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OPINION: As public anger at data centers grows, utility regulators squirm

Sparks are sure to fly at a Thursday meeting where a developer will ask permission to build private gas power plants for its data centers.
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Suddenly, skeptics of data center development are almost everywhere.

Not long ago, tech billionaires and the politicians who treated them as interplanetary royalty were locked in a Vulcan mind meld when it came to artificial intelligence (AI) data center proliferation – with juicy tax abatements included!

For months, many of the industry's biggest boosters downplayed or ignored the growing pushback from communities across the nation. Lowly taxpayers and lots of registered voters expressed increasing concerns about the adverse impact of hyperscale centers on the environment, electricity grid and water supply.

Now elected officials across the land have caught on. In Nevada, former legislators who voted to shower developers with inducements have course-corrected. Even industry cheerleaders such as Nevada Gov. Joe Lombardo (R) have begun to tone down the platitudes about the landing of the tech giants.

On top of all that, with their fortunes in flux, AI kings at last are recalibrating their rhetoric in response to what industry insiders claim is the potential for the systems to pose an existential threat to the human race. And, as we all know from economics class, existential threats are mostly bad for business. So is creating products that victimize children, come to think of it.

With all that happening, I'm not sure what's going through the minds of the members of the Public Utilities Commission of Nevada. They're preparing for Thursday's special meeting in Carson City to consider a request by Tract Capital Management and its subsidiary Fleet Data Centers. The company is seeking the approval of two privately financed, 360-megawatt methane gas power plants to generate sufficient electricity for the hyperscale projects it is building at and near the Tahoe Reno Industrial Center (TRIC) in Storey County.

If approved, it would allow the company to bypass the traditional power grid operated by NV Energy and enable it to provide electricity to its client-users of its data centers.

Sounds good? NV Energy doesn't think so. It is locked in increasingly pugnacious litigation with Tract/Fleet.

Environmental activists are likely to also have a few things to say about methane-burning natural gas power plants, officially temporary for whatever that's worth. They'll operate two or three years, Tract/Fleet estimates, or until NV Energy can catch up to the data center development gold rush — whenever that is.

Natural gas is cleaner than coal, but it is by no means carbon-neutral. And by Nevada law, power providers must follow the mandates of the state's renewable portfolio standard. Upon completion, Tract's megaprojects at Peru Ridge and South Valley are slated to use approximately 44 percent of Nevada's current residential power use.

The data center company argues that its natural gas power plants are not bound by the state's renewable energy portfolio standard — 50 percent by 2030 — because it is not officially an energy provider.

It just, you know, will provide energy to its customers at data centers.

Officially, state statute defines "Provider of electrical service" as "any person or entity that is in the business of selling electricity to retail customers for consumption in this State, regardless of whether the person or entity is otherwise subject to regulation by the Commission."

The Public Utilities Commission of Nevada, that is.

And all that puts the folks at the commission in what by most measures would qualify as an awkward position — or at least one with more stress than usual. It's not as if Tract/Fleet doesn't have its own image to consider in a state that has awakened to the potential impacts of data center development.

Tract is no stranger to Nevada courtrooms, after prevailing in bruising litigation with Nevada data center developer Switch. That may be remembered as an undercard bout compared to its dispute over energy issues with the state's largest provider. After fighting to enter the Nevada market and spending millions on acreage at the sprawling TRIC, its reputation precedes it.

There is more at stake than company pride, of course. According to one Fleet filing and a trade publication, its South Valley project already has signed a 16.5-year, triple-net lease with a $3 trillion company (rumored to be Nvidia).

Given such an atmosphere of competing interests, the Thursday meeting promises to be one place in Nevada with no shortage of electricity.

John L. Smith is an author and longtime columnist. He was born in Henderson and his family's Nevada roots go back to 1881. His stories have appeared in New Lines, Time, Reader's Digest, Rolling Stone, The Daily Beast, Reuters and Desert Companion, among others.

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