The Midwest's data center boom comes to Indiana
Why it matters: Data centers power the AI boom — but their soaring energy and water demands often go unreported and the benefits for local communities are unclear because data centers create few permanent jobs.
Data centers, which are essentially warehouses for computers and servers, used 4.4% of U.S. electricity in 2023 and could consume up to 12% by 2028, according to the Department of Energy.
Construction of the centers is at an all-time high, increasing 69% year-over-year from 2023 to 2024, per commercial real estate firm CBRE.
State of play: Columbus, Ohio and Chicago are the region's primary data center markets, but companies are increasingly eyeing places such as Minneapolis and parts of Indiana, where land is cheaper and energy is more available.
The Midwest's tax incentives are particularly appealing for companies, Jon Davis, a policy strategist for The Council of State Governments, tells Axios.
Plus: Cooler Midwest temperatures and proximity to the Great Lakes reduce the need for energy-intensive cooling — an advantage over warmer southern states.
Zoom in: The largest project is the Amazon data center campus coming to New Carlisle, but Microsoft, Google and Meta have also announced hyperscale data centers in Indiana.
Citizens Action Coalition has tracked nearly 30 data centers that have been proposed across the state so far.
Even though Indiana's data center boom is in the nascent stages, it's having an impact on energy usage. Indiana Michigan Power has estimated that the handful of data centers coming to Northern Indiana will use more electricity by 2030 than all Hoosier households.
Friction point: The expansion often happens behind closed doors.
Local governments frequently sign nondisclosure agreements with tech firms, limiting public knowledge of energy and water usage, says Helena Volzer of the nonprofit Alliance for the Great Lakes.
The other side: Our world is growing increasingly digital, and the data needs to go somewhere.
"It's businesses of all shapes and sizes as well. They're increasingly relying on digital infrastructure," Dan Diorio, senior director of state policy for the Data Center Coalition, tells Axios.
As companies build to meet that surging demand, energy is a "significant cost driver" and it's in their best interests to be efficient, he says.
Data centers house server farms that store our information, along with electrical equipment that gets hot, requiring 24/7 air cooling that annually uses millions of gallons of water as a refrigerant.
Yes, but: Their true water consumption is unknown, since most of them rely on municipal utilities, Volzer says.
The Great Lakes Compact is an agreement among Illinois, Indiana, Michigan, Minnesota, New York, Ohio, Pennsylvania and Wisconsin about managing the Great Lakes water basin.
Cities report to the compact how much water they're using, but that isn't broken down into details such as how much is from data centers.
Plus: Data centers also use a large amount of electricity, which requires generating water. However, water consumption is attributed to power plants rather than data centers, further obscuring their transparency.
By the numbers: Hyperscale data centers, which can take up over 10,000 square feet of floor space and house over 5,000 servers, can use between 1 million and 5 million gallons of water per day when evaporative cooling — the most common method — is used, according to the Alliance for the Great Lakes.
For reference, a hyperscale data center that uses 365 million gallons in a year is equivalent to what roughly 12,000 Americans use in a year, according to the Alliance.
Threat level: To meet the demand on existing electricity power grids, some strained markets may have to add capacity on- or off-site.
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