Power

Dec 14, 2023

Take a look back at the Omaha Public Power District's 10 biggest storms in terms of outages.

A pair of Facebook data center complexes straddle Highway 50 in Sarpy County, huge digital warehouses where tens of thousands of computer servers make it possible for your friends to see those pictures you just posted of your new puppy or family vacation.

Just to the southwest, dust rises where Facebook is building yet another complex of data center buildings, testament to the Omaha metro area’s growth in recent years into a top 30 market nationally for such server farms.

But perhaps as striking as the windowless gray structures themselves are the mind-boggling number of high-voltage lines and electric wires feeding into them.

Data centers gobble up incredible amounts of power — for big ones, as much as a small city. And Omaha’s data center growth is leading what’s believed to be the largest spike in demand for electricity in the Omaha Public Power District’s 77-year history.

To meet that growth, Omaha’s public customer-owned electric utility is now looking to spend some $2 billion to nearly double its generating capacity over the next decade.

While residential and commercial power usage is also growing, World-Herald calculations show nearly 90% of the projected new demand that OPPD is striving to meet is coming from industrial customers — very large business enterprises that are heavy energy users. And roughly two-thirds of that new demand, OPPD says, is from data centers.

That raises a number of questions about OPPD’s plans to power up over the next decade.

Are there lots more data centers on the horizon? Just how firm are the projections for this big spike in industrial demand?

Are the region’s economic development benefits from this growth worth their costs?

With so much new generation, how is OPPD going to continue its drive to reduce its climate-changing emissions?

How much will rates go up? And are the data center operators and other big industrial customers going to pay their fair share?

Some of the power infrastructure outside the Google data center in Papillion. With centers in Council Bluffs, Papillion and northwest Omaha, the metro area has emerged as the company's largest data operations presence in the country.

“It was quite shocking to say the least to hear of this,” said David Corbin, the Nebraska Sierra Club’s energy committee chair, recalling in May when OPPD first revealed its plans. “They’ve said they need all this, but they are not giving much information on how they know it.”

Leading up to the OPPD board’s planned Aug. 17 vote on a fleet of new generation facilities powered by wind, solar, natural gas and other sources, The World-Herald will be exploring such questions. It begins today with a look at the projected new demand, what’s driving it, the costs and benefits of data centers, and who will pay.

As part of the paper’s examination, OPPD President and CEO Javier Fernandez sat down for the most extensive interview on the plan to date.

He and others make clear there’s a lot more than the future of data centers riding on OPPD’s proposal.

Thousands of other jobs and the region’s entire economic trajectory could also be dependent on OPPD having enough power to fuel growth.

Growing energy demand is being seen across many major economic sectors in the state. That includes manufacturing, which is becoming more automated and growing as more production returns from overseas.

Construction workers on site at Facebook’s new complex of data center buildings in Sarpy County. A large data center takes two years to build and employs more than 1,000 construction workers.

It was recently revealed that microchip manufacturers are eyeing locations in Fremont and Omaha, representing a potential all-new industry for Nebraska.

“We are seeing lots of projects looking in our region that are very large and very power-intensive,” said Mark Norman, vice president of economic development for the Greater Omaha Chamber. “If we want to compete for those, we have to have power.”

And while it’s overshadowed by the massive growth in industrial demand, residential needs are also growing as we plug in more gadgets and increasingly drive electric cars.

“The economy is changing pretty dramatically,” said Bryan Slone, president of the Nebraska Chamber of Commerce and Industry. “I credit OPPD for taking a long-term look forward and saying, ‘We need to be ready for this.’ ”

Since it now takes as much as a decade to bring new generation online, Fernandez said there’s also some urgency in moving forward with the plans to power up. The utility must be proactive, not having the luxury of sitting back to see what happens.

And while providing the new resources will challenge the utility, he says it’s a good thing that so many businesses want to locate, invest and bring jobs here.

“This is one of the most exciting times that we have had, not only at OPPD but the state of Nebraska as a whole,” he said. “Is it going to challenge us to build all that infrastructure? Absolutely, it won’t be easy. But it’s a story of excitement and optimism and pride.”

***

The big driver

In April 2017, state and local leaders posed with shovels emblazoned with the blue Facebook logo as the iconic social media company announced it had selected a site in Papillion for its ninth global data center.

