Data centers could drive up energy demand in New Mexico, experts warn

Deborah Kapiloff, policy adviser with Western Resource Advocates, believes data centers are an increasingly necessary part of people’s daily lives.

“Something like online banking, streaming Netflix, listening to music on Spotify, using Google Docs or Outlook for email, even scrolling on social media — all of those functions are supported by data centers,” Kapiloff said.

But, as the data center craze makes its way to New Mexico, citizens and policymakers alike wonder how the facilities will impact the state.

At Thursday’s legislative Science, Technology and Telecommunications Committee in Las Cruces, Kapiloff told lawmakers various ways in which data center development could affect New Mexico, including possible impacts on electricity rates.

Hyperscale data centers are extremely large and support mounds of data storage, cloud computing and artificial intelligence applications, Kapiloff said. These are the big-ticket items driving development, where states across the U.S. are competing to house such massive investments — despite demanding energy needs.

According to a recent report from the International Energy Agency, data centers accounted for 1.5% of the world’s electricity consumption, of which the U.S. makes up the largest share.

By 2030, the agency estimates data center electricity consumption will more than double to nearly 945 terawatt-hours — slightly more than what Japan consumes annually.

Kapiloff said data centers requiring large amounts of power can flood the grid with “phantom” loads, which complicates a utility’s ability to forecast electricity demands and can lead to over-acquisition of resources or overspend of capital. According to a July study from Western Resource Advocates, where Kapiloff was a contributing author, annual electricity sales grew by 1% per year from 2010 to 2023. Now, utilities are predicting a 4.5% energy demand increase annually from 2025 to 2035.

Further encouraging data centers to build out, Kapiloff said jurisdictions around the nation, including New Mexico, are offering incentives, tax exemptions or are decreasing property and sales tax rates.

Project Jupiter, a proposed Doña Ana County data center campus, was recently named one of five sites integral to the $500 billion Stargate Project. In the months leading up to the September approval, county commissioners greenlit an unprecedented $165 billion in industrial revenue bonds to help build and finance it.

While data center construction can bring significant temporary jobs, Kapiloff said, the facilities bring few permanent positions once operational. Sen. Jay Block, R-Rio Rancho, challenged this, claiming the Meta Platforms Inc. data center campus in Los Lunas has about 400 direct employees.

Meta saw its Los Lunas center come online in 2019 and has since grown to house multiple buildings, with a third expansion slated over the next few years. Block added that Meta’s decision to locate there was also largely based on tax incentives offered by Valencia County.

Kapiloff outlined recent legislation passed in the January session. This included House Bill 93, which provides new ways for data center customers to generate and sell power through behind-the-meter customer generation or the opportunity to sell excess energy back to a utility. Additionally, microgrids created under the bill are subject to New Mexico’s zero-carbon generation requirement by 2045.

Kapiloff recommended a variety of policies to help mitigate the data center development challenges, ranging from implementing clean energy tariffs to requiring water reports and creating large-use policies.

Western Resource Advocates is neither “pro or con” data center, Kapiloff said, noting the presentation was merely meant to highlight environmental considerations and consumer protection.

“It probably is not unpopular to say that residential electricity rates are a concern, and that cost allocation for customers is tricky with these data centers,” she said. “Large customers, especially really well-capitalized companies like the Amazons and Metas of the world, should be paying their fair share for the services they’re receiving from the electrical grid.”