Can Data Centers Succeed In A Part Of The Country Where Antelope Outnumber People?

Cheyenne, Wyoming, is known for cowboys, rodeos, sprawling scenic districts and roaming herds of antelope that outnumber people.

It also happens to be an up-and-coming location for data centers in the Rocky Mountain region. 

“At first glance, Cheyenne may not seem like the ideal place to build a data center, but it actually sits at the convergence of several regional and transcontinental fiber optic cables,” said Bret Jones, manager of business development for Black Hills Energy.

“With much of Denver’s digital traffic flowing through Cheyenne, and multiple national internet service providers having a presence in the area, companies are quickly discovering that Cheyenne is, indeed, a perfect place for data centers," he said. 

In 2012, Microsoft opened a facility in Cheyenne, which is served by Black Hills Energy, a South Dakota-based energy provider that services 1.3 million customers in small towns and rural communities across an eight-state footprint in the middle of the U.S. 

From the start, Black Hills Energy worked with Microsoft to secure the power it needed at a reasonable price. This led to a partnership and the design of an innovative tariff that was later approved by the Wyoming Public Service Commission. 

The tariff, named the Large Power Contract Service tariff, is available to all eligible Black Hills Energy customers in its Cheyenne, Wyoming, service area. It lets Black Hills Energy use customer-owned generators, a key to mission-critical reliability, as a secondary power source for the energy grid.

This tariff, coupled with on-site generation, also provides Microsoft access to market-based energy and the opportunity to use significantly more renewable energy, while ensuring the reliability essential to its operation.

Further, because the tariff eliminated the need for Black Hills Energy to construct a new power plant to serve Microsoft’s load requirements, it resulted in cost savings for the balance of their customers as well.   

“What made this situation unique was how that backup generation was leveraged to the mutual benefit of Microsoft, Black Hills Energy’s other customers and the utility itself,” Jones said. “The tariff has proven to be a landmark collaboration with far-reaching benefits.” 

As a result, Microsoft has been able to leverage the tariff and its on-site generation to gain access to the market power it needed for its Cheyenne facility. This has positioned the company to also enjoy the other benefits of opening a mission-critical facility in southeast Wyoming. 

Although Wyoming already has a business-friendly tax environment — there are no personal state income taxes, no corporate state income taxes, no inventory taxes and low property taxes — the state put into place additional incentives to specifically support data center development.  

Recognizing the value of attracting data centers to the state, the Wyoming legislature approved a sales and use tax exemption for qualifying purchases and rentals of the computer equipment necessary for the operation of a data processing services center. Other incentives included an exemption from permitting under the Industrial Siting Act, a grant program for offsetting utility expenses for a three-year period and training grants.  

Jones noted that in the years since Microsoft has opened its facility, Cheyenne has seen growth among vendors and networks that are well-versed in serving mission-critical facilities. While many of these vendors initially served the Cheyenne market from their Denver operations, the demands of a growing data center presence in the area means many have expanded their presence in Wyoming.  

After a 10-year partnership between the two companies, Black Hills Energy’s commitment to supporting Microsoft and its continued growth in the Cheyenne footprint is as strong as ever.  

“I believe we’ve learned a lot from each other in our collective efforts,” Jones said. “From a utility perspective, Microsoft’s presence and investment in Cheyenne has allowed us to better understand the needs of mission-critical facilities and only strengthens our commitment to meeting their evolving needs as a preeminent supplier of technology services.” 

According to Jones, reliable service from Black Hills Energy and a low-risk environment are other major draws for data center operators that are taking a closer look at Cheyenne.

Over the past 10 years, Black Hills Energy has consistently been in the top quartile for investor-owned utilities in the country for reliability. Also, while natural disasters can happen anywhere, Wyoming is safe from threats like hurricanes, earthquakes and tornadoes that menace many coastal and Midwestern data center clusters. 

As millions of Americans continue to work from home, the use of cloud platforms is skyrocketing. The world’s three largest cloud service providers, Amazon Web Services, Microsoft Azure and Google Cloud, have all reported jumps in demands for their services since early March. Many companies that were not planning on moving their operations online have been forced to rethink their strategies and go digital.  

Experts have projected a strong demand for data center network services to support this digital migration. This means the industry will need to build more data center facilities. As those responsible for finding space for these new facilities engage in that effort, they may find success in rural locations like Cheyenne that have been able to assemble the critical pieces of the data center puzzle. 

This feature was produced in collaboration between the Bisnow Branded Content Studio and Black Hills Energy. Bisnow news staff was not involved in the production of this content.