How will the growing demand for power impact Valley development?
What do data center, semiconductor and industrial developments all have in common? They require a hefty dose of power. According to CBRE’s latest North American Data Center Trends Report, there is 2,287.6 megawatts (MW) of data center supply currently under construction, with more than 70% already pre-leased. And, as reported by the Arizona Technology Council, in phase one of development, “Taiwan Semiconductor Manufacturing Company will need approximately 200 megawatts of power, which is equivalent to powering nearly 30,000 homes in Arizona, according to APS.” With the demand for power only increasing, how will it impact Arizona and its utility providers? Are we ready? To help answer these questions and others, AZRE turns to Carrie Kelly, CEO of Pick It Up! Management & Consulting and Jeanine Jerkovic, economic development director for City of Surprise.
AZRE: What are some of the most common misconceptions surrounding electricity and the demand for power?
Carrie Kelly:One misconception about electricity is that it comes from a single source. In Arizona, electricity comes from various sources, and both APS and SRP have committed to running entirely — or nearly entirely — on renewable energy by 2050.
Jeanine Jerkovic: The biggest misconception we’ve experienced in Surprise is that the maximum amount of power required for high-power uses will be available from day one. Projects tend to assume that the transmission and production capacity can be created quickly. In fact, all of it takes time, equipment and thoughtful phasing.
AZRE: With increased data center and semiconductor development, how does this alter energy uses?
CK: The U.S. has experienced significant growth of new manufacturing facilities in the last few years, aided by federal funding through the Inflation Reduction Act, Infrastructure Investment and Jobs Act and CHIPS and Science Act. Arizona’s economic partners have proactively planned for — and brought advanced manufacturing to — every corner of the state. Arizona will continue to see manufacturing companies enter the state because of the strong infrastructure and existing industry clusters. APS and SRP have been leaders in long-term planning to meet the increase in energy demands.
JJ:Due to increased AI uses in every industry, data centers in particular are experiencing higher energy demands than ever before — up to two to three times more energy capacity needs than in the past. Since the TSMC project landed in the Northwest Greater Phoenix market, it sent a message to other semiconductor manufacturing plants that Arizona is the place to do business. As a result, we’ve seen a marked increase in project interest from this area, opening a floodgate of high-energy use projects into our region.
AZRE: What are some of the energy-related challenges associated with current development projects, especially those that require a surplus of power?
CK: In economic development, we continuously benchmark against our competitors. The good news is that regardless of Arizona’s challenges regarding energy-intensive projects, other states are experiencing the same challenges. We have landed these types of projects here because of Arizona’s strong infrastructure.
As we compete, it is good to note that Arizona is No. 2 in the nation for power grid reliability, has a low cost of doing business, and has a solid workforce pipeline from universities and community colleges.
One challenge that is not energy-related but related to this
discussion is the availability of sites in Arizona. As Arizona has had more development, there are fewer sites available. We need to develop more sites now and in the future.
JJ: For some cities like Surprise, one challenge is that the transmission and energy production infrastructure just doesn’t yet exist in the future growth areas where we want advanced manufacturing and technology development to land.
Another challenge is that we want to make sure we can meet project timelines, and the increasing high- energy use project demands have forced all of us to consider projects much more carefully than in previous years. Energy-related challenges are increasing development timelines and could potentially delay operation schedules for businesses, and we must be upfront with new projects about that and reset expectations until a solution is identified.
AZRE: How has the evolution in the data center/semiconductor/technology sectors impacted APS and SRP?
CK: With the increase in demand, both APS and SRP have been innovative in their solutions and proactive in infrastructure development. APS and SRP have incredible economic development teams, and both Karla Moran and Kelly Patton have been recognized as North America’s Top 50 Economic Developers. Moran will also lead the Arizona Association for Economic Development (AAED) as president starting in July 2024. Having top talent like Patton and Moran leading economic development efforts through Arizona’s expansion over the past few years has been critical to Arizona’s success.
JJ: Everyone loves a big project win, but patience is a virtue that many in the high-tech development sector haven’t had to practice in Greater Phoenix until recently. Our utility partners, which have exemplary track records of exceeding business expectations for decades, are now under tremendous pressure unlike ever before to meet nearly impossible power demands created by global market forces beyond anyone’s control. An increasing time in development cycles means resetting project timeline expectations for some high-energy use companies locating to the Greater Phoenix market, and we all need to learn to communicate early and often with our utility partners to make deals happen.