The new reality for data centers: no easy answers

Episode Summary

Executive Summary: The episode examines how data center development has been transformed by power constraints, long equipment lead times, large-load tariffs, and growing community opposition. Holly Adams and Ian Black argue that the old “find land, wait for power” model is gone; developers now must sequence land, interconnection, generation, and community engagement at once, while utilities and politicians struggle to adapt.

Main Topics: The end of the old data center development model (Priority: 5/5): Both speakers say the traditional approach—secure land first and rely on utilities for fast power—no longer works because interconnection queues, equipment delays, and capacity scarcity require integrated planning from the start. Large-load tariffs and utility gatekeeping (Priority: 5/5): They discuss how large-load tariffs are being used to filter speculative projects, but argue these rules are now only one layer of a broader political and regulatory backlash that can make projects harder, not easier. Community opposition and public trust (Priority: 5/5): A major theme is the shift from data centers being welcomed to being politically contentious. Developers now need earlier, more transparent, and more local engagement to avoid rejection or delays. Sequencing power infrastructure with development timelines (Priority: 5/5): The conversation highlights the mismatch between months-long data center build timelines and multi-year power delivery timelines, forcing developers to pre-order equipment and align closely with utilities. Powered land as a higher bar than before (Priority: 4/5): Powered land is no longer just land near transmission and fiber; it increasingly requires permits, money, utility relationships, and proof that the developer is a real end customer ready to build. Bring-your-own generation and resource mix uncertainty (Priority: 5/5): The speakers debate islanded or semi-islanded power models, emphasizing unresolved questions around cost, resilience, cross-default risk, and what mix of gas, renewables, storage, and possibly SMRs will actually work. Geographic strategy and market selection (Priority: 4/5): Beale Infrastructure is focused on secondary/tertiary markets with excess capacity and supportive communities, while Digital Realty stays anchored in core metro markets while expanding in concentric circles around existing sites.

Key Arguments: Data centers now face the same queue-management and speculative-project filtering dynamics renewables faced years ago, but with even tighter land and capital commitments. Utilities are applying stricter collateral, site control, and proof-of-readiness requirements because they cannot plan around uncertain load that may never materialize. Large-load tariffs may rationalize queues, but they have not ended the political conflict; instead, legislatures and public backlash are becoming additional hurdles. Community acceptance must be earned early and locally; transparency, avoiding NDAs/redactions, and showing tangible benefits are becoming essential. Developers need to order long-lead equipment before interconnection is fully secured so projects don’t finish the physical build before power is ready. Powered land is harder to define than many assume; utilities increasingly want to treat only the true end customer as the applicant, which complicates developer-led models. Bring-your-own generation is likely to grow, but it is still early-stage and raises unresolved issues around economics, reliability, and legal/financial entanglement. Holly Adams argues renewables may now be the bridge to gas for data centers because gas turbines and pipelines have long lead times, even for developers who prefer a renewable-first strategy. Ian Black argues utilities cannot remain gatekeepers if hyperscalers and large loads move faster than grid planning; utilities need to become facilitators or risk being bypassed.

Data Points: Digital Realty facilities: ~300 facilities - Ian Black describes Digital Realty as a global owner-operator with this footprint. Digital Realty metro areas: 50 metro areas globally - Scope of Digital Realty’s portfolio. Digital Realty PJM sites: 52 sites - Ian notes the company has this many data centers in PJM. Data center development value per watt: $10 to $13 per watt - Ian compares typical data center build costs with renewables. Renewables spend comparison: $2 per watt - Ian contrasts this with solar plus storage or other renewable builds. Gas plant cost example: $2,500 - Ian references this as an example cost for BYO gas generation equipment. Equivalence of spend: $1 billion renewables vs. $15 billion data center equivalent - Ian uses this to show how data center capital requirements ripple through the value chain. Large-load tariff adoption: 38-39 states - Ian references the spread of large-load tariffs across states. Data center and power sequencing: Months vs. multi-year - The episode repeatedly contrasts short data center build times with much longer power delivery timelines. Project negotiation timeline: 1.5 years - Ian says one ESA negotiation in the western U.S. has been ongoing for this long. Texas study wait time: 2 years - Ian says they have been waiting on ERCOT/Encore for this study period. ESA signing timeline: 20 days - Ian says another ESA was negotiated and signed very quickly due to BYO power. Voltages mentioned: 12 kV, 20 kV, 35 kV, 110 kV, 161 kV - Ian lists the range of connection voltages Digital Realty is seeing. Utilities’ queue filtering: 80% cut in applicants - Ian says utilities show graphs claiming financial-security rules reduced applicants by this amount.

Pivotal Quotes: "the whole model is being challenged" — Ian Black: Ian explains that queued interconnection, speculative applications, and new utility rules are breaking the old data-center development playbook. "this is no longer in the wonky world of PUCs and FERC. This is now in the popular culture" — Ian Black: He describes how data centers have become a public political issue rather than a niche regulatory one. "if the community doesn't want us to be there, we don't want to be there" — Holly Adams: Holly explains Beale Infrastructure’s stance after withdrawing from an Oklahoma project over community acceptance concerns.

Implications: Data center developers will need earlier community engagement, more rigorous proof of project viability, and integrated power procurement strategies. Utilities face pressure to modernize planning, or risk being outpaced by large customers building around them.