The Growing Concerns of Nevada’s Data Center Expansion
Nevada could soon face a series of challenges, including higher energy bills, an overburdened power grid, and an increasingly arid desert landscape due to the rapid expansion of data centers. These facilities, which store cloud data and power search engines, require massive amounts of energy and water, raising concerns about their long-term impact on the state’s natural resources.
A recent report from the nonprofit Western Resource Advocates highlights the potential negative consequences of the West’s data center boom. The report outlines policies that states and utility commissions should consider implementing to better regulate this growing industry, warning that without proper oversight, it could have devastating effects on natural resources.
In Nevada, the projected growth of data centers is particularly significant, according to Deborah Kapiloff, a report author and policy adviser at the nonprofit. She notes that utility projections suggest Nevada will need to double its electrical infrastructure over the next 20 years to accommodate these new customers. Kapiloff emphasizes the importance of ensuring that everyday Nevadans are not burdened with the costs of this expansion.
Protecting Customers from Higher Costs
NV Energy, one of the state’s primary utilities, has taken steps to ensure that new data center growth does not lead to increased costs for existing customers. A spokeswoman for the company, Meghin Delaney, stated that the utility is setting up agreements to ensure that new developments pay their own way. She pointed to several power purchase agreements approved in the 2024 Integrated Resource Plan (IRP) as well as the 400-megawatt Sierra Solar and Battery Energy Storage System in Churchill County. Additionally, two multibillion-dollar Greenlink transmission lines are moving forward to support more energy projects in rural areas.
Delaney also highlighted that residential power rates in Nevada were 55.4 percent lower than in California and 14.8 percent lower than the U.S. average through April. However, load growth estimates in NV Energy’s IRP nearly doubled from 2021 to 2024, with major data center projects cited as the main driver behind the increase.
Water Use and Environmental Strain
Water-intensive data centers are placing additional pressure on the Colorado and Truckee Rivers, which are critical lifelines for desert living in Nevada, the nation’s driest state. Olivia Tanager, director of the Nevada chapter of the Sierra Club, raised concerns about the use of water resources for data centers and artificial intelligence technologies like ChatGPT.
“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?” Tanager asked. “Or would we rather use those resources elsewhere?”
The divide between northern and southern Nevada is evident when it comes to data center development. Southern Nevada has implemented a ban on evaporative cooling systems, which limit the types of cooling methods allowed for data centers. This ban, solidified in February 2024, prevents water used for cooling from being recycled back into Lake Mead. The Southern Nevada Water Authority has the authority to reject water-intensive data centers based on this policy.
Meanwhile, in Northern Nevada, tech companies are flocking to the Tahoe-Reno Industrial Center, a business park the size of Detroit. With a demand for six gigawatts of electricity and billions of gallons of water annually, the Reno metro area is on track to become a global hub for data centers.
Innovation and Economic Opportunities
Despite the environmental concerns, some see the data center boom as an economic opportunity. Scott Whittemore, a consultant with Energy Project Solutions, believes the key factor driving data center placement is whether investor-owned utilities have the capacity to support them. He emphasized the need to quickly deploy energy generation assets to meet demand and prevent data centers from relocating.
Taylor Adams, CEO of the Economic Development Authority of Western Nevada, noted that the harsh desert environment and limited grid capacity have spurred innovation in data center technology. For example, a 16-mile pipeline near Reno will use effluent wastewater for cooling, and some companies are exploring ways to generate their own power to reduce reliance on NV Energy’s grid.
Regulatory Efforts and Future Considerations
Advocates like Tanager continue to push for stronger regulations to protect everyday Nevadans from the financial burden of grid expansion. While a proposed moratorium on data center construction in Reno was ultimately rejected, her group remains focused on advocating for policies similar to Oregon’s POWER Act, which places data centers in a separate utility consumer class requiring them to pay for grid expansion.
Nevada has also set an example by securing an agreement with Google and NV Energy to develop a geothermal project through a clean transition tariff proposal. This initiative allows NV Energy to buy and sell power to Google, providing credit for the project’s energy generation.
Whittemore emphasized that a combination of solar, wind, geothermal, and natural gas will be necessary to meet Nevada’s growing energy demands. “The boom is here, and the genie is out of the bottle,” he said. “Now, the question becomes, where do we want these things to be built, and how can we do it in a smart way?”
Tax Abatements and Economic Trade-offs
Nevada leaders have introduced tax abatements to attract data centers, offering incentives such as personal property tax cuts and sales tax reductions. However, a nonprofit report revealed that the state lost nearly $140 million in revenue from these abatements. Tanager argued that the state should reconsider these incentives and focus on attracting only the most beneficial data centers that work closely with local communities.
On the other hand, Taylor Adams of the Economic Development Authority of Western Nevada sees the abatements as a worthwhile investment. He highlighted the benefits of data centers, including stable tax revenue and minimal strain on public infrastructure. Adams noted that data centers do not significantly impact traffic or public safety, making them an attractive option for struggling local governments.