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Phoenix plans to build gas plants to help power new data centers

Catherine Boudreau   

Phoenix plans to build gas plants to help power new data centers
  • Phoenix is now the ninth largest data center market in the world.
  • An unprecedented pipeline of new data centers will require vast amounts of power.
  • Utilities are considering expanding fossil fuels to meet the demand.

The Phoenix metro area isn't just booming in population. The region has become the ninth-largest data-center hub in the world as tech companies build out their servers, cloud storage, and AI computing power.

In September, Google broke ground on a $600 million facility in Mesa, just east of Phoenix. Amazon Web Services also plans to expand its existing footprint in the area with two data centers. The developer Vantage Data Centers is in the second phase of a $1.5 billion campus, and Stack Infrastructure is building a campus with five data centers.

Those projects are among an unprecedented pipeline that will require vast amounts of power. To keep up with demand, a Phoenix utility under a recently approved plan could add some 2 gigawatts of new natural-gas plants by 2035, said Caryn Potter, the Arizona representative for the Southwest Energy Efficiency Project, a nonprofit that monitors the plans of utilities in the region. That expansion would be in addition to several other already-approved natural gas projects. The plans were approved even though Arizona's largest utilities pledged to move away from fossil fuels.

"In comparison to other Arizona utilities, the Salt River Project is actually expanding their natural-gas resources at a much quicker pace than what we're seeing really across the region," Potter said, referring to the utility that serves part of Phoenix.

Potter noted that the Salt River Project's draft plan also includes 9.5 gigawatts of new renewable-energy capacity, including solar, battery storage, and hydro storage. The utility studied various pathways to ensure the power grid is reliable to accommodate more extreme heat, more people, and more data centers.

Data centers require around-the-clock power, which is a main reason the utility had to look at natural-gas resources, Karla Moran, an executive at the Salt River Project, told Insider.

Phoenix isn't the only region where data centers threaten to prolong the use of fossil fuels. An investigation by Insider's Dan Geiger and Ellen Thomas also found that utilities in Omaha, Nebraska, and Northern Virginia are under similar pressure. The amount of electricity needed annually to power data centers in the US is expected to more than double by 2030 to 35 gigawatts, according to McKinsey — enough to power nearly 26.3 million homes.

A utility in Omaha got approval to delay the retirement of a coal plant from 2023 to 2026 and build some new gas capacity as part of a larger investment in renewables. In Northern Virginia — the largest data-center market in the world and Amazon Web Service's top hub — a utility is also considering delaying the retirement of two coal plants and building new gas plants.

"There is a pathway in the power-generation and utility sector to become 80% to 90% decarbonized," Potter said. "It's that last 10% that's going to be tricky. But Arizona still has a lot of gas on the system, as well as coal-fired power plants that don't have a public commitment to be retired yet. So I feel strongly that we need to prioritize renewables and energy efficiency to the fullest extent before we invest in so much more gas."

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