*Opinions expressed in Letters to the Editor are not necessarily those of The Messenger.
Energy use is a concern many people, myself included, mention when discussing potential data centers. But what aspects are direct cause and effect relationships and what are separate components?
I’ll ask you, as I’ve asked myself, what information or evidence would you need to ease your concerns or change your mind with regards to energy concerns? Is your current energy view based upon your own research, or from memes and postings online, and how do you go about sorting out fact from fiction? Having discussed water in the past couple of weeks, I started to delve into the energy topic.
As a part of my research, I emailed a list of questions to Dakota Electric, my electric provider, to inquire about energy. The CEO and VP of Energy invited me to sit down with them and gave me an hour of their time to ask direct questions, I received direct answers. Certainly, Xcel may have different business models in some aspects, but from what I’ve ascertained they operate fairly similarly.
Can our power grid handle the increase in demand that data centers require? My answer to this is an overview of how the energy utility is managed. First, all investor-owned power utilities and one cooperative (Dakota Electric) are regulated by the state’s public utility commission (PUC). To meet power needs, a utility provider, like Xcel or Dakota Electric’s power supplier Great River Energy, purchase “zonal resource credits” (ZRC’s) from independent power producers, or generate their own power. Dakota Electric contracts to buy most of their power from Great River Energy. To comply with the public utility commission (PUC), utilities have to show purchasing contracts to supply their “peak load capacity”, or highest potential power need. I was told that the utilities are not allowed to over-promise their power generating capacity.
Power utilities by state law have obligations to provide power safely, reliably, and affordably to those they serve. When a new development, such as a data center, wishes to connect to the grid the power utility has to first be able to meet those obligations before saying yes. The utility cannot just hook them up if they don’t have the ability or ZRC’s to provide the amount of power requested. Multiple agencies also weigh in on the feasibility of such large power consumption plans and if infrastructure, like large capacity transmission lines and local substations and lines, can accommodate the build out. Any large infrastructure needs for such build outs are often times negotiated between the power utility and paid for up front by the developer. Ergo: The power utility has or will have the generating capacity for the data centers they agree to by the time they come online.
That said, these data centers will take years to build and will come online incrementally. This means that over the next 2-5 years the power utility will also have time to build additional infrastructure in accordance with these contracts to meet new demands coming online.
These contracts and infrastructure not only provide the needs of the development, but has an overbuild capacity which yields redundancy to the entire system at large, which we all benefit from. This can be in the form of capital for substations, increased capacity transmission lines, and large energy contracts from power generators, all of which give the overall power grid sustainability.
Certainly, the laws and regulations set at the state level by elected officials impact what the power generation is and its sustainability. Currently in Minnesota we have state-imposed mandates that by 2030 80% of electricity generated in Minnesota will be carbon-free and 100% by 2040. This means that our state’s energy will need to come from sources like wind, solar, hydropower, and nuclear, which do not release carbon dioxide. One difficulty being Minnesota also has a moratorium on allowing any new nuclear power production being built. This leaves less consistent power sources to have to be built instead.
Energy reform to these government-imposed mandates would allow energy companies to pursue a wide variety of new generating options determined by their cost to benefit ratios and would allow cheaper options of power generation to be pursued. If you want cheaper prices, advocate for less constraints and regulations.
Are there any potential benefits that these data centers might bring? Seemingly yes. If, as according to Dakota Electric, the utility company negotiates strongly with these developers there is a great benefit gained by all by requiring the developer to pay the build out costs of this infrastructure, which in turn provides resiliency to the overall grid. It also helps power utilities to cover fixed costs, under contracts, which in turn can lead to keeping power rates lower longer. Time will tell how energy rate hikes will occur. Dakota Electric had hikes in 2014, 2019, and 2025, about every 5 years. Where Xcel has a new hike going into effect in 2025, and also had increases in 2016, 2017, and 2018.
Will energy prices go up in the coming years? Certainly in some degree, but regulated energy utilities have to ask the state for permission to increase their rates, this isn’t something that they can just do overnight. Asking for a rate increase is their way of keeping their expenditures covered. These past rate increases were asked for before the data center incentive bill was passed in 2024, so it seems difficult to claim a cause and effect that rates are going up because of data centers. Rates are going up because utility costs are going up. It would seem that if power utilities can negotiate beneficial upgrades to their power grid, paid for by these potential data centers, then those costs won’t need to be paid fully by the rest of us. This would seem to be worth considering and learning more about.
As our City Councils start considering these proposals might we, citizens, press our councils to negotiate as hard as possible like the energy companies seemingly are, and not simply take the first offer given to them? And if negotiation isn’t a City Council’s strong suit, then perhaps consider hiring an independent representative to negotiate strongly on the City’s behalf.
In order to have these discussions we should also seek out facts and limit our fears of what might be or could be “bad” about growth and development and also consider to ask what might be or could be good.
