With Demand Spiking, Data Center Projects Become Increasingly Complex, Costly and Tense

Stephen Humes, a veteran energy and project finance partner at Pillsbury, said that among other challenges these developments often face significant zoning and compliance issues. That’s because potential data centers usually represent the largest customers on a given grid.

“It's like turning on a new city or a new major community to power that hasn't had power before, but all the power is going to one address, one customer,” he said.

As a result, the utility company often has to perform an impact study to see what improvements are necessary to its transmission and distribution system when a large power user asks for service. And some of those power providers are even implementing extra costs or tariffs for data centers that require minimum contract lengths to pay for the costs of building transmission infrastructure.

One alternative to avoid those costs is to build a power plant adjacent to the data center and plugging the energy source directly into the facility, which is called going "behind the meter."

Doing so is easier if the project is outside the purview of the Federal Energy Regulatory Commission, such as in Texas, Humes said.

To read Pillsbury’s comprehensive guide on data centers, please see here.