The Age of Fake Datacenters

There has been vaporware software and even phony wars, but has anyone heard of a fake datacenter?

At the recent Data Center Frontier summit, on a great panel with industry experts like Buddy Rizer, Rich Paul-Hus, and the amazing Stan Blackwell, I realized that we have entered the age of fake datacenters. Stan, a longtime Dominion Energy executive, shared some anonymous data on requests for power that Dominion has received from the datacenter industry. And those are eye opening.

Dominion, Northern Virginia’s largest - but not only - data center electrical power utility has received 50 Gigawatts of aggregate demand orders. Those include some campuses of 6 GW or more. In short, I think about 90% of those requests are fake at worst and speculative at best. To begin with, ASG estimates a North American data center capacity shortfall for AI of ~35GW, of which a portion is already under construction. Now, that doesn’t account for Cloud Growth - we estimate that there is about 4.5GW of built Cloud datacenter in Northern Virginia across all utilities (primarily Dominion and NOVEC) and a 20% cloud growth CAGR, so lets say that doubles in a decade. Assuming half the AI number is in Northern Virginia (a wild overestimate) and add in the Cloud with some Internet Application growth, you get to something like 20GW of aggregate additional demand in Northern Virginia - only some of which is in Dominion territory. And realistically, that is in a 150 mile radius circle around Northern Virginia, so add in the Quantum Loopholes and gigawatt Pennsylvania and Stafford County projects. Even then, 20GW is likely on the high side.?

And, let's look at the capital you would need to build it. The mysterious 6GW campus project - at a reasonable $10/w build cost, we’re talking about $60 Billion - with a “B”. Even over a decade, that’s simply unreasonable.? The numbers just don’t add up.?

So, what’s real? Today the standard campus datacenter build unit is about 300MW, and we’re seeing campuses of up to 1GW, with power delivered over 5 to 8 years. In Loudoun County, however -? although we do see it in Spotsylvania, in Prince William (constrained though development may be) and across the river at Quantum Loophole in Frederick County, MD. But these are all well thought out developments, by experts - Prince William’s Digital Gateway is a Compass and QTS project, and no one can doubt the acumen of Chris Crosby or Chad Williams. Similarly Quantum Loophole has industry experts Josh Snowhorn and Rich Paul-Hus at the helm - these are real data center real estate developers.?

But who is building the rest of this? And where are they getting their money? At some point, the lure of great returns attracts real estate developers with fewer scruples and a more aggressive posture into the market. However, this doesn’t work - our data center campuses have gone from 10MW to 300MW to 1000MW rather quickly in real estate epochal time - only the most adept developers, architects, engineers, and business developers can ride this particular train.?

Add on to this, the risk management factor. A campus larger than 1GW will, by necessity, be split amongst multiple users - there is a logical limit to the numeric financial risk that any single entity will take in constructing a campus in a single location. The total all-in value of a 1GW campus, when you put buildings, fit-out,? improvements, machines, and all else, easily exceeds $15b - that's a lot to put in one basket when there are F5 tornadoes and similar environmental risks.?

So for those panicked about 50GW of Northern Virginia data center real estate development - it might be time to take a deep breath. The bandwidth of skilled developers to bring this to market in a reasonable timeframe is limited, the utilities are limited, the capital is limited, the risk management is complex. And Dominion and other utilities need to be able to explain to the public how they are differentiating the figurative wheat from the chaff when it comes to their order process. Because there are too many fake datacenters.?