Developers Forced To ‘Invent The Wheel’ To Meet Ballooning Data Center Energy Needs

The massive data center facilities used by tech giants like Amazon Web Services, Microsoft, Google and Meta have begun gobbling up far more energy than ever before, and they are approaching an inflection point. 

The size of hyperscale data center campuses — measured in the amount of energy they consume — has grown quickly over the last decade from dozens of megawatts to hundreds. And as that growth accelerates, the world’s largest tech companies are reportedly looking for sites to deploy more than a gigawatt of capacity at a time.

One gigawatt is enough to provide a full year of power to nearly 900,000 households — about the size of a major city like Houston. 

Driven by the need for computing power to support artificial intelligence, this represents a massive leap forward for a data center industry still grappling with how to deliver facilities a fraction of that size. 

Bringing gigawatt-scale deployments to fruition as quickly as hyperscalers hope presents enormous challenges due to a power grid that is already being pushed to the brink by skyrocketing demand from data centers. Developing these megacampuses will require innovative approaches to acquiring power and close collaboration between the data center industry and energy firms to ensure the grid keeps up with booming data center demand, industry executives say.

“Executing gigawatt campuses means we’re having to invent the wheel here,” said Pat Lynch, Executive Managing Director of CBRE Data Center Solutions. “I don't know if there’s a silver bullet for that.”

No gigawatt-scale deployments have been announced yet, but evidence of the pipeline of these projects has emerged in two ways: requests for proposals submitted by major tech companies to developers and brokerages, and requests for connections to the power grid reported by utilities. 

At least three hyperscalers have released RFPs north of a gigawatt in the Atlanta market alone, with one firm looking to deploy 4 GW in the market, according to two executives speaking at a Bisnow event last month and a CBRE report released in March. 

In Virginia, utility Dominion Energy reported in April that requests for interconnections for data center campuses now ranged from 300 megawatts to “several gigawatts,” a significant increase in the scale of power demand. Similarly, Florida-based utility NextEra Energy indicated on its first-quarter earnings call that it has multiple data centers in its interconnection cue looking to use more than 3 GW. 

While the firms behind these RFPs and interconnection requests haven't been disclosed, the details of one planned multigigawatt campus may have come to light. According to a March report from The Information, Microsoft and OpenAI are planning an AI supercomputing campus called Stargate that could be as large as 5 GW. The $115B project has a projected 2028 delivery date, although the report didn't indicate where the Stargate megacampus would be. 

While Microsoft executives have called aspects of The Information’s reporting inaccurate, there is little question that such large-scale projects are on the near-term horizon. The average capacity of new hyperscale data centers is expected to double in the next six years, according to a study by Synergy Research Group.

This acceleration is driven by the rapid adoption of high-performance computing equipment needed for AI that uses far more energy than previous data center equipment. Meta CEO Mark Zuckerberg said this trend makes gigawatt-scale data centers an inevitability. 

“No one has built a 1 GW data center yet. I think it will happen. … It is only a matter of time,” Zuckerberg said on Dwarkesh Patel’s Dwarkesh Podcast last month. “Some of these things will take some number of years to build out. Just to put this in perspective, a gigawatt would be the size of a meaningful nuclear power plant only going towards training a model.”

Tech giants would already have launched these multiple-gigawatt campuses if they could, Zuckerberg said, a sentiment echoed by industry leaders who spoke with Bisnow.

The problem is finding the power, they said.

Rising electricity demand, largely from data centers, is already pushing transmission infrastructure across the U.S. to its limits, and developable land with immediate access to the amount of power hyperscalers are looking for has become practically nonexistent. DigitalBridge CEO Marc Ganzi suggested this month that the entire U.S. grid today has less than 7 GW of total available capacity.

Building large-scale data centers therefore requires bringing new capacity to the grid by improving transmission infrastructure or adding new generation facilities, a process that can add years to development timelines.

“I think we would probably build out bigger clusters than we currently can if we could get the energy to do it,” Zuckerberg said. “If you're talking about building large new power plants or large build-outs and then building transmission lines that cross other private or public land … you're talking about many years of lead time. If we wanted to stand up some massive facility, powering that is a very long-term project.”

Making these gigawatt-scale data centers a reality as quickly as possible will require creative approaches to acquiring power. Developers and major end users are already pursuing an array of solutions to power their ballooning infrastructure needs: from completely reconsidering site selection criteria to investing in technologies that allow data centers to produce their own power on-site — some with small nuclear reactors. 

“Data center developers, operators and users alike are going to have to get very creative in the way they work with the utility companies and evaluate utility delivery and options to sites,” said Ali Greenwood, executive director of Cushman & Wakefield’s data center group. “I don’t believe anyone has the magic answer, but certainly many creative avenues are being considered and explored, and my belief is the more flexible and creative you are, the more likely you are to be successful on these developments.”

Among the industry executives who spoke with Bisnow, there was broad agreement that bringing gigawatt data centers to fruition will require increased collaboration and partnership between the data center industry and energy firms responsible for bringing new capacity to the grid. They pointed to a growing convergence between the two sectors already. 

There are numerous examples of the major tech companies partnering with utilities or energy developers to help finance new generation projects, particularly renewables like wind and solar farms, by pre-purchasing power or even serving as a co-developer.

Earlier this month, Microsoft signed a $10B energy framework deal with Brookfield that will see the asset manager’s energy portfolio companies build out 10 GW of new generation to power Microsoft’s data centers — the largest corporate renewables purchase agreement in history by a significant margin. Weeks earlier, Meta completed a joint venture with Phoenix-area nonprofit utility Salt River Project to construct a solar-panel-based generation plant to power data centers in the region. 

“That partnership between the utility company and the end user was important when you're talking about 100 MW, which 12 months ago was still a big load,” CBRE's Lynch said. “Now that there are these huge loads, that partnership is critically important the bigger these projects become.”

It has been utilities, not the major tech companies or third-party data center developers, that have typically led the charge in developing the largest data center campuses, Lynch said, with electricity providers identifying large blocks of electricity and approaching cloud and social media companies themselves.

He expects this trend to continue as firms look for capacity of a gigawatt or more. 

This kind of utility-led campus development was exemplified two months ago in Pennsylvania, where Talen Energy had designated hundreds of megawatts and more than a thousand acres at its Susquehanna nuclear power station for data center development. In March, AWS swooped in, acquiring the land and rights to nearly 500 MW in a $650M deal.

Similarly, AWS’ massive planned data center in Mississippi, unveiled in January, was spearheaded by utility Entergy Mississippi. Entergy first approached the cloud giant about a campus in its service area and worked with state and local officials on a range of initiatives to lure AWS and ensure the project went forward. 

More energy firms will get into the data center development business more directly, said Barry Kupferberg, managing partner at Barkers Point Capital Advisors.

He predicted that firms specializing in power generation projects, particularly nuclear or renewables like wind and solar, will take a cue from Talen Energy’s approach in Pennsylvania and launch their own data center development arms that provide end users with build-ready sites. 

“You’re beginning to see a bit of a convergence between power and data center ownership,” Kupferberg said. “Power companies are starting to see that so much of the data center business is access to power, and that’s their wheelhouse.”