Georgia wanted to attract more data centers. Now it needs more power

Incoming electric vehicle and battery factories have significant electricity needs. But in hearings this month, Georgia Power revealed the vast majority of its forecast demand crunch — roughly 80% — is driven by different kinds of facilities: data centers.

Whether you’re browsing Instagram, uploading photos to the cloud or using artificial intelligence, our digital lives are powered by data centers. But the often-stark warehouses packed with computer servers are electricity and water hogs, nearly as insatiable as the market’s demand for the facilities themselves.

“Humans are addicted to technology,” said Raul Martynek, CEO of DataBank, which has five planned data center campuses in metro Atlanta. “Unless that changes … you’re going to need more data center capacity.”

An analysis by The Atlanta Journal-Constitution found at least 18 data center campuses are either in development or preparing for sizable expansions across Georgia, mostly near Atlanta.

For years, local and state officials have courted the industry, pitching Georgia’s cheap land, substantial tax incentives and abundant access to power and water. Not only does Georgia provide tax savings to developers of some of the biggest data centers, local governments have doled out hundreds of millions of dollars in additional property tax breaks.

But the facilities themselves create few jobs and demand to build here is so strong, critics contend generous giveaways aren’t needed, especially when ratepayers may fund added power capacity.

“(Data centers) are generally not seen as one of the best businesses to attract,” said Nate Jensen, a professor at the University of Texas at Austin who studies economic development strategies. “It’s just eye-popping dollar numbers because they’re investing so much capital.”

Mega-sized megawatts

Metro Atlanta is now the No. 6 market in the U.S. for data centers, which are not only growing in number but vastly increasing in size.

At the end of 2019, metro Atlanta’s entire multi-tenant data center market totaled 142.6 megawatts (MWs), according to real estate services firm CBRE. Now, at least eight individual data center campuses are under development in North Georgia today with potential power capacities exceeding 150 MWs, the AJC found.

As data centers get larger, they also get more expensive, with some costing billions to build. But the servers are often built overseas or by companies based elsewhere, meaning the centers’ local economic impact is far lower than other huge corporate expansions.

Despite their mammoth size, proponents argue data centers don’t burden the infrastructure of their surrounding communities. A million-square-foot facility usually only employs a few dozen workers, while similar industrial developments might employ hundreds and generate thousands of truck trips to wear down nearby roads. But some communities are already exploring costly water and sewer expansions in anticipation of more data centers.

Many of the world’s largest companies, from Amazon to Facebook to Microsoft, operate in-house data centers, while other companies house servers they rent to other firms.

Vantage Data Centers, developer of a sprawling Douglas County server farm, announced it has received more than $8 billion in equity investment since September. Qualified Technology Services is not only expanding its Fulton County campus but spent $154 million last year to buy 615 acres in Fayette County for one of the world’s largest data center complexes.

Bill Thompson, a vice president at DC Blox, another developer with two Georgia projects, said companies see markets like Atlanta as a new gold rush.

“There is a literal race going on,” he said.

A terminus for fiber lines

For decades, northern Virginia has served as the country’s preeminent data center market, buoyed by the military and federal government.

But its grip on the data storage sector loosened after a flood of servers stressed its power grid. Companies, looking elsewhere, have found Georgia a willing host.

Mike Lash, first vice president of CBRE’s data center solution team in Atlanta, said the city’s telecommunications industry helped pave the way. Metro Atlanta’s network of fiber, the underground cable network connecting data centers to the outside world, is crucial infrastructure for the industry and mirrors the rail network that gave birth to the city, Lash said.

Credit: HYOSUB SHIN / AJC

Credit: HYOSUB SHIN / AJC

“Once a market gets established as a primary market, it’s a gravitational pull,” said Martynek of DataBank.

DataBank first came to Atlanta in 2018 by adding a 9-MW data center called ATL1 into Georgia Tech’s Coda tower in Midtown. Since then, the company has opened or planned four others here.

Patrick Snyder, the manager of ATL1, said they are preparing for a client to move servers into the entire top floor, exhausting the facility’s power capacity.

When asked what happens when a center is full, he laughed and said, “You build new ones.”

DataBank’s newest project is a $2 billion campus in the region’s premier online storage farm market: Douglas County.

Just west of Atlanta, Douglas was early to court data centers with property tax breaks. Chris Pumphrey, president of the Elevate Douglas Economic Partnership, said data centers were seen as more desirable than other industrial projects because they don’t overburden schools with employees’ kids or attract trucks that clog or damage roads.

Last year, the county offered roughly $143 million in tax savings to DC Blox for a $1.2 billion campus. But Pumphrey said that was likely a “tail-end project,” given how many centers have already flocked to Douglas. Other data centers haven’t received any local incentives. The county is largely shifting its incentives to other industries, such as media and entertainment.

