Stack Infrastructure SVY02A data center project in Santa Clara.
(Bloomberg) – Two of the world’s largest data center developers have plans for Nvidia Corp. in the hometown, which may remain empty for years because the local utility is not ready to supply electricity.
Santa Clara, Calif., home of the world’s largest artificial intelligence chip supplier, Digital Realty Trust Inc. in 2019 filed a request to create a data center. Some six years later, the development remains an empty shell waiting to be fully energized. Stack Infrastructure, which was acquired by Blue Owl Capital Inc. earlier this year, has a 48-megawatt project nearby that is also vacant, and city-owned utility Silicon Valley Power is working to add capacity.
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Digital Realty’s SJC37 data center project in Santa Clara. Photographer: Jason Henry/Bloomberg
The fate of the two facilities highlights a major challenge facing the US technology sector and the economy as a whole. While the demand for data centers has never been higher thanks to the boom in cloud computing and AI, access to electricity is emerging as the biggest constraint. This is largely due to aging power infrastructure, slow construction of new transmission lines, and various regulatory and enabling barriers.
And the pressure on electrical systems will only increase. According to BloombergNEF forecasts, artificial intelligence computing will increase the electricity demand by 2035. likely to more than double in the US. Nvidia’s Jensen Huang and OpenAI’s Sam Altman are among the company leaders who have predicted trillions of dollars in new AI infrastructure.
“Demand has never been higher, and that’s really our feeding problem,” Bill Dougherty, of real estate brokerage CBRE Group Inc., said in an interview. executive vice president of data center solutions.
The Santa Clara projects are relatively small compared to the massive complexes for big language AI modelers now under construction in Texas, Pennsylvania, Louisiana and New Mexico, where electricity costs are lower but power sources are often still in the works. Smaller hubs serve local cloud customers who pay higher prices for real estate and electricity to reduce the latency caused by long-haul signals—think high-frequency traders or autonomous vehicle operators who need information in microseconds.
“There is a need for some data centers that need to be as close to population centers as possible,” Dougherty said. “There has to be a demand like this in California. They can’t put it online because the capacity is limited.”
Santa Clara has 57 data centers in operation or under construction, according to a May City Council presentation. Silicon Valley Power has contracts with Stack and Digital Realty that outline the terms of service, and is constantly evaluating requests for additional power, utility spokeswoman Janine de la Vega said in an email.
“SVP is undertaking a $450 million system upgrade to meet the needs of these and other customers, and the project is currently on schedule for completion in 2028,” she wrote.
Silicon Valley Power Substation in Santa Clara. Photographer: Jason Henry/Bloomberg
Of course, there are other places facing similar delays due to utility capacity constraints. As demand outstrips available power and transmission infrastructure, U.S. utilities are struggling to keep up.
Last year, Dominion Energy Inc. said it expects the time it takes to bring large data centers online will increase from one to three years, with some as long as seven years. Dominion serves northern Virginia’s so-called Data Center Alley, the world’s largest concentration of computing facilities. In Oregon, Amazon.com Inc. claims that, according to the complaint, Berkshire Hathaway Inc. the owned company did not provide enough power for four data centers.
A three-year power wait is “typically in line” with the time it takes to secure electricity in most of the U.S., but wait times are longer in high-demand areas such as Silicon Valley and Northern Virginia, said Jordan Sadler, a spokesman for Digital Realty, which owns more than 300 data centers worldwide.
“If you were to find a site in Santa Clara today and look for new power, you’d be years away,” Sadler said in an interview. “Sometimes we’re a little late. But usually we’re not. You don’t want to be late.”
Digital Realty’s SJC37 data center project in Santa Clara. Photographer: Jason Henry/Bloomberg
Digital Realty’s Santa Clara project is currently a vacant 430,000-square-foot (40,000-square-meter) four-story building. The company’s fully equipped US centers cost an average of about $13.3 million. USD per megawatt, Sadler said, although prices in Silicon Valley are higher. Digital Realty spends about 20-25% of the final construction cost of the housing until the building is ready for occupancy. The company is partnering with Silicon Valley Power to get electricity by 2028.
“Digital Realty continues to work with SVP to obtain the remaining power needed to support the entire critical IT load of the 48-megawatt building by the end of this year,” Crystal Delany, the company’s vice president of data center portfolio management, said in an email.
Due to strong demand, developers can often lease projects for several years before completion, and 74.3% of the current U.S. construction pipeline is already occupied by tenants, CBRE said. Digital Realty leased about 61% of the $9.7 billion USD worth of data centers. The company declined to disclose the leasing status of its Santa Clara project.
The Stack Infrastructure factory, a 551,000-square-foot building with four floors of now-empty data rooms, originally sought city planning approval in 2021. “Energy will be delivered through a dedicated on-site substation, with 12 megawatts of critical capacity immediately leased,” increasing capacity to 48 megawatts.
email In an emailed statement, Stack said the deal with Silicon Valley Power “reflects existing power and new power that will be available through 2027.” Stack declined to discuss the lease status of the center.
Stack Infrastructure SVY02A data center project in Santa Clara. Photographer: Jason Henry/Bloomberg
Stack Infrastructure’s data center project SVY02A, right, and the Memorex Junction substation, left, in Santa Clara. Photographer: Jason Henry/Bloomberg
Blue Owl Capital in September and October. announced more than 50 billion USD investment in data centers, including 30 billion USD to Meta Platforms Inc. in Louisiana and more than $20 billion. USD to Oracle Corp. in New Mexico. Investment firm Stack employs 1,000 people who design, build and operate data centers, co-CEO Marc Lipschultz said on Oct. 30. in a conversation with investors.
“It’s not about what you did today,” Lipschultz said during the interview. “It’s about what you did two years ago to have the right land, the right power and the right understanding of the regulatory frameworks and how to actually do that. Because doing that is as important as the capital, and we do both.”
