week from people trying to see if they have the megawatts available.”

The commission recently hosted a meeting in Pierre with representatives from regional utilities, regional power grid associations and data centers. The goal was to understand the emerging demands and facilitate an information exchange.

Bob Sahr, a former public utilities commissioner and current CEO of East River Electric Cooperative in Madison, emphasized the scale of energy needed.

“We’re talking loads that eclipse some of the largest cities in South Dakota,” he said.

A single data center campus can require anywhere from 300 to 500 megawatts of electricity to operate. One megawatt can power hundreds of homes. By one estimate, there are over 1,000 hyperscalers worldwide, with the U.S. hosting just over half of them.

Ryan Long, president of Xcel Energy, headquartered in Minneapolis, illustrated the extreme nature of the demand.

“We now have, I would say, north of seven gigawatts of requests across the Xcel Energy footprint for data centers to locate in one of our eight states,” he said. “And I’ll be very frank that there’s no way that we’re going to be able to serve all of that in a reasonable amount of time.”

Protecting existing customers from potential costs or energy shortages is another shared concern. Utility representatives emphasized the need for coal and natural gas to maintain a reliable “base load” when renewable sources like wind and solar are unavailable. Arick Sears of Iowa-based MidAmerican Energy underscored the point, noting that costs for each data center should depend on how much energy it consumes. 

“We need to ensure that large-scale energy users are paying their fair share,” he said.

Utilities also flagged the risk of “stranded costs,” referring to a data center ceasing operations, leaving a utility with added infrastructure to meet a demand that no longer exists. They said financial safeguards will need to be written into power agreements with hyperscalers.

Speed of deployment is another pressing issue. Representatives from Montana-Dakota Utilities, headquartered in North Dakota, and NorthWestern Energy, headquartered in Sioux Falls, noted that some facilities expect to be operational within months of making a deal, straining infrastructure, planning and resources.

Grid managers Brian Tulloh of Indiana-based Midcontinent Independent System Operator and Lanny Nickell of Arkansas-based Southwest Power Pool echoed those concerns. They warned that data center growth is outpacing the grid’s ability to meet demand and cautioned against decommissioning coal power plants too quickly. Setting aside how much it would cost to produce the required energy, Tulloh estimated that MISO needs $30 billion in electric transmission infrastructure to support the demand from hyperscalers.

“The grid wasn’t designed for that,” Public Utilities Commissioner Chris Nelson told South Dakota Searchlight after the meeting.

Nelson was glad to hear the data centers will include backup generators, similar to hospitals, for power outages or when homes need prioritization. He said some even aim to have huge batteries to power the plant until the generators get going. They would consume massive amounts of diesel and natural gas until the outage is over. 

Nelson said all of this makes modern nuclear energy facilities more attractive. He said few alternative “base load” options remain, and the public has little appetite for ramping up coal power. 

NorthWestern Energy is exploring the possibility of constructing a small nuclear power plant in South Dakota, with an estimated cost of $1.2 billion to $1.6 billion for a 320-megawatt facility. The plant would be the first in the state since a test facility near Sioux Falls in the 1960s. 

The company is conducting a study, partially funded by the Department of Energy. Details about the study and potential plant sites remain confidential. 

Additionally, South Dakota’s Legislature has shown interest in nuclear energy, passing a resolution for further study on the topic that led to the publication of an issue memorandum by the Legislative Research Council.

Massive data centers consuming large amounts of energy have eyes on South Dakota is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.

A top executive with Minnesota’s largest utility says data center growth will not prevent it from meeting the state’s 100% clean electricity law, but it may extend the life of natural gas power plants into the next decade.

“As we take all of that coal off the system — even if you didn’t add data centers into the mix — I think we may have been looking to extend some gas (contracts) on our system to get us through a portion of the 2030s,” said Ryan Long, president of Xcel Energy’s division serving Minnesota and the Dakotas. “Adding data centers could increase the likelihood of that, to be perfectly honest.”

Long made the comments at a Minnesota Public Utilities Commission conference this fall exploring the potential impact of data centers on the state’s 2040 clean electricity mandate.

The expansion of power-hungry data centers, driven by artificial intelligence, has caused anxiety across the country among utility planners and regulators. The trend is moving the goalposts for states’ clean electricity targets and raising questions about whether clean energy capacity can keep up with demand as society also tries to electrify transportation and building heat.

