Microsoft Announces $1 Billion Investment in Ohio Data Centers as Officials Ponder Power Demands

Tech giant Microsoft announced an initial investment of $1 billion to support three new data centers in Licking County, Ohio. The company on Oct. 28 confirmed construction of campuses in New Albany, Heath, and Hebron that will support the company’s Azure cloud computing platform as demand for cloud technology and data storage increases.

One Columbus, an Ohio economic development agency, on Monday announced details of the project. Ohio officials over the past several months have ramped up discussions of how to supply the needed electricity for energy-intensive data centers as the industry builds new facilities in the region. Data center development has expanded rapidly in recent years across utility AEP Ohio’s service territory, especially in the Columbus area in central Ohio. Officials have said that electricity demand in central Ohio, driven largely by data centers, is expected to more than double by 2030.

“We are excited to work with state, regional, and local partners to bring new data center campuses to the Columbus region,” said Bowen Wallace, Microsoft CVP Datacenters, Americas Region, in a news release. “The Columbus Region’s skilled workforce, strong infrastructure, and strategic location make it ideal for this project. Many Ohio businesses and government entities use the Microsoft cloud as the platform for their business operations. These data center developments will help us continue to effectively serve our Ohio customers.”

The need for more power to support data centers already is causing Ohio utilities to look at ways to recoup the cost of building more energy delivery infrastructure. CenterPoint Energy recently asked state regulators to approve a rate increase for natural gas service. The company said the move would result in an increase of about $23 per month for the “average residential customer.”

$420 Million Project

Microsoft announced earlier this month announced construction of a $420 million data center in New Albany, although no timeline has been announced. The local city council unanimously passed a resolution giving the tech giant a 100% property tax abatement for 15 years. Officials said the locations in Hebron and Heath are pending approval.

American Electric Power (AEP) Ohio, the utility that serves about 1.5 million customers in the state, on Oct. 23 filed a settlement agreement addressing how to serve the state’s growing data center industry while protecting the utility’s other customers. Several entities, including the staff of the Public Utilities Commission of Ohio (PUCO), the Ohio Consumers’ Counsel (OCC), the Ohio Energy Group (OEG), Ohio Partners for Affordable Energy, and Walmart joined AEP Ohio in the filing.

“Ohio’s economic success in bringing data centers to our state comes with immense demands for electricity, and we have to meet those efficiently and responsibly,” said Marc Reitter, AEP Ohio president and chief operating officer. “The agreement insulates our other customers—including residents, small businesses, manufacturers and other industries—from the impact of the necessary infrastructure improvements. Our goal throughout this process has been to provide customers with protections, while keeping Ohio an attractive place to run and grow a business. This proposal provides that balance and was developed with PUCO staff and consumer advocates. I’m grateful for the hard work of all of our stakeholders.”

Covering Cost of Infrastructure

The agreement, which is subject to review and approval by the PUCO, requires large new data center customers (such as Microsoft) to pay for a minimum of 85% of the power they expect they will need each month. The 85% figure applies even if the data center uses less that the anticipated amount. The money would be used to cover the cost of infrastructure needed to bring electricity to those facilities.

The agreement also creates a sliding scale that allows small- and mid-sized data centers with flexibility in their payments. The deal also requires data centers to provide proof they are financially viable, and able to meet those requirements, as well as to pay an exit fee if their project is canceled or unable to meet the obligations outlined in the electric service agreement contract.

AEP Ohio said the requirements would be in place for up to 12 years, including a four-year ramp-up period. The agreement also outlines a process to end the moratorium on new Central Ohio data center agreements.

A group of data center industry leaders earlier in October filed a separate agreement, in which they proposed to pay for a minimum of 75% of the energy they say they will use. AEP Ohio said that deal was was not supported by AEP Ohio, the PUCO staff, OCC or OEG.

Reitter in a statement said, “Our proposal recognizes the importance of data centers, not only to our region and Ohio’s economy, but to the country at large. We welcome the incredible investment large data centers are making in Ohio. Our agreement strikes a balance between the costly investments required for high-powered cloud and AI needs and protections for AEP Ohio’s other customers.”

—Darrell Proctor is a senior editor for POWER (@POWERmagazine).