“We’re terribly excited about the opportunity to have Facebook here,” Nebraska Gov. Pete Ricketts said that day, saying the center and its 100 permanent jobs would be key to expanding a growing “Silicon Prairie” in the state.

Facebook was Omaha’s first big prize in the aggressive nationwide competition to attract the hyperscale data centers of the nation’s tech giants, among them Google, Amazon, Microsoft, Apple and Facebook. The companies have been investing billions to build dozens of such server farms around the country.

A bridge over Highway 50 connects two Facebook data centers just north of Capehart Road.

You may not know what a data center is or what they do. But there’s a good chance you interact with one many times a day, as they’ve become the backbone of both the modern economy and modern life.

Anytime you stream a movie or play an online video game. Anytime you download a picture to Facebook or watch a video on YouTube or TikTok. Anytime you make an online purchase or pay $2 for parking using an app on your phone.

In each case, you are interacting with a data center.

Simply put, data centers are huge digital warehouses where information is stored and where online interactions and transactions take place. And they require reams of capacity for computer servers and data storage.

Overall, global internet usage has grown 20-fold since 2010. And lifestyle changes since the pandemic, with the rise of working from home and more online shopping, have only helped to further drive the demand for data centers. The rise of artificial intelligence has become another recent driver.

“As a nation, we are data hungry,” Norman said. “The need for the processing those data centers provide continues to grow. If you look at the projections for data centers across the country, the growth curve is still very steep.”

Indeed, according to one published report, data center capacity in the United States has doubled since 2018, and it shows no sign of letting up.

Data centers started off in Silicon Valley, but as demand rose, they proliferated across the country to be closer to the customers they serve. The server farms tend to cluster in major cities, with the Midwest in general and Omaha in particular becoming hubs.

Dgtl Infra, a company which tracks industry data on data centers, towers and fiber infrastructure, earlier this year ranked Omaha the 35th-biggest city in the country for data centers. That ranking did not include the data centers across the river in Council Bluffs, which had they been included would put the Omaha metro’s ranking closer to 30th.

“Clearly the metro area is trying to be that Silicon Prairie, and it’s a smart strategy,” Slone said. “For Nebraska to succeed economically and to attract young people, we have to be a technology state. Data centers are one component of that.”

Facebook, which two years ago changed its corporate name to Meta, clearly liked the Papillion location it picked in 2017. It has twice since announced expansions, growing the site into one of the largest single enterprise data center campuses in the country.

Google, which opened its first of its four data centers in Council Bluffs in 2009, subsequently in 2019 broke ground for its own data center in Papillion near Facebook. That complex is now operational and currently undergoing an expansion.

Google has still another data center complex under construction in northwest Omaha at the intersection of State Street and Blair High Road.

The company has said little publicly about its facilities and plans. But it has previously indicated that when combined with its Council Bluffs operations, the complexes under construction will give the metro area its largest operational presence in the country.

A Google data center under construction near State Street and Blair High Road in northwest Omaha.

According to Dgtl Infra, the Omaha-Council Bluffs metro area is currently home to at least 20 data centers from a dozen different providers.

Sarpy County, with its vast available flat farm ground, has emerged as the metro’s focal point of data centers, not only home to Google and Facebook but also to others operated by Yahoo, Travelers Insurance, Fidelity, LightEdge Solutions and Tierpoint.

LightEdge and Tierpoint are examples of “co-location” data centers, where businesses can rent capacity rather than build and operate their own. There’s even a co-location data center at UNO’s Aksarben campus that has had Major League Baseball as a major client.

It’s interesting to note the way Dgtl Infra measures the size of data centers — not by their square footage, but by the electricity they consume. That’s the industry standard, which also speaks to data centers’ voracious appetite for power.

Not only does it require a lot of power to operate all those processors and servers that must run 24/7, but data centers also require substantial cooling systems to control all the heat that machinery generates.

According to the U.S. Department of Energy, a large data center requires over 100 megawatts of electricity — enough to power roughly 80,000 households.

That’s also why the companies that operate data centers look for places where electrical costs are lower.

There’s no doubt OPPD’s relatively low rates for electricity have been a big draw for data centers. OPPD’s average industrial rate is about 4% below the national average, and 5% below the region’s (its residential and commercial rates are below average, too).

