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Data Center Electricity Demand

  • Will it leave citizens freezing in the dark?

Back in 2012, Wyoming Governor Matt Mead announced that Microsoft would build a $112 million data center in Cheyenne. Since then, Microsoft announced two data center expansions, for a total investment of about $450 million.

Sounds great, but is it?

Data centers move here because, in addition to taxpayer-funded bribes from government, they use a lot of electricity and thus look for locations with low electricity costs. Electricity in Wyoming is relatively cheap—for now.  As demand rises, so does the price of electricity because when public utilities build more capacity, they ask the Public Service Commission for a rate hike, and they usually get it. But something more insidious lurks behind this apparent lack of incentive to keep costs down. Government policies are currently pushing cheap energy off the grid. When Environmental Protection Agency (EPA) regulations shut down coal-fired plants, utilities build new plants that generate electricity with another energy source, such as natural gas. But coal-fired plants in Wyoming produce electricity at a cost of $10.89 per megawatt hour, while natural gas plants produce electricity at a cost of $53.33 per megawatt hour.

This means, should new power plants come online because of rising demand from power pillaging data centers, Wyoming families could be struggling with fuel poverty as their electricity bills skyrocket.

Even now, in our current anti-family, anti-cheap energy environment, when new electricity plants are built, electricity rates go up. For example, Cheyenne Light Fuel and Power’s (CLFP) new $222 million gas-fired electricity plant, Cheyenne Prairie Generating Station, will light up in October 2014. When that happens, the requested rate increase will take an estimated $14 million more out of the pockets of Cheyenne families every year. CLFP wants the hike to earn a return on investment for its portion of the construction cost and recovery of its share of the associated operating costs of the Cheyenne Prairie Generating Station, according to a company press release.

CLFP and another Black Hills Corporation utility, Black Hills Power, share the construction and operating costs as joint owners of the new 132-megawatt power plant. CLFP’s parent company, Black Hills Corp., requested a rate hike for its portion of the $222 construction and operating cost of the new power plant. This would take an additional $2.8 million per year out of the pockets of families trying to heat their homes, for a total of $16.8 million per year.

But families have already been paying for Prairie Generating Station’s construction cost. Since October 2012, a rate rider was added to electricity bills, which started out at $0.00157 per kilowatt hour (kWh) and then rose quarterly to its present $0.00889 per kWh, a nine percent addition to the normal $0.0999 per kWh charge.  This rate rider will go away when the Wyoming Public Service Commission approves the rate increase request. 

Even higher electricity prices are coming to Wyoming because data centers use a lot of electricity.

A 2007 EPA report showed that in 2006, data centers used about 61 billion kilowatt-hours (kWh) of electricity, or about 1.5 percent of all U.S. electricity consumption, about twice as much as in 2000. The 61 billion KWh are equivalent of the all the electricity used by about 5.8 million U.S. households.

The EPA warned at the time that consumption could double again by 2011, but according to  the US Department of Energy, data centers now use about 2 percent of all the electricity produced in the U.S., a 33 percent increase over 2006. The slower increase was likely due to the slowdown in the economy. The increase could accelerate once the economy picks up. 

Then what?

Well, as demand for energy increases, so will the need for new power plants. When new capacity is added, each customer, big or small, will pay more during construction and still more later with higher rates according to use. Sure, big users like Microsoft may pay more than Cheyenne families, but families could actually pay twice, once through their own use and again through taxpayer-funded handouts to these data centers through the Managed Data Center Cost Reduction grant, a grant subsidizing data center electricity use.

At this rate, electricity may soon become a luxury good affordable only by the well-to-do.

Given the current federal government policy of making electricity more expensive for families trying to heat their homes and cook their food, the last thing Wyoming needs are energy hogs. Government must stop bribing data centers to come to Wyoming.

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Sunday, 25 February 2018

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