Amazon Web Services bought a northeast Pennsylvania data center site in the shadow of a nuclear power plant, a source of carbon-free energy for the digital hub to help the tech giant meet its emission goals.
The deal comes as data center demand surges, driven by the rapid growth of artificial intelligence, and pushes developers into new markets.
AWS paid $650 million for the 1,200-acre property, making it the largest individual U.S. commercial sale of the year, according to CoStar data. The cloud computing business of Seattle-based e-commerce giant Amazon is one of the world's largest providers of those services with more than 100 data centers in over 20 countries.
Houston-based Talen Energy sold the site as-is with one data center on the property. AWS expects to expand the campus to up to 960 megawatts of data center capacity, or the equivalent of the energy consumption of nearly 900,000 houses. Data centers are measured in their power-handling ability as opposed to square footage.
Amazon has set a goal to reach net-zero carbon emissions by 2040 — 10 years ahead of the Paris Agreement deadline, a legally binding international accord on climate change.
“We’re on a path to power our operations with 100% renewable energy by 2025 — five years ahead of our original 2030 target,” Erika Reynoso, an Amazon spokesperson, said in an email to CoStar News. “To supplement our wind and solar energy projects, which depend on weather conditions to generate energy, we’re also exploring new innovations and technologies, and investing in other sources of clean, carbon-free energy. This agreement with Talen Energy for carbon-free energy is one project in that effort.”
Data centers are attracting a broad swath of investors across the globe. Blackstone acquired data center developer and owner QTS Data Centers in 2021 for $10 billion and, just last year, QTS signed at least $8.5 billion of development deals preleased to major technology companies that need more AI capabilities.
The sites generate significant heat and humidity that must be mitigated to keep equipment functioning and prevent fire hazards and other safety issues. While cost-effective, cooling data centers takes a significant amount of water. The average data center uses 1 million to 5 million gallons of water per day, equivalent to the daily water use of a town with a population of 10,000 to 50,000 residents, according to a study this month by Frederick County, Maryland.
Data centers also account for about 2% of the total electricity used in the United States, the report said. They consume 10 to 50 times the energy per floor space of a typical commercial office building. This high energy use has prompted criticism that data centers could add more stress to the electric grid while increasing greenhouse gas emissions if the energy used to power them is from carbon-intensive resources.
Nuclear Push
With those concerns, carbon-free energy supplied through nuclear reactors is a growing area of interest for large cloud service providers and users such as AWS. Last summer, U.S. power utility Constellation completed an agreement with Microsoft to significantly reduce the carbon footprint of one of Microsoft’s data centers in Boydton, Virginia.
Under that agreement, the data center will receive up to 35% of its energy needs from nuclear power. That accord put Microsoft close to its goal of operating the data center on 100% carbon-free electricity around the clock, according to Constellation.
“Nuclear energy is becoming increasingly important to hyperscalers and users alike, as it is being looked at as a carbon neutral source,” Andy Cvengros, managing director of U.S. data center markets for JLL, said in an email to CoStar News. “This helps them meet their carbon neutral and sustainability goals for very large deployments.”
As data demand grows, it will take more than just efficiency improvements to address the challenge of going carbon-free, according to a report from Last Energy, a Washington, D.C.-based nuclear energy provider.
Data centers and data transmission networks are responsible for about 330 megatons of carbon dioxide emissions every year, or 727.5 billion pounds, according to Last Energy. That’s about 1% of total energy-related carbon emissions around the world.
Talen decided to sell the Berwick, Pennsylvania, data center as part of a plan to monetize its physical assets, CEO Mac McFarland said on a call with analysts.
“Data from the International Energy Agency indicates that global electricity demand from data centers, AI and cryptocurrencies could more than double over the next three years,” McFarland said. “We had the assets and we needed to create value out of these assets in the best way possible.”
Growing Power Demand
Under the deal with AWS, Talen will supply energy to all the data centers the campus will house, creating a steady, reliable income stream, McFarland said.
“The contracted earnings and cash flow from our long-term agreements with AWS are expected to increase significantly as the campus grows,” he said.
In 2023, companies leased or preleased a record 4.3 gigawatts of power capacity within data centers, enough to power more than 3.2 million households for one year in primarily North American data center markets, according to JLL's North American Data Center report for the second half of the year.
In secondary markets, companies leased or preleased 554 megawatts last year, enough energy to power more than 415,000 houses for a year. That leasing was led by the Northwest with Hillsboro, Oregon, accounting for 62% of the total, according to the report.
Firms such as AWS are searching the country and will go where there's bandwidth, according to JLL. In primary and secondary markets, the brokerage said the data center capacity under construction totals 5.3 gigawatts, enough energy to power all households in metropolitan San Francisco for one year.