BISMARCK — Artificial intelligence is on the rise, and North Dakota is set to play a key role in the global advancement of artificial intelligence by hosting a data center.
But the massive demand for electricity is already affecting residents across the state, leaving government officials and industry leaders scrambling to find ways to power their facilities without impacting consumers.
The term “data center” is commonly used to describe facilities lined with powerful computers that store, process and transmit digital information in the form of data. They are used for services ranging from cryptocurrency mining to cloud computing, and are highly secure and technologically advanced.
“The conversation around AI is very different than other data center uses,” state Commerce Commissioner Josh Teigen told the Public Utilities Commission at a meeting in early August.
The global artificial intelligence (AI) market was valued at $515 billion in 2023. According to Fortune Business Insights, the market value is expected to rise to more than $2.7 trillion by 2032.
“It’s fair to say that crypto mining is really in decline. There aren’t a lot of new industries trying to get into this space,” Teigen said at the conference. “We’re seeing tremendous growth in the AI space.”
Given the high cost of new projects, the state has been especially keen to try to attract AI-focused facilities.
Teigen told the committee that some data center companies have individually estimated their projects at $135 billion, calling for a power load greater than the output of six Coal Creek generating stations and more than 30 times that of the state’s largest existing data center.
Concerns are growing over the lack of regulation of recently built super-large facilities, with opposing outcomes.
Atlas Power’s 200-megawatt cryptocurrency mining data center in Williston has strained the local power transmission system, causing price spikes for customers. Montana Dakota Utilities, an investor-owned utility company regulated by the state, has filed a complaint with the Federal Energy Regulatory Commission about the spikes.
The loud noise emanating from the facility has also led to lawsuits from the surrounding community.
“It was a big mistake,” Commissioner Julie Fedorchak said at the August meeting, which Atlas Power was invited to but did not attend.
Meanwhile, Applied Digital and its data centers have eliminated expensive congestion on power lines by consuming wind energy, preventing a shortage of power lines to connect to the grid and saving ratepayers about $2 million.
The company also plans to build 20 homes and 35 apartments in Ellendale by October to support workers at the 100-megawatt facility.
Image courtesy of Applied Digital.
Local leaders, including Gov. Doug Burgum and Ellendale Mayor Don Flaherty, commented on the situation in an Aug. 7 announcement.
“This housing project will play a critical role in meeting the needs of our workers and demonstrate how the private and public sectors can work together to find solutions and help people and communities realize their full potential,” Burgum said.
The number of data centers in North Dakota is not tracked, and Commerce Department Economic Development and Finance Director Rich Garman said the industry has not defined what constitutes a data center.
He made the distinction based on how the facilities make their profit, saying cryptocurrency mining facilities make money by specifically processing digital currencies like Bitcoin.
Contributed by North Dakota Department of Commerce
Other companies, however, benefit from processing and distributing a wide range of data formats.
“They’re both computer digital-based processing facilities, but they have different end goals,” Garman said.
In other words, encryption facilities are to data centers what kiosks are to shopping malls.
Either way, both facility types consume huge amounts of energy: Most of the North Dakota facilities are described by Gurman as “medium to small” based on the number of megawatts they consume, while facilities deployed to support AI computing are described as “hyperscale,” consuming gigawatts, or thousands of megawatts, to function.
“In the past, tens of megawatts, maybe even 100 megawatts, were big projects. AI said to us, ‘We want to start with 500 to 1,000 megawatts and then scale to 5,000 to 10,000 megawatts,'” Teigen said at the meeting. “We know that if we connect to the existing grid, we’re not going to get that much power.”
The energy demands generated by upcoming AI data center projects will exceed the entire generating capacity of the state of North Dakota.
Claire Vigesa, executive director of the North Dakota Electric Transmission Board, said the state has about 8 gigawatts of rated capacity, or the maximum generation capacity of its power plants, on windy days. According to the 2022 North Dakota Energy Report, electricity supply is about evenly split between coal and wind, with natural gas contributing slightly only during peak demand periods and hydroelectric generation having little impact.
