Data centers are the backbone of the internet. They store and manage everything from social media to cloud computing, artificial intelligence and our favorite streaming services. As more people and businesses go digital, the number of data centers is quickly growing. While many of these centers were once built near large cities, more are now being sited in rural areas.
Electric cooperatives are receiving regular requests across the nation from companies that seek to build large data centers in their service territories. These requests bring both big opportunities and major challenges.
Why are data centers coming to rural areas?
There are several reasons why companies are choosing rural locations for their data centers:
- More land. Rural areas have plenty of space for large buildings.
- Resource diversity. Electric cooperatives own and operate reliable sources of energy.
- Lower costs. Land and labor are less expensive outside of cities.
- Tax breaks. Local and state governments may offer tax benefits to attract these businesses.
Data centers can be huge, sometimes requiring more electricity than all a co-op’s members combined. This increased demand for electricity brings several new opportunities for co-ops.
- New jobs and growth. Data centers can bring jobs and revenue to small communities. In Virginia, the data center industry supported around 74,000 jobs and added billions to the state’s economy, according to a 2024 report by the Joint Legislative Audit and Review Commission.
- Stable revenue. These centers require a lot of power and usually sign long-term contracts. This provides the co-op with steady income, which can help pay for system upgrades and keep rates lower for other members.
- Improved infrastructure. To serve a large data center, the co-op might need to build new power lines or substations. While this is expensive, it can also improve service for all co-op members by making the electric system stronger and more reliable.
While data centers create significant opportunities for electric co-ops by driving demand and investment, they also present new challenges in meeting increased electricity needs while maintaining reliable and resilient power delivery.
- High upfront costs. Building the new infrastructure to power a data center can cost millions, which is why co-ops work diligently with data center customers to ensure costs are covered.
- Risk of losing a big customer. If the data center moves away or shuts down, the co-op could be left with expensive equipment it no longer needs. This could negatively impact the co-op’s finances.
- Permitting and siting. Acquiring permission to build new power lines and substations takes time. There may be zoning rules, environmental reviews and public meetings that slow things down.
Planning for the future
To manage both the risks and rewards that data centers bring, electric co-op leaders are taking a careful, informed approach. They are working closely with their generation and transmission (G&T) provider, economic development offices and financial experts to plan these projects.
Co-ops are also ensuring contracts with data center operators include protections for the co-op. For example, if the data center leaves early, they may be liable for paying part of the infrastructure costs. Forecasting tools are also aiding co-ops in understanding how the new load will impact the local system.
Serving large data centers could be a gamechanger for many electric co-ops. These projects can bring jobs, revenue and new technology to co-op communities. But, they also come with financial risks and planning challenges. By asking the right questions and building smart partnerships, electric co-ops are poised to make decisions that serve their members well — now and in the future.
