Nevada is at a crossroads as it grapples with the expansion of data centers that could lead to increased energy bills, a stressed power grid, and potential water shortages in its arid environment.
A report from the nonprofit Western Resource Advocates highlights significant issues resulting from the surge in data center construction, urging state and utility commissions to implement more stringent regulations to protect natural resources.
“Over the next 20 years, these utility projections are saying, essentially, that we need to double Nevada’s electrical infrastructure to accommodate these customers,” said Deborah Kapiloff, a policy adviser at the nonprofit and a co-author of the report.
She emphasized the need to ensure that everyday Nevadans do not end up financially burdened by this expansion.
In response to these concerns, NV Energy spokeswoman Meghin Delaney assured that the utility is establishing agreements to ensure that new growth will pay its own way.
This, she stated, is to protect existing customers from the rising costs that may result from the burgeoning demand for energy.
Delaney referenced several power purchase agreements approved in the 2024 Integrated Resource Plan, as well as the construction of the 400-megawatt Sierra Solar and Battery Energy Storage System in Churchill County.
Additionally, NV Energy’s two multibillion-dollar Greenlink transmission lines are set to facilitate more energy projects in rural areas.
As of April, residential power rates in Nevada were reported to be lower than those in California by 55.4 percent and 14.8 percent lower than the national average.
However, the load growth estimates from NV Energy’s IRP indicate a nearly doubling of demand from 2021 to 2024, driven largely by major data center projects.
The environmental impact of these water-intensive data centers poses a significant threat to the Colorado and Truckee Rivers, which are essential for water supply in Nevada’s desert setting.
Olivia Tanager, director of the Nevada chapter of the Sierra Club, voiced her concerns, asking, “Do we want to use our water resources for data centers and AI so that seventh graders can get out of having to do their homework? Or would we rather use those resources elsewhere?”
The challenges present in Nevada are distinctly divided along geographic lines, with southern and northern regions experiencing varied data center dynamics.
In southern Nevada, evaporative cooling methods are banned, limiting the types of cooling systems that data centers can employ.
This ban, enacted in February 2024, prevents water that evaporates during cooling processes from being returned to Lake Mead, where it is crucial for sustaining local water supplies.
The Southern Nevada Water Authority can reject high water-demand data center proposals due to this ban, reinforcing the need for sustainable practices.
Agency spokesperson Bronson Mack noted that existing data centers in Southern Nevada are still consuming vast amounts of water.
For example, Google’s Henderson data center is projected to use 352 million gallons of water in 2024 alone.
Conversely, Northern Nevada’s Tahoe-Reno Industrial Center, which spans the size of Detroit, is seeing a growing influx of tech companies and data centers.
This area is poised to become a global hub for data centers, with estimates indicating a need for six gigawatts of electricity and billions of gallons of water annually.
Energy consultant Scott Whittemore remarked that the primary factor influencing data center placement currently is whether investor-owned utilities can accommodate their energy needs.
He stated, “The crisis is, how fast can we deploy energy generation assets? How fast can we meet the demand so that the data centers don’t go elsewhere?”
Nevada’s harsh desert conditions are prompting innovative solutions for data center operations, according to Taylor Adams, CEO of the Economic Development Authority of Western Nevada.
For example, Southern Nevada’s evaporative cooling ban is catalyzing the development of alternative techniques to reduce water usage, such as a new 16-mile pipeline that will utilize effluent wastewater for cooling.
Similarly, some companies are looking into generating their own power to lessen reliance on NV Energy’s grid.
Adams expressed optimism about the new technologies emerging to address these challenges.
Within the discussion, calls for increased regulation gain momentum.
Advocates, including Tanager, are prioritizing the protection of everyday Nevadans from bearing the financial brunt of grid expansion.
A proposal for a moratorium on data center construction at the Reno City Council was ultimately rejected, reflecting the uphill battle regulatory advocates face in their efforts.
Tanager is advocating for Nevada to adopt legislation similar to Oregon’s POWER Act, which categorizes data centers as their own utility consumer class that must contribute to grid expansion costs.
In a positive development, Nevada secured an agreement with Google and NV Energy to invest in a geothermal project through a clean transition tariff proposal.
This arrangement enables NV Energy to purchase power, sell it to Google, and allow Google to receive credits on its bill for the energy generated by the project.
Whittemore emphasized the importance of a multifaceted energy strategy, stating, “It’s going to take every part of the energy sector — solar, wind, geothermal and natural gas — to get Nevada up to speed.”
He concluded, “The boom is here, and the genie is out of the bottle. Now, the question becomes, where do we want these things to be built, and how can we do it in a smart way?”
The Nevada government has implemented incentives to attract data centers, including tax abatement packages of 10 and 20 years, offering a 75 percent personal property tax reduction and a 2 percent sales tax cut contingent upon specific employment and revenue targets.
However, these incentives come at a cost.
A recent nonprofit report highlighted that Nevada has lost nearly $140 million in revenue due to this tax abatement framework.
Tanager pointed out that a budget shortfall of $191 million revealed in the last legislative session reflects the limited resources the state can afford.
She proposed that the state should reconsider these tax abatements, suggesting that Nevada should only attract data centers that align with community interests and work cooperatively with local officials.
On the other hand, business leaders like Adams argue that these tax incentives are a valuable investment in the tech industry.
According to Adams, data centers can provide essential tax revenue to struggling local governments and serve as a stable revenue source less susceptible to economic downturns.
He also noted that data centers do not place significant burdens on traffic infrastructure, parking space, or public safety resources.
Adams highlighted the potential of data centers to contribute positively to Nevada’s economy, especially in light of the upcoming budgetary challenges for cities and counties.
In conclusion, as Nevada navigates the complex terrain of data center growth, striking a balance between economic benefits and environmental stewardship will be vital for the state’s future.
The dialogue among stakeholders continues as they seek solutions that align technology expansion with water conservation and energy sustainability.
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