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Two of the world’s largest data center developers are facing prolonged delays in bringing their facilities online in Nvidia Corp.’s hometown, as local power shortages stall the projects indefinitely.
This news was released after Digital Realty Trust Inc., a real estate investment trust that owns, operates, and develops data centers worldwide, mentioned that it applied to construct a data center in 2019.
Notably, the company applied to build a data center in Santa Clara, California. Although they applied about six years ago, sources confirmed that the project is still awaiting complete power activation and is currently under development.
On the other hand, Stack Infrastructure, which was acquired by Blue Owl Capital Inc. earlier this year, has also revealed a 48-megawatt project that is currently sitting idle. At the same time, Silicon Valley Power, the city-owned utility, works to improve its ability to provide services.
The situation surrounding these facilities demonstrates a critical challenge for the US tech industry and the wider economy. This follows a report from analysts highlighting that, although demand for data centers is greater than ever before due to a surge in cloud computing and AI, gaining access to an electricity supply is becoming a significant problem.
US firms aim to invest large amounts in new AI infrastructure amid power shortages
The power supply issue primarily stems from slow progress on new transmission lines, outdated power infrastructure, and various challenges with regulations and permits. Sources have also pointed out the likelihood that pressure on power systems will escalate.
BloombergNEF shared its forecast that US demand for electricity from AI computing could double by 2035. This forecast aligns with the predictions of company executives, such as OpenAI’s Sam Altman and Nvidia’s Jensen Huang, who anticipate that trillions of dollars will be invested in building new AI infrastructure.
“The demand has reached an all-time high, and we are facing a power-supply issue,” said Bill Dougherty, the executive vice president for data center solutions at real estate firm CBRE Group Inc., during an interview.
Meanwhile, in terms of size, the Santa Clara projects are reportedly smaller than those in big facilities that leading AI developers are constructing in New Mexico, Louisiana, Texas, and Pennsylvania. Although these areas have lower electricity costs, their power supply sources are still being developed.
The smaller centers serve local cloud clients who pay more for electricity and real estate, thereby reducing delays caused by long-distance data transfers. This is critically important for self-driving car operators and high-frequency traders, who require rapid access to information.
Dougherty explained that some types of data center demand must be located near population centers. According to him, this is the kind of demand that needs to be addressed in California. However, he raised concerns that they cannot start up due to the restrictions on the available power supply.
Regarding the situation, a May presentation by the city council highlighted that Santa Clara currently has 57 data centers that are either operational or under construction.
In an email, utility spokesperson Janine de la Vega mentioned that Silicon Valley Power has contracts with Digital Realty and Stack that outline how they will provide their services. The representative also revealed that they regularly review requests for additional power supply.
“SVP is working on a $450 million upgrade to their system to meet the needs of these customers and others. This project is on track to finish by 2028,” she added.
The dilemma of power shortage in the US sparks concerns among data center developers
Apart from Santa Clara, analysts discovered that many other places are also facing delays due to restrictions on utility capacity. Based on their argument, utilities across the United States have struggled to maintain their pace as the electricity demand grows faster than the power grid can deliver.
Last year, Dominion Energy Inc. forecasted that connecting large data centers to the grid would take an additional one to three years, with some projects potentially taking up to seven years.
Dominion serves northern Virginia’s Data Center Alley, home to the world’s largest group of computing facilities. In the meantime, Amazon.com Inc. has filed a complaint against a utility owned by Berkshire Hathaway Inc. in Oregon, alleging that the electricity provider has not supplied enough power for four of its data centers.
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