Stephen Humes Examines Water and Power Challenges Facing Rural Data Center Development

In a recent article published by Law360 Real Estate Authority, Pillsbury partner Stephen Humes noted that droughts and water scarcity pose significant challenges in several states with an abundance of vacant land, including Texas, which generally does not permit data centers to use “once-through” cooling systems. Such systems draw water from rivers or lakes to absorb heat, then discharge it as wastewater rather than reuse it.

“That’s not a desirable solution these days,” Humes said, adding that governments typically favor “closed-loop” systems, which continuously recirculate cooling fluid through sealed pipes.

Power availability is another key consideration, and projects in rural areas may require developers to build their own electrical infrastructure.

Humes noted some behind-the-meter systems being planned for data centers in Texas include nuclear power. Although nuclear facilities can generate substantial electricity once operational, they require lengthy construction timelines and significant power during the construction process, he explained.

“Some of them are small modular reactors, maybe 350 megawatts per reactor,” Humes said. “Some of them are large-scale reactors.”

Other behind-the-meter systems combine rooftop solar panels and wind turbines while maintaining a connection to the electrical grid, he said.

In addition, developers pursuing their own power solutions effectively undertake two projects simultaneously, raising the critical question of who will build the energy source.

“Is that the data center customer, or is a third-party wholesale generation provider going to build the power plant and sell the power output directly to the data center, using a contract we call a power purchase agreement?” Humes said. “If it’s a power purchase agreement deal, you’ve got to deal with a site easement or lease, plus the power contract, plus a whole lot of other considerations to get the integration done right.”

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