Opinion: New data centers aren't the dream they may seem
By Howard Tullman
Credit: Massimo Botturi/Unsplash
October 02, 2024 03:50 PM 17 minutes ago
One of the lessons from the pandemic has to do with the new three Rs — reserves, redundancy, and resilience.
During the pandemic, we paid a price for our decades of reliance on fragile and foreign supply chains driven by the gospel of just-in-time everything, as well as an infinite consumer desire for an abundance of cheaply made and readily disposable goods.
We were left with bare shelves, empty-handed workers with nothing to assemble, layoffs, and ultimately a shattered economy. It became increasingly obvious that on-site and nearby storage and availability of all manner of materials, inventory, and supplies is essential to avoid similar problems in the future.
In response to the pandemic, Amazon and other mass merchandisers began a national program to build additional, enormous, well-stocked, and strategically located warehouses. These distribution centers are typically located close to, but carefully outside of, major urban centers (except in New York, where a major facility is located in Staten Island). Proximity to huge populations of Prime customers is crucial, but dodging the pitfalls and the extortionate politics of our major U.S. cities was equally critical.
Collar counties and small exurban cities are ideal and welcoming targets for these mammoth facilities, which promise to bring hundreds, if not thousands, of jobs. By and large, with some occasional whining about the associated truck traffic, these burgs are happy to have Amazon and others as their big new neighbors and employers, especially because there appeared to be no economic or environmental downsides. Funding for social projects, schools, and other local government initiatives also helped to smooth the path for these facilities.
A new and far more problematic wave of development, modeled on Amazon, is gathering speed across the U.S., which communities have endorsed and supported based on their prior assumptions and overall positive experiences with the DCs.
But this new activity — the building of self-standing and substantial data centers — is a far different and more complicated undertaking. Data centers come with near-term and potentially far-reaching environmental and other adverse consequences. These buildings and campuses are remarkably energy and water hungry facilities.
Everyone hears Chicken Little stories about the evils of AI, but in terms of the general public’s awareness, these tales are almost exclusively focused on the generative content created by the huge, large language modules that support the processing.
Very few civilians and almost no city or state regulatory authorities have any real understanding of the ancillary costs in terms of power requirements, water consumption, and carbon footprint that these facilities will spawn. Common agreement — while noting that there are varying methodologies and measurement approaches — is that an AI inquiry takes many times more compute (power) than a comparable Google search does.
The companies proposing and building these centers are making representations about control, remediation, and elimination with far distant timeframes, which are speculative at best and most likely unrealistic in any event. Meta’s DeKalb data center is a good example. Its plant envelope is about 2.4 million square feet, and cost about $1 billion to construct. Meta claims that it will support several hundred jobs when fully operational, has provided more than $1 million in direct funding to local schools and nonprofits, and has made more than 60 grants and sponsorships for other community organizations and programs.
At the same time, the company notes that it “expects” to be “water positive” by 2030 (at which point the project will restore more water than it consumes). Meta also notes that its global operations have reached net zero emissions. Needless to say, there are no remedies or redos for missing any of these objectives, and no regulatory tools to enforce or assure compliance — or even progress — in the interim.
Aurora is another city that has quietly become the home for a number of co-located data centers for major firms such as the CME Group and Google Cloud, which are constructing multiple buildings to house trading systems. Edged Energy — a division of Endeavour — is another national data center builder and operator that is building a new net-zero waterless data center campus in Aurora. And finally, Amazon itself has two fulfillment centers in Aurora with about 1,000 employees.
The bottom line is an exciting and very mixed blessing for smaller cities where no one can offer anything more concrete than their best guesses as to the long-term environmental concerns of the new technologies being tested and implemented. Data center power use will reach 35GW by 2030, according to one recent report, up from 17 GW in 2022.
If we thought that crypto processing ran away with the world before anyone figured out exactly how much heat it generated and how much power it consumed, we may be looking at another version of the same old entrepreneur’s credo — build first and figure things out later.
Howard Tullman is a serial entrepreneur and venture capitalist based in Chicago.
By Howard Tullman