Credit: HYOSUB SHIN / AJC

Credit: HYOSUB SHIN / AJC

Other counties, such as Rockdale, east of Atlanta, are still anteing up. Rockdale offered DC Blox incentives similar to Douglas, but the county didn’t disclose an estimated value. Kevin Hanna, president and CEO of Conyers Rockdale Economic Development Council, said the county’s willingness to provide the incentives will lessen as facilities cluster.

“You start out aggressively, and then as you get more and more, the desire for more fades and so the incentives start to fade as well,” he said.

Since data centers don’t employ many workers, property tax benefits are the main appeal to surrounding communities, said Jensen, the Texas professor.

“The irony is that to attract them, you’re going to give them tax breaks,” he said.

Fossil fuels

Data center servers run 24/7, requiring huge amounts of electricity and water to keep them powered and cool, raising concerns about how they’ll affect other customers.

Compared to a typical office space, data centers use 10 to 40 times more electricity per square foot, according to the federal Energy Information Administration.

Electricity usage figures for Atlanta’s facilities are spotty, but several existing metro area data centers and others in development require anywhere from 100 to 200 MWs or more of electricity. A single MW is enough to power between 400 and 900 homes.

Credit: Courtesy DataBank

Credit: Courtesy DataBank

In its long-range energy roadmap plan filed last October, Georgia Power says demand for power is growing so fast it needs forgo the normal competitive bidding process for new electricity generating resources and asked state regulators to allow it to add almost 3,400 MW of new capacity.

The company says it is still committed to transitioning to renewable energy, but about 70% of the capacity Georgia Power wants to add would likely come from fossil fuel sources.

Pressed by the Public Service Commission in a hearing this month to explain the explosion in projected electricity demand, Francisco Valle, Georgia Power’s director of forecasting and analytics, said data centers were responsible for about 80% of its expected new load.

Georgia Power executives have repeatedly testified that serving data centers, EV factories and other facilities coming to Georgia would put “downward pressure” on rates. But there’s no guarantee that will happen.

Building new oil and gas-burning units, installing massive batteries and buying electricity from out-of-state, as Georgia Power has proposed, costs money — money the company will likely ask to collect from ratepayers. It will be up to the PSC to determine who will pay for it.

In the last 13 months, the commission has approved a series of rate hikes that will increase the typical residential Georgia Power customer’s bill by about $38 per month.

Grappling with growth

Data centers’ water demands are also challenging local governments. One of the first and largest to come to Douglas was a Google data center that completed its first phase in the late 2000s and has since expanded.

Gil Shearouse, the executive director of the Douglasville-Douglas County Water and Sewer Authority, said serving the facility potable water would have stretched the county’s available supply. With funding from Google, they found a solution — sending treated wastewater to cool the servers instead of finished drinking water.

But more data centers are coming.

The county is in the midst of a $150 million expansion of its main water supply — the Dog River Reservoir — to triple its capacity to 6.5 billion gallons. The expansion was supposed to solidify Douglas’ supply for the next 50 years. But without building new infrastructure to serve data centers wastewater for cooling, like it did for Google, the extra reservoir volume may only sustain growth for 10 years, Shearouse said.

“When we build a reservoir, it takes about 15 years just to get the thing permitted and built,” Shearouse said. “And if one industry, one customer, takes up 10 or 20 percent of that capacity that we have planned for, that drastically affects how our community can grow.”

Credit: Courtesy DataBank

Credit: Courtesy DataBank

Republican PSC Chairman Jason Shaw is among those tasked with evaluating Georgia Power’s plans. Before he joined the PSC, Shaw served in the state House of Representatives.

Shaw co-sponsored legislation signed into law by then-Gov. Nathan Deal that created lucrative tax breaks to large or “hyperscale” data centers. It provided tax savings for the equipment housed within these centers, mirroring a Virginia law that dozens of other states have copied.

Georgia’s law sunsets in 2033, meaning it will automatically expire unless lawmakers extend it. The policy requires periodic analysis of the return taxpayers get for the subsidy. The most recent study conducted by the University of Georgia in late 2022 found that state tax collections have decreased as a result of the policy. It ranges from a $5 million loss in 2018 to a projected $57 million loss in 2030.

“The total of increased state tax collections resulting from construction and operation of data centers is not high enough to offset the forgone state tax revenue from the incentive,” the analysis found.

Shaw said he doesn’t regret pushing the bill. “That was the posture we were in: to try to become a state where these things (data centers) want to come,” he said.

But now, he said he’s worried they could drive up other customers’ rates, adding that, “We’ve got quite a bit of work to do to figure this out.”