00:11:33 · Jordan Nanos, Maya Barkin
[00:11:33] S1: Makes sense. Exactly. Jeremie, what's your what's your take there? Oh, yeah. Sorry. My [00:11:38] S2: No. I just wanna... Jeremie, you can go ahead. But I just wanted to give an example of Texas or another state where... It's actually most states where, as Wayne said, both candidates are actually in favor of tougher conditions, if not moratorium, at least tougher conditions around building campuses in their states. [00:12:03] S1: Makes sense. Yeah. What's your take talking to people themselves?
00:12:09 · Jeremie Eliahou Ontiveros
[00:12:09] S0: Mean, look, like the global conditions have like changed so much. Right? Because a few years ago, let's call it the supply demand balance was so different, where counties would offer big tax breaks, would try as hard as they can to attract data center developers. And that actually kind of makes sense because if you look at the data center, it's this big warehouse. It's not that large of a construction project. It consumes energy, it consumes water, but it's not as much as other heavy industrial use cases. But the value of the building is really large, right, because the data center itself is expensive and the servers inside are even more expensive. Sort of the ratio of project value to project size and sort of industrial scale is quite interesting and one of the highest, I think, in terms of value per sort of industrial footprint, let's say. And so as long as these data centers, I guess, there weren't that many, things were overall fine and people wanted them in the territory. And so you would offer tax breaks. Now there's so many of them, and they're becoming so large that it's becoming complicated, and obviously they have a few issues, they can make a lot of noise. The country, especially in some states, have more and more water issues, and there's a bunch of data centers in the past that would not really look at water as an issue, and so they would have these open loop cooling systems that would be very energy efficient with water inefficient. And so as you go from just the scale of like a few gigawatts built per year to in 2027 in The US, 40 gigawatts. So we're effectively at something like 10 to 20x the size of the annual build out in something like five years. Everything is different. There's obviously so many of them. And because of the supply constraints that we have now, the balance of powers has dramatically changed, right? And so it's like, we don't necessarily want them now, but if they come, they gotta do things right. And they're also more and more valuable. GPUs are much more valuable per megawatt or per acre or per square feet. And so you can effectively make them pay a lot of money.
00:14:12 · Jeremie Eliahou Ontiveros
I think capitalism is gonna solve part of the problem where these guys should be able to pay materially, let's say, just cut less incentives and so pay much more to the local community, contribute much more, it's such a small percentage of project value. So it makes total sense. The other thing is, as you add more and more of these data centers, that's mostly on the electricity side. But as they connect to the grid, they can create a systemic risk, which is in Texas, what the grid is worried about. It's kind of the opposite scenario of what we've seen in Spain a few years ago with renewables on the generation side, where if they're unreliable and they're sort of a fault, it can trigger a cascading effect where everything trips out and the grid goes dark for a few days. You can have the same thing on the low side. It's nearly happened in Virginia already, where because of a voltage dip on the grid, every single data center that triggered their UPS system, they all disconnected at once from the grid, you had one and a half gigawatts of load disappearing. That scale, that fast, that can trigger a blackout for the grid. So there's actually a lot of things that are very legit, which kind of makes sense and sort of justifies why this is bipartisan. And so all of this, I think, is understandable. There's a transition period where, yes, now you have to add equipment that's gonna add a bit of cost to handle these sort of grid issues and make sure you're a, let's call it a good grid citizen. As people like to say, water. Of course, now you realize that if you're taking water and there's five other projects, then obviously there's not gonna be enough for for everyone. So you gotta be more water efficient. Everyone is doing that. And so my my... Actually, my expectations is gonna sound crazy, I think things could get better because everyone is sort of realizing, okay, yeah, it makes sense the way we sort of designed before was for a smaller scale. And as we have so many of these data centers at the same time, we need to adapt the way we do it so it makes sense for for the country. Right? So, yeah, I I think data centers are gonna become much better neighbors, and that should hopefully make the build out better. But I I would say that that heavily justifies why this is a bipartisan issue. There are very legit concerns that data center developers need to adapt to.
00:16:30 · Wayne Ma
[00:16:30] S3: Yeah. I just wanna add, one of the things that surprised me was Ohio. So Ohio had these incentives that they thought would cost them maybe 136,000,000 a year to bring data centers into the state. And last year, those incentives cost them... Or two years ago, those incentives mushroomed to 555,000,000. Last year, it was 1,600,000,000. So they were leaving, like, that... You know, they couldn't conceive that they would be leaving 1,600,000,000 on the table with these incentives. And that's why one of the things is a lot of these candidates, you know, are running to roll back all these incentives regardless if they're Democratic or Republican.
00:17:04 · Jeremie Eliahou Ontiveros
[00:17:04] S0: I mean, just to caveat this a little bit, I think it's pretty common to... When you wanna host, like, very large scale industrial projects, because again, like a one gigawatt data center as we know is a $50,000,000,000 project, just an insane amount of money. It is pretty common to offer tax breaks, tax advantages. So it's not like data centers were there by the guys and this was like something crazy. No, I think it's pretty common. So one way to look at it is to say like, hey, could have gotten that much more money. Another way to look at it is to say like, this is actually the normal way, but because we're in times of supply constraints, now we can actually like have these guys contribute materially more and increase the welfare of everyone around, which I think makes sense. Everyone wants to build in The US. It's one of the world's best countries to build data centers, and so it makes sense to also make sure they can you know, support the local folks. And, you know, I think we're starting to see more and more of that and a lot of data center developers are spending or not accepting tax breaks anymore or are just contributing more locally.
00:18:04 · Jordan Nanos
[00:18:04] S1: Yeah. But I guess one thing that I'm hearing you guys say is kind of converting a single governor's race into the policy across the whole state. And in practice, Maya, I think you've educated me many times that, like, this depends on city councils, county boards, board of supervisors, utility commissions, like local issues rather than stuff that's statewide. So, let's say one of the states goes one direction or the other, how does that actually flow through to every single project when there could be so many across the whole state, across so many different counties?