Peyton Haug / Forum News Service
Grid reports from states and major energy cooperatives such as Southwest Power Pool and Midcontinent Independent System Operator, which are not state-regulated and serve mostly rural residents, consistently agree on the need for infrastructure upgrades.
“This is my personal opinion, not the state’s, but data centers are so big that I don’t see how they can be reliant on the power grid,” Viguesa said of data centers. “Do you think a cooperative or a utility company wants to take the risk of building a gigawatt generator for one company?”
Xcel Energy alone, for example, is considering 6.7 gigawatts of new data center projects, CEO Bob Frenzel said during a quarterly earnings conference call on Aug. 1. Frenzel said the company doesn’t have the capacity to keep up with demand and is seeking resources to increase generation and build new transmission lines.
To get ahead of the years it would take to upgrade power lines, there is a growing push to go “behind the meter,” where data centers would essentially build their own power plants off the grid.
The Commerce Department told the Public Utilities Commission that off-grid natural gas power plants could help the oil industry by capturing the Bakken’s growing emissions. Instead of shipping the natural gas by pipeline to other states, it would be consumed in data centers, which would transmit the data in return.
“Why not use natural gas here? We don’t have the transmission capacity to move that amount of power, so let’s put the data center here in western North Dakota or in North Dakota, closer to the pipelines and gas processing plants, and these companies can build their own gas-fired power plants,” Viguesa said. “That way, there’s another benefit: if you use more natural gas, you can produce more oil, so it’s a win-win.”
The economic impact of exporting data rather than natural gas cannot yet be quantified, but improving fiber optic networks instead of building new pipelines tends to be less controversial, Viguesa said.
While those responsible for mitigating data center development debate alternative, quick fixes, state and federal agencies are addressing deficiencies in the power grid.
On August 7, Burgum’s office released a statement saying the Department of Energy would award Montana $700 million to support the North Plains Connector, a $3.6 billion, 3,000-megawatt transmission line that would stretch from Center, North Dakota, to Colstrip, Montana.
“North Dakota welcomes this investment in transmission infrastructure to ensure a strong and reliable electric grid. But to meet growing consumer electricity demand and support economic growth, we need to add transmission capacity and bolster existing baseload generation, not try to shut it down,” Burgum said in the release.
Data Center Maps is a company that aims to serve as a database for data center development. North Dakota is home to seven significant data center sites operated by five organizations, and that number is set to grow dramatically as the state welcomes new projects.
North Dakota has long encouraged data center development, and Vigesa said the state’s cool climate, proximity to fiber optic networks, light regulations on natural resource use and flat terrain make it a good location for AI data centers.
“We want to put them here for safety,” Vigesa said. “Where could we put them better?”
At the same time, he’s interested to see how the public will react to the prospect of an expensive, noisy concrete facility spanning hundreds of thousands of square feet being built on farmland.
“It wasn’t really discussed (at the meeting), but the land is not small. It’s many acres in size, with a big white building with air conditioning built around it,” Vigesa said.
“[Data center companies]want 500 acres, even more than 500 acres, of flat land. How much less corn or meat production will that produce?'” Vigesa said. “And then the farmer who sold that land probably sold it for 50 times what it was originally worth, and now he’s competing with the regular farmer who bought the land and couldn’t sell it, and then he’s paying an exorbitant price to get the next piece of land that comes along, and then he gets pushed out.”
“But whether it will happen in North Dakota is confusing,” he said.
Data centers are regulated only by county-level zoning permits, conditional use permits that rezone agricultural land for industrial use. Currently, there are no siting requirements from the Public Service Commission, but that could change in upcoming legislative sessions.
At the Public Utilities Commission’s August meeting, when Chairman Randy Christman made his point, no one jumped at the idea of passing legislation to oversee the development of AI data centers.
Peyton Haug / Forum News Service
“If there are complaints, can I give you your cell phone number?” Christman asked.
Aaron Burst, president of the North Dakota Association of Counties, said regulating the industry could take control away from local governments.
“We welcome economic development projects in the county, but we still need to make sure that the development stays within the community because otherwise there aren’t as many negative land use issues,” Burst said after the meeting. “To just dump these things into a community without a lot of thought and zoning is just a recipe for disaster.”
