It’s been an exciting time for the Kansas City Metro in the digital infrastructure world. The area has long had more than 100 enterprise and colocation data centers, largely serving companies with corporate headquarters in KC. Recent developments in the city are changing from a local market to a national one. Diode Ventures’s own Golden Plains Technology Park hyperscale data center campus is planned for 750 megawatts (MW) of IT load at full build out. Planned for more than 5,000,000 square feet, it would rank among the world’s largest data center campuses. In other local data center news, Overland Park, Kansas-based QTS Data Centers in August received a bolus of capital as a result of being acquired by Blackstone while Midwest-focused LightEdge with its underground KC-Missouri facility was acquired by San-Francisco-based GI Partners.
Amazon Web Services (AWS) gave notice in July 2021 that the web giant will be adding Kansas City to its list of Local Zones where cloud customers can expect ultra-low latency. This announcement follows a trend of Big Tech moving away from the expensive coasts and toward the friendly (and lower cost) population centers in the Midwest.
Kansas City has officially entered the chat.
Driving trends – Cheap power and data saturation
The early data center giants clustered in Tier I locations (think Silicon Valley, Northern Virginia, and Atlanta) with access to subsea cable landing stations. A second wave of Tier II markets moved closer to major population centers full of consumers (think Denver, Chicago, Las Vegas). There are two main drivers of the shift to Kansas City and other smaller, newer markets. The first driver is the cost of energy. In recent years, the average wholesale electric price for Southwest Power Pool, manager of the grid and wholesale power market serving KC Metro, was the lowest in the nation, at just $30/MWh. West Coast prices were 27% higher. In Missouri, a unique special incremental power rate was passed in 2019 that further lowered the power pricing bar for mega energy users like data centers looking for long-term, low-cost electricity.
The second driver toward the middle of the country is the ever-present infiltration of data into our daily lives at work and home offices, in our drive-assist cars, and in our virtual classrooms. The COVID-19 pandemic's effect on commercial real estate was dismal, except for the bright spot of data. The highest-performing commercial real estate sector in 2020 was data center real estate investment trusts (REITs), with 21% growth. Data processing is growing exponentially, and so too must the growth of the facilities that host the data processing.
One of the keys to attracting Big Tech is green energy. The cost of energy from the Southwest Power Pool is attractive, but price isn’t the only electricity consideration. Every single major data center company has made a public commitment to zero carbon or another renewable energy goal, and you can’t meet those commitments while operating data centers powered by fossil fuels. Regional electric utility Evergy is making some bold moves, increasing their wind and solar assets to nearly 5,000 megawatts (MW) and providing more than a quarter of Evergy’s generation capacity through renewable facilities. More renewable assets are needed to offset the planned demand and welcome new green-minded data center operators. A good start would be constructing the massive 320 MW solar photovoltaic (PV) project planned in the suburbs of Kansas City.
Where do we go from here?
How can we capitalize on this momentum? Missouri Chamber of Commerce Technology 2030 Report recognized improved broadband, educational funding, and small business funding as key opportunities to capitalize on recent regional growth of the tech industry. Similar prospects face the other side of the state line in Kansas. We can continue to grow and support data infrastructure development, not only in data centers but high-speed fiber too. We also need to invest in our young tech talent. CBRE 2021 Tech Talent Report ranked Kansas City in the top 30 best cities for tech talent and the third-most diverse market for women in tech. To support world-class data centers, we need a world-class workforce. The region needs to support educating traditional and non-traditional students in fields like information technology (IT) but also construction to build physical data infrastructure assets. In addition to the workforce, data centers can bolster a community’s economy, too, by attracting new tech-focused developments and businesses. Can Kansas City become a Tier I data center market? What is KC getting right and what is it missing? Leave a comment with your thoughts.
This article was originally published on LinkedIn by Diode Ventures professional, Ashlynn Horras.