42 43 Because of its longstanding tech and innovation community in Silicon Valley, California seems at first glance to be a natural opportunity for data centers. The alignment of an AI-oriented workforce and considerable state-level support for innovation policy suggests that there will be persistent interest in California as a data centers destination as AI is increasingly used as a tool for innovation in the energy space and beyond. Los Angeles recently built a 33MW critical IT load data center, and more are on the way. California and the challenges of building new infrastructure quickly Case Study 3 Many reasons have caused this problem, including the challenges of land acquisition, political opposition, and - in certain circumstances - California’s challenging topography, which separates areas of viable generation assets and centers of demand. The inability to build major projects extends to California’s inability to expand its workforce, with housing shortages being one specific example. Despite long- standing housing shortages, California continues to lag virtually every state in authorizing and constructing new housing, after normalizing for population. Paired with increasingly high housing costs, California runs an increasing risk of neither having enough people to build data centers infrastructure not offering a competitive enough housing market to attract a data centers-oriented workforce. North Dakota - siting new data centers in areas with high readiness Case Study 4 North Dakota is home to some of the world’s best wind resource, enjoys substantial conventional hydrocarbon production, abundant land, and has a significant IT workforce. As such, this electricity-exporting state has the potential to become a data center cluster, with 19 data centers currently in operation and with new, much larger projects under discussion. North Dakota offers several opportunities which make it an attractive destination for new data centers. Ample real estate for both data centers and generation-distribution buildout, with easily navigable permitting for new construction. As a result, North Dakota has experienced one of the largest increases in commercial electricity demand growth in the nation between 2019 and 2023 at 37%. While as of 2024, North Dakota’s energy production was approximately six times that of its consumption, meeting this demand will begin to place stress on North Dakota’s energy system. Yet, it remains well-positioned to grow both its transmission and data centers management at the same time. Furthermore, in addition to its own abundant resources, North Dakota and neighbouring states can also call upon significant power from neighbouring Manitoba, which has significant hydropower and wind resources of its own. This can create auxiliary supply opportunities as data center demand continues to grow. The state’s population size, however, will be a limiting factor that North Dakota will need to address quickly. Given the population size and the lack of an addressable inference market, North Dakota will likely only be a suitable data center hub for applications - like training - that have low latency requirements. Furthermore, a data center buildout would quickly run into workforce shortages. The state unemployment rate is the second lowest in the country as it suffers from a shortage of workers. Meanwhile, North Dakota’s location offers several of its own advantages. As a relatively cooler climate, the energy needs for data centers cooling are negligible compared to other data centers hubs like Texas or Virginia. It’s also centrally located in the US, making it a highly attractive opportunity to encourage regional load shifting and data distribution. However, California’s significant challenges in building new supply and transmission infrastructure, and the costs of improving existing transmission infrastructure, challenges its attractiveness to new data centers. California has experienced significant renewables penetration since 2019, but as of 2024 this has plateaued, with over 1,000 projects waiting to be connected. This stagnation of new generation reflects severe gaps in transmission and distribution infrastructure that have not been resolved. For example, CAISO has also built just 920 circuit-miles of high-voltage lines, or 4% of all US construction, despite comprising about 6% of total US electricity consumption, facing grid stress, and holding decarbonization targets on paper. In-state Electric Generation by Fuel Type Source: Quarterly Fuels and Energy Reporting Regulations Cumulative High-voltage (345kV and higher) circuit-miles laid, since 2010 Unemployment rates (%) North Dakota monthly electricity generation and in-state sale (GWh) Wind Solar Thermal Solar PV Small Hydro Large Hydro Natural Gas Nuclear Geothermal Biomass Oil Waste Heat Petroleum Coke Coal Rest of U.S. Retail saled CAISO Generation Generation less retail sales