Are data centers worth the resources they use?

By STEVE BRAWNER 

When are huge data centers worth the electricity and water they use, and when are they not? If they are, how can communities ensure they pay their fair share?

Both communities and the state of Arkansas should answer those questions on a case-by-case basis. 

The issue was on display in a pair of stories in the Arkansas Democrat-Gazette’s Business section July 20. Three data centers – huge warehouses full of computers needed for the internet and artificial intelligence – are planned for Conway, Little Rock and West Memphis. Together they are valued at $12 billion. They would service unidentified Fortune 100 companies. 

The Democrat-Gazette reported that the West Memphis site would be by far the largest – $10 billion with five big buildings on 920 acres. It is expected to create 300 jobs for the region. 

It’s not been disclosed how much electricity these three data centers would consume, but it would be substantial. 

Art Peskoe, director of Harvard Law School’s Electricity Law Initiative, was quoted in the Democrat-Gazette saying the biggest data centers in late 2023 consumed several hundred megawatts of electricity. That’s equivalent to the city of Cleveland’s peak demand. 

That was 2023. By the end of 2024, companies were announcing data centers consuming far more electricity – one to two gigawatts. That’s what a typical nuclear reactor produces. 

Arkansas has one of those in Russellville. But only one.

It’s not just data centers that use a lot of electricity. Electric cars do as well. Bigger electric trucks use a huge amount, although it’s not clear if those are ever going to be deployed much outside of specialized, short routes where they can recharge often.

Somehow, the state’s electric utilities will have to create new generating capacity to meet this increasing demand. Arkansas lawmakers made it easier for them to do so this past legislative session. Act 373 by Sen. Jonathan Dismang, R-Searcy, lets public utilities finance infrastructure projects by raising rates during construction. Increases are limited to 10% below the national average. The Public Service Commission can increase the limit if it determines a project is in the public’s interest. Previously, utilities waited until a project was completed to raise rates, and then recouped their costs over time. 

It’s not just electricity. Data centers also use a lot of water to cool those buildings in response to the heat the computers generate. The Democrat-Gazette quoted another expert saying a medium-sized data center uses 110 million gallons of water annually. A large one consumes 1.8 billion gallons. Another article detailed the challenges confronting communities and residents when big data centers move into town and start using up a lot of water. In Newton County, Georgia, water rates are increasing and the county could face a water deficit by 2030. If the utility doesn’t upgrade, local residents might eventually have to ration water.

Arkansas has a better water situation than some other states considering all the rivers that run through it and alongside it. But it’s not immune to water resource challenges. Crop irrigation has depleted groundwater aquifers. Projects diverting surface river water to help accommodate those needs could go online next year.

Between electricity and water, data centers consume enormous amounts of natural and manmade resources. Huge influential companies like Google and Meta, which owns Facebook, will be calling on communities to supply them, and to do it quickly. They will dangle jobs and tax revenues as inducements. It will be hard tor policymakers to say no, and often they shouldn’t. 

But “yes” should only come after it’s clear the community can actually supply the needed electricity and water without negatively impacting the residents. Should billion-dollar corporations run by billionaires pay for the bulk of the costs for increasing capacity – or individual ratepayers struggling to get by? Traditionally, utilities have spread the costs of electricity expansions across the entire population, but that was before one facility could require so much new capacity all at once. Also, if a new data center harms a homeowner’s property value or lifestyle, the billion-dollar corporations should compensate them generously.

The billion-dollar corporations tend to win these things. If anything needs to be done, perhaps it should happen before the new neighbors move in.

Steve Brawner’s column is syndicated to 20 outlets in Arkansas. Email him at brawnersteve@mac.com.