My View: How data centers fuel Arizona’s digital economy boom
Story Highlights
- Data centers power digital lives and demand is rapidly growing
- Phoenix ranks fourth in North America for data center capacity
- Arizona attracts tech companies with climate and renewable energy potential
You no doubt have seen them while driving along a roadway where only barren desert or an empty building once was. I’m talking about structures akin to monolithic concrete boxes featuring industrial, even neutral designs and color schemes with few if any windows.
It’s almost like despite their size, the intent is that they are supposed to go unnoticed. Who possibly would want to spend any part of their life in them?
What you’ve likely spotted is a data center. What may seem boring outside actually is humming inside with the activity that powers nearly every aspect of our digital lives.
Every time you stream a show, upload a photo, use GPS or pay a bill online, you’re generating data — and that data needs a place to call “home.” Talk with Alexa this morning? Even she is in there somewhere.
Now, multiply that by millions of users, businesses and devices, and the demand is far from abstract. It’s very real and very personal.
Consider Arizona is just a piece of the enormous challenge to handle the data generated across the planet. One estimate is that global data creation is expected to reach 181 zettabytes in 2025. How big is that? Well, you would need more than 1.7 trillion CDs to handle that load!
Helping feed the need are:
- Artificial intelligence – Training and running AI models require massive computing resources
- Cloud adoption – More businesses are offloading local servers to cloud platforms
- Remote work, telehealth, e-commerce and Internet of Things – All must have constant, real-time data handling
- 5G and edge computing – These require processing closer to the user, boosting demand for localized data hubs like those growing in our own backyard
Sparked by this activity, Phoenix ranked fourth in North America last year in total data center inventory, according to commercial real estate firm CBRE. A total of 602.8 megawatts in data center capacity was a 67% year-over-year increase. Our being on the path toward becoming the front-runner for digital infrastructure has happened for several reasons:
- We have an arid climate and low risk of natural disasters.
- Our lower operating costs and proximity make us attractive to West Coast technology markets.
- Major players like Microsoft, Amazon, Meta and Google already are investing heavily here through job creation, tax base increases and digital economy growth. For example, Google’s Mesa data center is projected to generate $156 million in taxes over 25 years, including property and electricity sales taxes. OpenAI is also considering Arizona for data center expansion.
Data centers much more than ‘hidden’ assets
The companies also are taking the lead on dealing with the challenge of finding the power to keep the centers operating without forcing the rest of us to face energy shortages as a result, thanks to AI-optimized power management that improves efficiency. In addition, their plans call for incorporating innovative cooling systems, including evaporative, adiabatic and dry air to minimize water usage.
These large-scale data centers — also known as hyperscalers focused on delivering huge amounts of computing power and storage capacity — are moving toward 100% renewable energy portfolios. And thanks to Arizona’s solar potential, we’re well-positioned to lead on clean-powered digital operations.
To help do this, the companies are turning to partnerships. Meta has secured an enormous portion of its Mesa site’s energy from the 300-megawatt Eleven Mile Solar Center in Coolidge plus a 300-megawatt battery storage system. Google has turned to SRP and NextEra Energy Resources for more than 430 megawatts of new-to-the-grid, carbon-free energy to power its Mesa campus. Microsoft expects to gain 150 megawatts of power for its Arizona-based data center region from the Sun Streams 2 photovoltaic plant in Arlington through a collaboration with First Solar.
Our state already recognizes the value of the centers operated by a variety of companies. In fact, their efforts are encouraged through a program administered by the Arizona Commerce Authority in conjunction with the Arizona Department of Revenue. The program provides transaction privilege tax and use tax exemptions at the state, county and local levels on qualifying purchases of equipment.
It’s time for us to stop treating data centers as “hidden” assets. They have become as vital as roads, airports and water systems. Arizona’s leadership gives us a competitive edge, positioning us to attract high-tech companies, drive innovation and build a future-ready economy.
As we continue to debate energy policy, land use and economic incentives, keep this in mind: The digital economy runs through data centers — and those data centers increasingly run through our state.
Steve Zylstra is president and CEO of the Arizona Technology Council.