Minnesota PUC commissioner Joe Sullivan organized last month’s conference in response to multiple new data centers projects, including a $700 million facility by Facebook’s parent company Meta that’s under construction in suburban Rosemount. Microsoft and Amazon have each acquired property near a retiring Xcel coal plant in central Minnesota. 

“We need to ensure that our system is able to serve these companies if they come,” Sullivan said, “and that it can serve them with clean resources consistent with state law.” 

Alongside concerns about whether clean energy can keep up with new electricity demand, there’s also an emerging view that data centers — if properly regulated — could become grid assets that help accelerate the transition to carbon-free power. Several stakeholders at the Oct. 31 event shared that view, including Xcel’s regional president.

A 100-megawatt data center could generate as much as $64 million in annual revenue for Xcel, enough to help temper rate increases or cover the cost of other projects on the system, Long said. He said the company wants to attract 1.3 gigawatts worth of data centers to its territory by 2032, and it thinks it can absorb all of that demand without harming progress toward its 2040 clean energy requirement.

Long said data center expansion will not change the company’s plans to close all of its remaining coal-fired power plants by 2040, but it may cause them to try to keep gas plans operating longer. Ultimately, meeting the needs of data centers will require more renewable generation, battery storage, and grid-enhancing technology, but rising costs and supply chain issues have slowed deployment of those solutions.

Other utilities echoed that optimism. Julie Pierce, Minnesota Power’s vice president for strategy and planning said the company has experience serving large customers such as mines in northeastern Minnesota and would be ready to serve data centers. Great River Energy’s resource planning director Zachary Ruzycki said the generation and transmission cooperative “has a lot of arrows in its quiver” to accommodate data centers.

Ruzycki noted, too, that much of the interest it has received from data center developers is because of the state’s commitment to clean energy. Many large data center operators have made corporate commitments to power them on 100% carbon-free electricity, whether from renewables or nuclear power.

Pete Wyckoff, deputy commissioner for energy at the Minnesota Department of Commerce, expressed doubts about the ability to meet unchecked demand from data centers. Even with the state’s recent permitting reforms, utilities are unlikely to be able to deliver “power of any sort — much less clean power — in the size and timeframes that data centers are likely to request.”

He sees hydrogen, long-duration batteries, carbon capture, and advanced nuclear among the solutions that will eventually be needed, but in the short-term the grid could serve more data centers with investments in transmission upgrades, virtual power plants, and other demand response programs.

“These solutions can be deployed faster and cheaper than building all new transmission and large clean energy facilities, though we’ll need those, too,” Wyckoff said.

Aaron Tinjum, director of energy policy and regulatory affairs for the Data Center Coalition, said data centers provide the computing power for things like smart meters, demand response, and other grid technologies. The national trade group represents the country’s largest technology and data center companies.

“We can’t simply view data centers as a significant consumer of energy if they’re all helping us become more efficient, and helping us save on our utility bills,” Tinjum said. 

He also pointed to data centers’ role in driving clean energy development. A recent report from S&P Global Commodity Insights found that data centers account for half of all U.S. corporate clean energy procurement. 

The true impact of data centers on emissions and the grid is complicated, though. Meta, which participated in the recent Minnesota conference, says it matches all of its annual electricity use with renewable energy, but environmental groups say there is evidence that its data centers are increasing fossil fuel use and emissions in the local markets where they are built.

Amelia Vohs, climate program director with the Minnesota Center for Environmental Advocacy, raised concerns at the conference about whether data center growth will make it harder to electrify transportation and heating. She pointed to neighboring Wisconsin, where utilities are proposing to build new gas plants to power data centers.

“This commission and the stakeholders here today have all done a ton of work and made great progress in decarbonizing the electric sector in our state,” Vohs said. “I worry about possibly rolling that back if we all of a sudden have a large load that needs to be served with fossil fuels, or [require] a fossil fuel backup.” 

The Minnesota Attorney General’s Office argued that state regulators need to scrutinize data center deals to make sure developers are paying the total cost of their impact on the system, including additional regulatory, operational and maintenance work that might be required on the grid.

In an interview, Sullivan said he was impressed by tech companies’ interest in having data centers in Minnesota because of the 2040 net zero goal, not despite it. They want to buy electricity from Minnesota utilities rather than build their own power systems or locate in neighboring states, he added, and the October meeting left him confident that “we can deal with this.”

Xcel Energy says data center growth won’t get in the way of 2040 clean energy target in Minnesota is an article from Energy News Network, a nonprofit news service covering the clean energy transition. If you would like to support us please make a donation.