Planning and Powering Data Centers in a Shifting Energy Landscape

The data center industry has undergone profound changes in recent years, spurred by the surge in digital services, advancements in technology and shifting energy strategies. According to Enverus Intelligence® Research, these factors are reshaping how data centers are planned, sited and operated. This blog explores the critical factors in data center siting and powering, the challenges and strategies involved, the importance of power infrastructure, market dynamics and future trends and how Enverus can support these efforts. 

Critical Factors in Siting and Planning 

Successful data center siting and planning depend on a range of interrelated considerations. One of the primary drivers is available withdrawal capacity—the amount of power that can be reliably drawn from a nearby substation. Without adequate power infrastructure, a data center cannot operate efficiently.  

Proximity to power generation sources is also crucial to reducing risks, lowering energy prices and improving operational reliability. Several other key factors include: 
 
Utility data: Access to real-time information about upcoming projects, existing infrastructure and future IRP plans. 

Interconnection queues: Understanding the queue for future projects for potential power offtake.   

Power grid dynamics: Monitoring changes in power flow from new generation or infrastructure helps mitigate risks. 

Land acquisition: Securing land with appropriate zoning, accessibility and environmental compliance is critical. 

Environmental impact: Avoiding floodplains, wetlands or critical habitats to minimize environmental and regulatory risks. 

Local incentives and regulations: State or municipal tax incentives and compliance requirements can influence site selection. 

Fiber optic connectivity: Provides high speed data transmission for large volumes of data to networks, servers or storage systems.  
 
Effective data center planning also requires integration of multiple data sources—from power capacity assessments to environmental impact data—ensuring that the planning process is comprehensive and data-driven. However, managing and interpreting these diverse data streams demands specialized tools and expertise, which can become a challenge for many organizations. 

Best Locations to Build Data Centers  

Choosing the right location for a data center depends on the specific project scope, including size, capacity, cooling methods and proximity to clients or skilled labor. Traditionally, data centers were clustered to benefit from economies of scale. However, as power demand grows, utilities are now discouraging such clustering. 

A growing trend is to build urban data centers close to major population hubs for low-latency applications, or alternatively, to locate facilities in more remote areas for AI, blockchain and crypto mining purposes. Remote sites often offer greater flexibility with power availability and lower land costs, but they may require additional infrastructure investments. 

Types of Energy Used for Data Centers  

The choice of energy sources plays a pivotal role in data center operations, impacting sustainability goals, costs and long-term resilience. Developers can select from multiple energy acquisition strategies, such as purchasing power from wholesale markets, partnering with IPPs or developing on-site power generation. Increasingly, data centers are exploring renewable energy options to align with ESG goals and improve sustainability. 
 
Here are the primary energy types used in data center operations: 

• Natural gas: A popular choice for on-site generation, offering reliability with lower emissions compared to coal. 

• Coal: Less common in new builds due to environmental concerns, though still used in certain regions. 

• Wind power: Data centers located near wind farms benefit from stranded assets and access to renewable energy. 

• Solar power: Ideal for data centers with large rooftops or adjacent land for solar arrays, especially when paired with energy storage systems. 

• Hydropower: Provides consistent power in regions with access to hydroelectric plants, though siting near water bodies can be restrictive. 

• Nuclear energy: Offers stable, high-capacity power but involves regulatory hurdles and public perception challenges. 

• Combined heat and power: Improves efficiency by generating electricity and reusing waste heat for cooling. 

When choosing an energy source, developers consider several factors: 

Reliability and withdrawal capacity: Can the source meet the facility’s power demands consistently? 

Sustainability goals: How well does the energy align with ESG targets? 

Cost efficiency: Is the energy source financially viable, especially when considering incentives or regulatory fees? 

Operational resilience: Does the energy strategy allow for hybrid solutions to manage peak loads or supply disruptions? 

Emerging Trends in Data Center Planning  

The future of data center planning will be shared by technological advancements and market conditions. The data center market is dominated by major players such as AWS. These large companies, known as hyperscalers, are driving significant growth in the industry. Recently, Open AI pitched the White House on constructing 5GW data centers: