- Electric co-ops have some extra power capacity for expanding data centers
- Data center growth presents a new revenue stream for co-ops that have struggled with lack of density
- But co-ops must grapple with zoning issues, negative public perception about data centers and more
As data center developers increasingly seek rural pastures, local electric cooperatives could be the saving grace to their power and permitting issues, said James Tanneberger, CEO of Accord Telecommunications Collaborative.
With regards to supporting distributed AI workloads, “we already have a substation that has a transformer sitting there that’s only half loaded,” he told Fierce. In other words, a 22.5 MVA transformer may only have “10 MVA of load on it” that the co-op uses to supply power and broadband to its members.
“Now we’ve got an opportunity to serve a 10-megawatt load on that substation without having to add any long lead time equipment,” Tanneberger said. “So we’re talking six months from start to finish.”
Electric co-ops that offer a power pick-me-up to data centers can reduce their own power costs. Because these utilities cater to a mostly residential base, they need to buy power at “the two most expensive times of the day,” Tanneberger explained, which is when residents wake up and when they come home from work.
But a data center that runs all day long “allows us to buy more power during those in-between times and it brings our overall cost of power down,” he said.
On the permitting side, he noted electric co-ops own all their fiber easements and that they often face less oversight from a Public Utilities Commission (PUC) because they’re governed by member boards.
For Accord’s part, “we actually plan to make those data centers members, which means any profit we make, we actually pay back,” said Tanneberger.
“What we see coming is a world where the hyperscaler is going to realize if they want to keep expanding, they’re going to have to do it on a more granular level,” he said.
With land, power, fiber and local relationships, rural co-ops do seem to have all the ingredients data centers are looking for. A recent Fiber Broadband Association (FBA) whitepaper highlighted the potential revenue streams rural ISPs can tap into, with rack space leasing and server leasing being the “best near-term low-risk expansion.”
RVA, which calculated providers need to build 92,000 new fiber route miles to keep up with data center demand, similarly noted rural operators are in a good position to help with that need as they can supply routes to ensure network uptime and redundancy.
Data centers going rural is also good news for operators that have long struggled with lack of density, as Tanneberger pointed out U.S. rural co-ops serve on average just roughly 7-9 customers per square mile.
“My challenge is always I have a whole bunch of assets out there…serving many fewer customers [than investor-owned utilities],” he said. “So I’m bringing in much less revenue for the amount of asset that I have out there.”
The downsides of data center growth
Of course, all the potential upside isn’t without hurdles. An electric co-op may have enough power for a data center but it still has to work with the local transmission provider to make sure their transmission line has enough capacity for the load.
“If it doesn’t, then it doesn’t matter if I have capacity on the substation,” Tanneberger said.
Zoning and securing property is another issue.
“My county has said if I can get something that’s agricultural, I can get an exception on the zoning so that I can land an AI data center in one month. But if it’s residential, that’s going to be a much bigger challenge,” he said.
And then there’s perception. Just the term ‘data center’ has “a negative connotation in a lot of communities,” he noted. Opposition is rising from residents in both new and existing data center hubs, as they have expressed concern about noise, water use, land preservation and more.
Furthermore, the data center sphere is essentially brand-new territory for electric co-ops. “Establishing a process” on how to capitalize on that growth is key, Tanneberger concluded, “because we’ve never done this before.”