When the first renewables projects started getting built in the late 1990s and early 2000s, developers would advance projects sequentially. First, they would find the land; next they would navigate the environmental permitting approvals; and once that was done, the community approvals. Only then would they turn to the grid and start an interconnection request, which at the time was a standard administrative step expected to take less than two years
According to Himali Parmar, vice president of energy markets at ICF International, the approach worked just fine in the beginning. “But then came the late 2000s, and you went through that same process, only to realize that the interconnection queues on the supply side were choked up, and the grid was already oversubscribed and couldn’t take you,” she told Latitude Media.
That experience, which led to the failure of many projects, holds a relevant lesson for the data center industry today: When selecting a parcel of land for a project, large load developers need to “have a 30,000-foot view of all the considerations about a land parcel at the same time,” Parmar said.
Those considerations are listed in a new report on data center siting, based on ICF’s data center siting tool and co-authored by Parmar. They include the availability of both energy and fiber optic network infrastructure, water access, zoning regulations, permitting complexity, and local community sentiment, among other things.
Once all these factors are evaluated, the amount of land well-suited for data center development dwindles significantly. In Loudon County, Virginia, for example, which is the heart of the Data Center Alley, the report identifies only 600 land parcels well-suited for data center development out of 1.5 million. That’s only 0.04% of the land parcels in the county. The “sweet spots” are defined as “industrial/mixed-use zoned parcels within 1,000 feet of fiber optic lines and located close to substations with 100+ MW of incremental grid capacity and minimal flood hazard risk.”
With viable real estate this scarce, the risk of selecting the wrong parcel of land increases, and failing to appropriately consider all the factors can lead to the project cancellations we’re starting to see, which parallels what happened in the late 2000s with renewables faced with longer interconnection timelines. In October, for instance, developer Sentinel Data Centers cancelled a $1 billion data center project in Central Ohio because of “power and energy constraints,” according to local news reports.
“The land parcel was there, it looked in the right zoning requirements, it had clear access to water and fiber optic, but there was no capacity on the grid,” Parmar said. “The substation can be within line of sight, but not have any capacity to give.”
The weight of energy
While all factors are important to develop a project efficiently, “energy typically carries the most weight,” the report notes. Energy supply variables include powered land access, grid capacity and stability, interconnection process and cost, power price outlook, and gas infrastructure availability.
“Most of our data center clients developing assets are not keen on becoming energy developers and would like to rely on the grid,” Parmar said. “Being an independent power producer is not the business model they are interested in.”
That said, developers are increasingly building their own generation, mostly in the form of gas, and as a bridge solution as they wait for utilities to implement the grid upgrades needed to meet demand. This has led ICF to introduce gas infrastructure availability as a factor to consider when selecting a land parcel. “Folks are realizing that the grid cannot give them a lot today, so the gas infrastructure has become very important,” Parmar said.
The added layer highlights new places on the map that could be good spots for data center development. For instance, King County, Washington doesn’t currently have any proposed data centers because of limited grid capacity, but has a combination of gas pipeline infrastructure and grid interconnection points that “presents a strategic opportunity,” the report notes.
Building new gas generation comes with its own hurdles, including supply chain bottlenecks that have sent gas turbine prices soaring and long-term environmental liabilities. But developers who manage to get their hands on turbines and other necessary equipment, “could deploy behind-the-meter gas turbines as an interim power solution to accelerate project timelines, while simultaneously monitoring utility transmission plans and interconnection queue progression to determine the optimal timing to transition to grid-supplied power.”
The ICF siting tool, on which the report is based, is currently being used mainly by developers and landowners. But utilities can also use it to decide where to invest and upgrade their infrastructure, implementing build-ahead strategies that target data center “sweet spots” in advance.
Once again, Parmar says, the renewables buildout of the early 2000s offers a useful parallel: In 2005, Texas identified land with good wind and solar potential and established the Competitive Renewable Energy Zones program. “They thought about developing transmission proactively, and it brought in several tens of gigawatts of new energy capacity to the mix,” Parmar said.
A version of this story was published in the AI-Energy Nexus newsletter on December 17. Subscribe to get pieces like this — plus expert analysis, original reporting, and curated resources — in your inbox every Wednesday.
