Power-Hungry Data Centers Look to South Dakota
Massive hyperscale data centers—designed to handle cloud computing and AI demands—are drawing interest from developers eyeing South Dakota as a potential hub. With its cold climate and abundant wind energy, the state offers ideal conditions for these energy-intensive facilities. However, the demand for electricity poses challenges for local utilities and the power grid.
Why South Dakota?
Nick Phillips of Applied Digital highlighted South Dakota’s appeal:
- Cold Climate: Reduces cooling costs for servers.
- Renewable Wind Energy: One of the most cost-effective energy sources, helping lower operational expenses.
Currently, the state’s largest data center is a 50-megawatt facility in Leola, but utilities report increasing inquiries about available megawatts every week.
Bob Sahr, CEO of East River Electric Cooperative, emphasized the scale:
“We’re talking loads that eclipse some of the largest cities in South Dakota.”
Energy Demands and Grid Strain
A single hyperscale data center can require 300-500 megawatts of electricity—enough to power hundreds of thousands of homes. Nationwide, there are over 1,000 hyperscalers, with the U.S. hosting more than half.
Ryan Long, president of Xcel Energy, noted:
“We have north of 7 gigawatts of requests for data center locations, but there’s no way we can serve all of that demand in time.”
Concerns for Utilities
Utilities and regulators raised several key concerns:
- Base Load Reliability: Coal and natural gas remain essential for backup power when renewable sources (wind/solar) aren’t available.
- Cost Sharing: Arick Sears of MidAmerican Energy stressed that energy costs must reflect consumption to ensure fairness.
- Stranded Costs: If a data center shuts down, utilities risk being stuck with unused infrastructure investments.
Grid Challenges and Solutions
Grid operators like MISO (Midcontinent Independent System Operator) and SPP (Southwest Power Pool) warned that data center growth is outpacing grid capacity. MISO estimates $30 billion is needed for electric transmission upgrades to meet the hyperscaler demand.
Speed of Deployment is another challenge. Some facilities expect to be operational within months, straining planning, infrastructure, and resources.
Exploring Alternatives: Nuclear Power
Given the growing demand, Commissioner Chris Nelson and NorthWestern Energy view modern nuclear power as a potential solution. The company is studying a 320-megawatt small nuclear plant in South Dakota, estimated to cost $1.2-$1.6 billion.
While details remain confidential, interest in nuclear power is rising as the state grapples with limited base load alternatives and resistance to expanding coal power.
Looking Ahead
As hyperscale data centers eye South Dakota for its ideal conditions, the state faces critical decisions:
- Balancing economic growth with energy sustainability.
- Ensuring grid reliability while managing skyrocketing energy demands.
- Exploring alternatives like nuclear power to meet future needs.
The decisions made today will shape South Dakota’s role in the expanding world of AI and cloud computing.
