Opinion: The push for more data centers, more housing and more impacts

 As I write this, there are two competing bills in the Legislature regarding data centers. One promotes them by providing massive tax breaks, while the other tries to address at least some of the impacts. 

This conflict exposes the underlying weaknesses of our way of providing infrastructure to serve new development and our failure to use basic economics to make development more self-regulating. The underlying problem that we face is the unwillingness to fully acknowledge and quantify the impacts of more development, and then to charge new development the costs of mitigating those impacts.

For example, last year the PUC gave permission to Xcel to pursue massive new investments in renewable energy, including wind, solar and battery storage (and a small gas plant, presumably for additional backup), so as not to miss out on the federal tax credits. Allegedly, two-thirds of this is needed for data centers, with only a small portion because of the upcoming retirement of coal plants.

Data centers’ impacts have to do with the massive increase in power demands and the huge costs of that infrastructure, the resulting pollution to the extent that fossil fuels are used, and the consumption of water for cooling. (Barclays Bank forecasts data centers will use roughly 13% of all U.S. electricity by 2030!) 

The problem occurs because these costs are inflated and then shifted onto the general ratepayers. Xcel and other private regulated monopoly power providers are granted inordinately high rates of return on invested capital. Xcel’s is currently over 9%, roughly twice the current government borrowing rates! Then these costs are spread out over their whole customer base. So, our rates go up, even though we are not adding to our electric demand. (Read “Power Struggle” by Rudolph and Ridley if you want the whole, sordid story of how this all happened.)

The solution is straightforward: Force data centers to provide their own power and pay for it themselves, and require the use of renewable energy so that they don’t add climate impacts. Then they will not be passing off their costs and will bear their own risks.

Water is a bit different. If tap fees on new development are set to equal the capital cost of the needed additional water rights, reservoirs, treatment plants and pipelines, and, importantly, expended to actually maintain these levels of service, then the capital costs are not passed through. But this is not generally done.

The additional problem here in Colorado is that our water supplies are diminishing as our climate warms and snowpack shrinks. Therefore, it’s very difficult to actually maintain levels of service. Either we dry up our agriculture and force punitive water restrictions on non-agricultural users, or we require data centers to use other means to cool their huge computer banks.

These issues parallel those related to the “housing crisis” and the apparent inability to recognize that our state has limits on carrying capacity in terms of preserving our ability to enjoy our lives. Additionally, our legislators seem unwilling to acknowledge that many land use decisions are best made at the local level, simply because impacts vary widely from one location to another, and so do the desires of local citizens to put up with these impacts.

The “housing crisis” also has some distinct problems. Once our highways and streets are built, widening is very expensive. And mass transit is even more so, largely because RTD collects only a fraction of its costs through fares.

Plus, we now have a new problem: RTD does not seem to be capable of managing its light rail system — witness the bizarre situation in the west Denver area discussed in a recent Denver Post story, where one line has been running at half service level, but the contractor has been paid as if it were running at full service!

Finally, there is the latest Legislative attempt (HB26-1001) to allow certain entities to build permanently affordable housing to the bill’s allowed density and height, which may exceed local zoning limits. Worse, the Legislature continues to refuse to take a long-term, big-picture look at housing demand for our state. For example, a Forbes survey (that I’ve quoted before) has the Denver area as the number one place people want to move to.

At some point, our politicians need to face up to this vast market size and to focus on preserving our quality of life while we still have some. And require growth to pay its own way so that our service levels are maintained rather than sacrificed.