How One Utility Company Empowers Data Centers In The Up-And-Coming Markets That Need Them Most

Data center operators continually struggle to secure low-cost, reliable power. Data centers in the U.S. use more than 90 billion kilowatt-hours of electricity per year, and consumption is projected to double every four years.

Along with being major energy users, data centers are also significant job creators, employing hundreds during the construction phase and, over the long term, supporting dozens of local jobs. This is one of the many reasons why several U.S. markets, including those in the Rocky Mountain West, have been striving to attract more of these facilities. 

But for data center operators looking to expand into these markets, finding affordable energy solutions isn’t always easy. As data centers continue to search for power, providing cost-effective, energy solutions — alongside superior reliability — is an important focus for the utilities that serve them. 

“Across the Rocky Mountain West, utilities and the communities they serve are hoping to draw in data center operators, but they need to be able to offer both affordable energy and the reliability to meet data centers’ needs,” said Bret Jones, manager of business development for Black Hills Energy, a South Dakota-based electric and natural gas utility company with more than 1.27 million customers. “In order to do that, utility companies have to develop a new, collaborative approach to working with these large-scale customers.”

Black Hills Energy has been working with data center clients in emerging markets like Colorado and Wyoming to gain access to affordable electricity. Bisnow recently sat down with Jones to learn more about how Black Hills Energy is working to help these markets not only attract data centers but also set them up for success.  

Bisnow: How are companies like Black Hills Energy working to meet the needs of emerging data center markets?

Jones: From our perspective, it’s about collaboration with customers looking to grow. Some time ago, we moved away from the traditional approach of simply providing utility services to large-scale customers and began focusing instead on a more collaborative approach.

Specifically, we’ve been working with clients, regulators and state policymakers to design energy tariffs that can give data centers access to low-cost market energy to support them while they work to establish or grow their operations in the markets we serve. We’ve also participated in efforts to work with state policymakers, state economic development agencies and local economic development groups to design incentives that can improve the economic climate for data centers wanting to locate to these areas.

Bisnow: How have you managed to build a successful footprint in a traditionally underserved data center market like Wyoming?

Jones: Cheyenne, Wyoming, has a lot to offer data centers, especially in regard to their critical needs: low-cost energy, reliability, access to multiple long-haul fiber carriers and attractive incentives. Other factors in our success include low latency due to Cheyenne’s strategic location on major fiber routes, available system capacity and infrastructure to serve new loads, and a semi-arid climate with a low risk of events that may cause service interruptions, like earthquakes and tornadoes. 

With the existing presence of a hyperscale data center, Cheyenne has also fostered a strong vendor presence that’s capable of supporting additional data centers, and with its close proximity to Denver, there is opportunity to further expand its levels of vendor support. 

Also, we partnered with state policymakers and state and local economic development agencies to put incentives in place that improve data center economics, including sales and use tax exemptions on computer equipment, UPS infrastructure and HVAC infrastructure. Coupled with tariffs that give our clients access to market energy and make the most out of the area’s renewable energy sources, there is a lot of opportunity in Cheyenne.

Bisnow: What about renewable energy? Aren’t most, if not all, data center operators focused on greening their energy-intensive loads?

Jones: They are, and given the current development trends in renewable energy in wind-rich Wyoming and solar-rich southern Colorado, there is access to an abundance of renewable energy in these markets. 

In fact, we’ve recently started a new, customer-driven renewables program for large industrial and commercial customers in our Cheyenne footprint, and are in the process of reviewing the numerous proposals we have received for up to 200 megawatts of additional renewable energy for our southern Colorado operation. 

Bisnow: From your perspective, what do data centers want most from their utility company? 

Jones: Along with a certain price point and exceptional reliability, I believe data center operators are looking for agility in a utility partner, a willingness to respond to their evolving needs and grow with them if they decide to expand their operations. 

We regularly ask ourselves: What can we do to help facilitate our clients’ growth? How can we best function as a partner in their effort to locate or grow in our service territory? Can we assist them in partnering with local development officials as they look to expand their site? It’s all about listening to and anticipating the needs of the client, because in the end, their success is our success. 

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.