"Our big (electricity) consumers were often eight to 10 megawatts — that was a big user that probably got a special (fee) in the (rates) that the utility provided a special user. Now we're plopping in 200 megawatt power (demands) in the countryside that completely and dramatically changes what the grid is doing to serve that," said Randy Christmann, chair of the state Public Service Commission.
The PSC convened a meeting to try to get a hold on the effects of and opportunities for the data center industry in North Dakota.
"Data center" is a catch-all term for physical infrastructure that houses machines used for cloud-computing, artificial intelligence and cryptocurrencies. The centers also require major industrial buildouts and can put significant strains on the power grid. But the industries that data centers serve are booming, and there can be benefits outside of the data they hold, too.
In the past few years, data centers have contributed to both raising and lowering of electric rates. The industry has caused some local disturbances but brought huge investments to rural areas.
There are only a few data centers operating in North Dakota, but the number is set to grow. At least six more are being developed, according to North Dakota Association of Counties Executive Director Aaron Birst.
Some people hope to make North Dakota a data center hub, given the state's vast source of fossil fuels and openness to using them. The Department of Commerce sees data centers as a potential aid to the state oil industry as it seeks to deal with the rising levels of natural gas coming out from the Bakken.
Officials say in the coming years, many companies will likely choose to shift their oil production to fields where there is already more natural gas export and use capacity as a response to increased regulatory and public scrutiny of gas pollution, unless the state builds its own.
"(Data companies) have approached us and said we want to start with 500 to 1,000 megawatts and scale to 5,000 to 10,000 megawatts," state Commerce Commissioner Josh Teigen said. This scenario would involve a data company building its own huge gas-fired power plant, he said, adding that project estimates he has heard have been around $125 billion.
For comparison, the largest power plant in the state is the coal-fired Coal Creek Station in Underwood, which produces around 1,100 megawatts of power.
LOCATION, LOCATION, LOCATION
Numerous meetings this past year have demonstrated that where a data center is sited is a big factor in the impacts it has both to local communities and the grid.
Public Service Commissioner Sheri Haugen-Hoffart asked Etienne Snyman from Applied Digital how that company chooses locations. The data center company has operations in southeastern North Dakota.
"Electricity is usually one of those things," he said, before listing a number of other considerations such as land, other existing infrastructure, and permitting.
Applied Digital's data centers are near a large number of wind farms that lack enough transmission to bring all the power that is produced there to the grid, creating costs for ratepayers. By having Applied Digital use that power, Montana-Dakota Utilities has been able to offset that price to its customers this year by around $2 million. As an investor-owned utility, MDU's rates are regulated by the state, which recently required a similar provision for an Applied Digital expansion.
But that type of benefit has not always been the case.
The 200-megawatt Atlas Power Data Center near Williston was brought online in 2022 by Mountrail-Williams Electric Cooperative. The co-op is a member of Bismarck-based Basin Electric, one of the largest utilities in the region. Atlas Power's demand is set to rise to 700 megawatts once construction is complete.
Earlier this year MDU filed a complaint with the Federal Energy Regulatory Commission, alleging that the data center's power demands were causing improper charges to the utility due to constraints and strains on the power transmission system that then were getting passed on to ratepayers. That is costing MDU's North Dakota's customers roughly $12 million. The complaint has been disputed by the Southwest Power Pool, the regional power market operator that gave the go-ahead for connecting the project to the grid.
As a cooperative, Basin and its members' rates — and many of its other actions — are not regulated by the state.
Since becoming operational, the Atlas Power facility's noise has drawn complaints from those living near it, prompting a lawsuit and regular complaints from locals at public meetings.
There were no representatives from Atlas Power at the meeting Thursday despite an invitation.
The potential issues with data centers have already spooked Morton County, which adopted a moratorium.
Birst, with the association of counties, said one of the larger stepping stones to finding a good location is companies' desires for secrecy when acquiring land and planning projects. This also happened during the oil boom, he said.
"If somebody would have taken a little bit of time to talk to a local, they could have avoided some of those (issues)," he said. "But again I understand the necessity that (companies) have to have some information close to the vest on those. So we've got to bridge the gap."
Some also pointed to the state's coal-fired power plants as suitable locations for new data centers coming in, given the industrial buildouts that are already in place. A data center taking power from Coal Creek Station has not been confirmed by Rainbow Energy Center, its operator, but company officials have given public comments alluding to one being there.
Incoming data centers could also be a financial boon for the state's coal plants, many of which are losing money according to regulatory filings. Numerous coal plants have retired across the country in recent decades, largely as a result of low prices from natural gas electric generation on power markets, and more recently falling prices for renewable electricity as well. Coal Creek almost shut down before a huge push by the state got Rainbow to buy it. This competition has been coupled with federally mandated adoptions of costly equipment to deal with the pollution that coal plants generate.
Electricity and grid connection might not be among the most important concerns for future data center companies setting up shop in North Dakota, with some companies looking to build their own generation using natural gas, as Tiegen alluded to.
WHAT ABOUT REGULATION?
PSC Commissioners lobbed criticism at Basin, Mountrail-Williams Electric Cooperative and the Southwest Power Pool during a panel discussion Thursday for their handling of the Atlas Power Data Center.
“It was a big miss,” Public Service Commissioner Julie Fedorchak said. “Ratepayers are paying for that mistake.”
Mountrail-Williams General Manager Alex Vournas defended the co-op’s handling of connecting the data center to the grid, and argued it brought benefits to the area. He said the data center lowered rates for other Basin members outside of his cooperative.
Commissioner Christmann asked if the other distribution cooperatives felt the same about the purported benefits, and none spoke up.
Vournas in comments defending his co-op's actions also highlighted the huge infrastructure investments that Basin is making in the region, including a large natural gas power plant and multiple transmission lines.
Many of these investments were set in place prior to the issues from the data center, largely attributed to the power demands of the oil, gas and related industries in the region.
Christmann also pointed to the reality that many utility infrastructure investments that could come as a result of data center demand get worked back into consumer rates.
That was also on the mind of Matt Hanson, CEO of McKenzie Electric Cooperative — another Basin member — when he spoke.
"The last thing we want to have happen is our legacy farm and rancher pay for large transmission and large infrastructure that they otherwise do not need," he said.
The question of whether the state should have more of a say in how these facilities are sited through regulation was brought up.
Christmann noted that since Applied Digital has a unique rate for service from MDU that the PSC had to approve, the process was similar to a siting hearing.
Snyman from Applied Digital agreed, and praised the PSC's process.
"I recognize you don't regulate all utilities but if there is a way to encourage other utilities to also think through that, and try to keep being a net benefit to all its users," he said.
Most who responded to questions about new potential state regulations were skeptical, arguing that could slow the data center buildout in North Dakota and push companies to other states or countries. There was support from some for more local-level regulations.
Those arguing against more state control included Birst from the Association of Counties, who said he worried action from the state Legislature could end up taking away local control, though he also cautioned that counties could go too far.
“You could see a local take it too far where they're trying to prohibit industry, and I think then the Legislature would have to step in,” he said.
Birst did speak to potentially creating “go” and “no go” areas at the state level to better coordinate the rollout of data centers. He also noted that despite data centers being huge investments, what would actually be taxed is relatively small, and argued that there should be provisions allowing for more cash going to communities.
"If you want the locals to be supportive of these types of programs, you need to have taxes going back to the locals," Birst said.
©2024 The Bismarck Tribune, Distributed by Tribune Content Agency, LLC.
