Good News: More Data Centers Likely to Follow Apple to Northern Nevada

More Northern NV data centers likely to follow Apple
John Seelmeyer
RENO/TAHOE — More major data centers are on the horizon for the Reno-Sparks area, and the next announcement to follow last week’s news from Apple is expected soon.

Economic development officials won’t disclose the identities of the companies that are seriously looking at northern Nevada as the home for major data centers — the huge bank of computers serve that host so-called “cloud” services — but at least one company may be very close to announcing its plan.

And a couple more plans are well along, says Mike Kazmierski, president and chief executive officer of the Economic Development Authority of Western Nevada.

The arrival of multiple data centers in the region would mark an important watershed in the development of northern Nevada — the creation of an entirely new sector that provides the basic employment upon which businesses ranging from retail to medicine are built.

And the economic effects are even more pronounced, Kazmierski says, because data center jobs generally pay very well.

They also tend to create other technology jobs.

“If you get the data center, often you get more of the company over time,” the EDAWN president says. A company is likely, for instance, to locate some of its information-technology supply operation close to a major data center.

Apple, for instance, will develop a purchasing center in downtown Reno.

In the case of Apple, the economic benefits are multiplied further because the company is so well-respected that other corporations may give northern Nevada a closer look for new facilities simply because Apple likes the region.

The importance of that can’t be underestimated, says Steve Hill, executive director of the Nevada Governor’s Office of Economic Development.

In fact, the third sentence of Hill’s announcement of the Apple decision last week read: “Apple’s decision to locate this data center in Nevada will open eyes across the country and throughout the world.”

Despite appearances, the arrival of major data centers in the region isn’t an all-of-a-sudden thing. They’re responding to changes in the region’s infrastructure that began more than a decade ago.

Among the big factors that are drawing the industry to the region is a steady decline of power rates.

“If you look at what is important to a data center, cost of utilities always are high on that list,” says Kazmierski.

Electric rates in northern Nevada have declined about 25 percent since the start of 2009, says Mary Simmons, NV Energy’s vice president for external affairs.

That’s largely a result of the sharp decline in the price of the natural gas that fuels the company’s generating station. NV Energy expects those natural gas prices to climb only slowly over the next three to five years, providing some predictability to companies that are building data centers.

But Simmons notes that NV Energy’s ability to capture the benefits of low natural gas prices arises only because of the company’s strategic decision a decade ago to build more of its own power plants to reduce its reliance on other suppliers.

Rates in the region are low, too, as more electricity is produced by geothermal, wind and solar plants — all of which don’t pay a penny for fuel once their capital-intensive facilities are in place.

“The trend downward is getting people’s attention,” says Kazmierski.

It’s getting even more attention because of the growing disparity between power rates in Nevada and those in California, where rates are about 35 percent higher than Nevada, says Simmons.

Nearly as important to data centers as electric cost is the reliability of the power system, and the NV Energy grid ranks among the 10 most reliable in the nation, says Brad Woodring, manager of economic development for the power company.

Along with the power consumed by servers in a data center, another big demand for electricity comes from the cooling systems that carry away the heat generated by the computers.

That’s where northern Nevada brings another natural advantage into play.

Its cool nights reduce the demand for air conditioning through many hours of the day. Low humidity also is important to improve the efficiency of a data center operation.

The geography of the Reno-Sparks area — it’s close to California, but not within the reach of the California taxman and regulator — also is drawing attention from developers of data centers.

Seismic studies place Reno and Sparks just outside the earthquake zone of the Sierra Nevada and northern California, and that’s a critical consideration for operators of data centers.

Nick Pavich, developer of the technology park east of Sparks that will be the home to Apple, told and industry group last year that his location is one of the few in the United States that also relatively safe from man-made disasters such as nuclear leaks.

And just as Interstate 80 and Highway 395 are critical pieces of the infrastructure for the logistics industry in the region, so is the availability of fiber optic lines for data centers.

Nancy McCormick, a former telecommunications executive who now works as vice president of EDAWN, notes that multiple telecomm companies run fiber into the region and send data from Reno across a number of routes to other cities.

That redundancy, she says, is another important consideration to data center operations that need to be online 24/7.

Kazmierski, meanwhile, says data center operators have been satisfied that they can find the skilled workers they need — Apple, for instance, will have 40 workers at its data center operations — and they think the region is attractive enough that they can recruit further talent.

The development of data centers in the region will provide a boost to the construction industry as well.

Kazmierski says relatively few of the vacant industrial buildings in the region meet the specialized needs of data centers. As a result, most will be built from the ground up.

Typically, a new data center demands an investment of $200 million to $300 million, the EDAWN chief says. The big Apple project, along with the facilities the company plans in downtown Reno, carries a $1 billion price tag.

The Apple projects alone are expected to generate nearly 600 construction jobs.