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Why Arizona has Become a Premium Location for Data Center Development

Mark Bauer 06/14/2022

     For years Arizona has been a hotspot for data center development. What makes Arizona such a premium spot for data center development, and what has caused such rapid growth over the last five years? 

 

Factors Playing into Data Center Development

     There are a few factors that play into developing new data centers. One of the biggest is the cost to build and maintain, with Arizona having lower land and energy costs than other competing states. It is desirable for new and existing developments. Compared to North California and Los Angeles (in 2020), the cost of power in Phoenix was almost half that of the neighboring state. Power prices in Denver continue to rise year over year, while Arizona prices were at an all-time low by year-end 2020. As Greater Phoenix expands west, land in cities like Goodyear and Buckeye continue to remain competitive in their pricing despite the increase in cost across the market. 

     Another factor when considering where to build is stability. Arizona has low natural disaster rates making it appealing and safe for data center operators. Outages cost money. MarketWatch reports that a six-hour Facebook outage cost the company approximately $164,000 a minute for a total of $60 million. In addition, Shares fell 4.9% in response, representing $47.3 billion in lost market capitalization. That is why data centers must be in an area with low natural disaster rates and high energy stability. Palo Verde Nuclear plant makes up most of Arizona's power production and is the largest nuclear power plant in the US creating stability in the AZ power market. In addition, increased use of renewable energy is making AZ increasingly green. 

     Low property and corporate income tax rates also bring tech companies and startups to Tempe and Phoenix. Having their data centers close to where they operate is important for smaller startups who need to save where they can. 

 

Where Arizona Stands

     Over the last five years, our energy costs have gone down, whereas land costs have gone up, we're seeing rapid population growth throughout Greater Phoenix. As for sustainability, Meta has pledged to use 100% renewable energy in their Mesa facility. In addition, they aim to be more water-efficient and reclaim more water than they use. Other hyperscale companies are following a similar practice. Colocation data centers are doing the same. Aligned Data Center's Union Hills facility uses Delta³™ cooling technology, rated for 85% more water-efficiency and gives users the option of 100% renewable energy. 

     SRP is pushing to increase supply in the wake of the rapid demand increase. They have a planned 2,000+ MW of solar inventory by the end of 2025. That is necessary to keep users who continually look for greener solutions coming to Arizona and to keep up with the continually increasing demand. 

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