OPPD also offers a flexible rate structure that allows big industrial users to seek to fulfill their energy demand with renewable generation. That has proven attractive to mega operators like Facebook, which are conscious of the environmental impact of their huge power use.

Large data centers are also eligible for the same business tax incentives available to other big businesses locating in Nebraska, including possible sales tax refunds and property tax exemptions on their equipment.

In a report last year, a trade group representing data center operators said Nebraska’s 25% annual growth rate for such centers is roughly the same as that of northern Virginia. That region near Washington, D.C., has emerged as by far the nation’s largest data center hub, with more capacity than the next four top regions combined, and 25 times more than Omaha.

That same report, prepared by economic consultant Magnum Economics, suggests data centers have also become an economic engine for Nebraska.

Perhaps their biggest economic jolt comes during the construction phase.

The trade group said it typically takes two years to build one of the mega centers, creating work for more than 1,200 people in the construction trades, particularly electricians and pipefitters, and 700 non-construction workers. That impact is evident in the dozens of workers’ pickup trucks parked at the current Facebook and Google construction sites.

The centers don’t tend to require a lot of permanent jobs, numbering more in the dozens rather than the hundreds. But the industry report indicated that as of 2021 there were nearly 500 full-time data center workers in Nebraska, the vast majority of them in metro Omaha, and that they were paid well above the state average wage.

Powerlines cross over farm fields near the Facebook data center just northeast of Highway 50 and Capehart Road.

Counting those operations workers, construction workers, contracted services and other spinoff jobs, the report put total Nebraska employment attributable to the centers in 2021 at 5,300 jobs.

There are tax benefits to the centers, too. The report pegs the centers’ tax impact at $18 million to the state and another $18 million locally. Those collections include sales taxes paid on their considerable purchases of electricity as well as local property taxes on buildings and land.

The Magnum report also suggests the data center industry here is still in its infancy. If it continues to grow at roughly half the rate it is currently, the state by 2035 will have 2,700 onsite data center operator jobs and will generate more than 11,000 additional jobs in the local economy.

But as we are now seeing, all that growth can also come with costs. Here and in many places across the country, data center growth is pushing available electric capacity to the limit, sometimes leaving utilities scrambling to keep up with demand.

“The existing data centers we have here obviously have been the trigger of the power consumption growth for the area,” the chamber’s Norman said. “But if we want to capture any of these others, we are going to have to create new generation.”

Indeed, for OPPD, such projected growth is not just a hypothetical thing. It’s something it must plan for, years in advance

***

The Plan

OPPD’s Fernandez acknowledged the new load did somewhat sneak up on the utility — not because it was asleep at the switch, but because of a recent big surge in plans by industrial customers to power up.

As part of OPPD’s planning process, OPPD account executives are in regular contact with their largest customers, talking to them about their future needs. The utility also has an economic development arm that works with chamber leaders on new prospects.

When current or potential customers mention the possibility of future expansion, the demand is documented and assigned a probability. As mere speculation turns to actual plans and then to site selection, those probabilities increase, with the mathematical calculations helping the utility determine when it needs to begin planning for more resources.

In the last year or two, Fernandez said, the number of industrial projects moving toward reality has mushroomed.

“Without revealing customer information, I have a lot more confidence this load is coming,” Fernandez said. “This growth came in really aggressively, and we had to get going.”

As a public power district with a territorial monopoly, OPPD also has a legal obligation to serve any and all of its customers, he said, regardless of their size and energy demand.

“Anyone coming in here, we can’t say no,” he said

OPPD has now mapped out the future demand, and it’s challenging. Data requested from the utility by The World-Herald paints a stark picture.

Industrial power usage, which grew at a 38% rate between 2012 and 2022, is projected to grow an explosive 175% between now and 2032.

The pace of residential and commercial usage is also projected to pick up, both from about 10% the past decade to 14% in the decade ahead.

In all, 87% of all the new projected usage is coming from industrial customers, with the rest evenly split between residential and commercial. When combined, customer usage is expected to increase more than 70% over the next decade.

Just four years ago, OPPD’s board approved 600 megawatts in new renewable generation — solar and wind power that the utility is currently working to bring online. But the new proposal that will be voted on by the board next month is essentially four times that size.

