Data center boom tests Arizona's power grid
Add Axios as your preferred source to
see more of our stories on Google.
The Valley is one of the nation's biggest markets for data centers. Photo: Ash Ponders/Bloomberg via Getty Images
Data centers consume an inordinate amount of electricity, and the Corporation Commission is trying to figure out how to cope with the demand.
The big picture: With low energy costs and few natural disasters, the Phoenix metro area has become one of the top data center markets in the U.S.
- Those buildings house computer equipment for data storage and are critical for companies including Amazon and Google and technologies such as AI.
- Driven by the growth of AI and other technologies, data centers are increasing energy usage not only in Arizona but across the U.S.
Why it matters: Arizona has enough energy to meet its current needs, but that may not be the case in three to five years, Corporation Commission chair Kevin Thompson told Axios.
- "That horizon is what I'm concerned about. That's what keeps me up at night," he said.
By the numbers: Arizona data centers could more than double their energy usage by 2030, according to a 2024 report by the Electric Power Research Institute, consuming up to 16.5% of the state's total electricity.
What they're saying: "It's something that Arizona needs to deal with in order to make sure we can continue our economic development position and keep growing and creating high-tech jobs," said Court Rich, an attorney with Rose Law Group who specializes in energy and utility issues.
State of play: Thompson earlier this month started a formal review, known as opening a docket, on data centers, the first step in allowing utilities, other stakeholders and the public to weigh in on the subject.
- Like other customers, data centers pay for the energy they consume. But the amount of power they use could necessitate new infrastructure and generation facilities.
- Thompson compared it to a city requiring a developer to pay for streets, sidewalks and gas lines for 500 new houses.
- He said one possibility is that the commission could impose special higher rates for data centers to cover the costs.
Between the lines: Thompson said the commission could also look at permitting data centers to generate energy themselves to offset increased demand.
- As battery technology improves, they could increasingly rely on solar power with battery backups.
- State Rep. Michael Carbone, R-Buckeye, sponsored legislation that would loosen state regulations so data centers and other major industrial energy users could place small modular nuclear reactors at their facilities, which Thompson said could be a potential solution.
Zoom out: Arizona Public Service, Salt River Project and Tucson Electric Power announced in February they're exploring the possibility of building a nuclear plant that likely wouldn't be online until the early 2040s.
- Rich said the best way to address Arizona's increasing energy demands is through low-cost renewables and batteries.
- Nuclear would be a great solution, too, but will take time, he said.