The proposed $2 billion lineup of new generation calls for another 400 to 900 megawatts of wind and solar, up to 125 megawatts of battery storage, 600 to 950 megawatts of natural gas, at least 32 megawatts of demand response (shifting or shedding electricity demand to help balance the grid) and approximately 320 megawatts of added fuel capability and fuel oil storage at existing generation facilities.

An electrical substation that’s part of the Facebook data center complex in Sarpy County. A large data center can consume as much energy as a small city.

Some of the new generation represents redundancy needed to compensate for when the sun doesn’t shine or wind doesn’t blow. OPPD estimates renewable sources will provide 90% of the new power overall, with the natural gas units and other sources providing backup and helping the utility meet peak demands and reserve requirements.

The operator of the regional grid OPPD is part of has also been requiring utilities to create bigger margins of reserve power to increase system reliability. Some of the new generation being proposed is attributable to that.

“A lot of people say, ‘Well, all of this is just because of data centers, so make data centers pay for everything,’” said OPPD board chair Eric Williams. “That’s not strictly true.”

Fernandez sees urgency to get moving on the new generation.

With many utilities around the country facing similar needs to generate more, there’s a backlog for manufactured electrical equipment as well as professional services. And there’s also a backlog of requests to connect new generation facilities into the regional power grid, with the approval time now taking roughly five years.

“This growth is happening everywhere,” Fernandez said.

If the growth in demand ultimately outstrips OPPD’s ability to produce, the utility can go out onto the grid to purchase energy. But the operator of the regional grid can also impose heavy penalties on utilities who aren’t pulling their weight, he said.

Fernandez said failure to deliver also could also cause some of the big industrial targets to look elsewhere, potentially costing future growth and economic development.

To move more quickly, the utility’s leaders are asking the board for authority to negotiate contracts for equipment and services without the sealed bidding process required by law.

There were enough questions and concerns expressed about the plan after it was announced in May that OPPD’s elected board of directors declined to vote as scheduled in June, putting it off until August.

The delay was appropriate, the Nebraska Sierra Club’s Corbin said. He has nothing against data centers and understands their role.

But he said he thinks OPPD needs to make sure that energy conservation is a vital part of the plan, including making sure the new data centers are as energy-efficient as possible. He said the utility has yet to deliver on past promises to work for energy conservation across the district.

“I’m all for having jobs and these sorts of things, but the growth needs to be smart,” he said. “It should be well-planned and intelligent, with incentives to save energy.”

And many are asking who will pay for it all.

Fernandez said he’s seen the concerns of residential ratepayers that they will pay to supply power for data centers. While rate-setting for utilities is complex, he is pretty unequivocal that that will not happen.

“The data centers are going to pay for the data centers,” he said. “You are going to pay for you.”

The utility has estimated that the power upgrade overall will require rates to increase about 10%, which would be phased in over four years beginning in 2027. That is just an average, and does not take into account any other general rate increases required to run the utility.

And exactly how much various rates for residential, commercial and industrial customers will change remains to be seen.

OPPD’s guiding rate document states that rates for customers requesting service will be set at levels that recover costs of investments in generation, transmission, distribution, facilities and equipment that make that service possible.

There are accepted standards within the industry, among utility regulators and the courts on how such costs are apportioned among various classes of customers to make sure rates are fair and nondiscriminatory. State law also mandates fair and nondiscriminatory rates.

Ultimately, rate-setting is based on complex cost of service studies that are also standard in the industry. In the end, Fernandez said, all OPPD customers will benefit from a more robust and resilient generation system, and everyone will pay their fair share.

“We take that seriously, and so does our board,” Fernandez said of the process of setting fair rates.

For now, the OPPD board’s decisions on how rates will change to fund the new generation are still years away. Next month’s vote is just to give the go-ahead to begin the process of building the new resources.

If the community is going to have the energy it needs to power future growth, Fernandez said, it’s a decision that should wait no longer.

“Because without electricity,” he said, “nothing happens.”

[email protected], 402-444-1130, twitter.com/henrycordes

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Reporter - Metro News

Take a look back at the Omaha Public Power District's 10 biggest storms in terms of outages.