SPENCER CIHAK: Thank you, Rob. Spencer Cihak here, joined by Rio Grande Valley Business Journal reporter Kristen Mosbrucker-Garza Kristen, thank you so much for taking the time.
KRISTEN MOSBRUCKER-GARZA: Thanks for having me.
SPENCER CIHAK: In recent years, Texas has become a tech hub for many companies, both nationally and internationally, and with that comes a need for these data centers for listeners who have heard the term but don't quite know what that is, what is their use?
KRISTEN MOSBRUCKER-GARZA: A lot of people can think of a data center as essentially a giant warehouse or a series of warehouses. I have a lot of really expensive computer equipment in there, and they do these big computations and essentially help the internet survive and thrive.
SPENCER CIHAK: Fascinating. There's been a lot of interest from data center companies in South Texas. What are some of the opportunities and challenges down in the Rio Grande Valley?
KRISTEN MOSBRUCKER-GARZA: So I think something that's really important for folks to understand is that data centers need three things, right? They need access to water, because when you have a computer, it needs to be cooled, and typically that requires some sort of water based cooling element to it. They also need access to high-speed internet, because most of the time they are connected to the cloud, in a sense, from these computer servers inside. And then the third thing that they use a lot of is energy, right? And so they draw enough electricity to power tens of thousands of homes, really hundreds of thousands of homes. So, you know, building a data center really requires electricity of essentially a midsize city.
SPENCER CIHAK: Oh, wow.
KRISTEN MOSBRUCKER-GARZA: Yeah. And that's a challenge in the Rio Grande Valley, because, as y'all are also having issues up in the Corpus region, water is scarcer than ever, right? We have a drought, and so, you know, there's sometimes contention about whether water usage, you know, should go on that industrial scale. Now, sometimes companies can use, like, reuse water in industrial settings, or even recycle it themselves, because they do typically need, like, pretty good water quality. So it's something that I think companies are really mindful about and trying to work through. Another piece of it is electricity. So AEP Texas, which covers most of the Valley that we have some other operators, has found that even just for our baseline electricity. So you know, for our existing residential, commercial and industrial customers. They are at a 30 year high like they they had 30 years of growth in like, three years recently. And so the Valley requires about two gigawatts worth of power already, and because of our transmission systems, we can't always get it, so we're not necessarily to the point of blackouts or anything like that, but we don't really have a lot of excess electricity for the most part, in our grid system. And so to share it with something that requires a lot of electricity can be a bit of a sticky point, right? And so one way companies are sort of getting around that is, we have one company under contract in Harlingen, and they are out of the UK. They're called Eneus Energy. So they are signing a deal with some farmers, because there's a lot of agricultural land in the Valley, even today, and it's all being rapidly developed. So they have under contract about 1800 acres, and the plan is essentially 16 data center halls. So, you know, imagine, like large warehouses. And they, instead of building something that would require all that electricity and water and power all at once. Essentially, they're going to build the infrastructure as the Valley's infrastructure is built out. So they're sort of trying to grow as quickly as they can within the constraints that we have.
SPENCER CIHAK: It sounds like there are a number of issues these companies are needing to overcome. What are some of the reasons why they still are interested in South Texas, the water issue and the power issue, what's still driving them to come to the Rio Grande Valley?
KRISTEN MOSBRUCKER-GARZA: I would say that there is just so much demand for computing capacity. You know, with artificial intelligence, there are companies, really, across the country that are just trying to keep up with Chat GPT and even cryptocurrency. So in Willacy County near Lyford, there's actually going to be a $50 million data center, and it's going to be in stages. So if they move forward with. The plans, as they've laid out, like it's actually all they're going to be in stages, but the first stage is for cryptocurrency mining, and in that way, they're actually trying to essentially get around all the constraints, right? Because there's not high speed internet access in, you know, a rural community like Willacy County, there's obviously not a lot of water, and there's also not a lot of electricity in that can be transported there. But in Willacy County, over the past decade or so, we've had several large scale wind farms, and so Saluna, this company Willacy County, actually came to the county because the wind farm operator reached out to them, and they said, hey, we have 166 megawatts of wind power that because of the constrained infrastructure system, where, essentially the transmission lines are not able to transport electricity in real time across the state where it's needed. They had a lot of excess wind power that was essentially going to waste. And because of all these wind farms in were in the same place, they also when they would sell it on the ERCOT market, they were actually getting negative pricing. So they were really kind of in a bind. They were like, we're producing all this electricity, and, you know, we know that data centers require a lot of it, and so why don't we try to solve that problem and still recoup the money that we spent on this giant wind farm? Right? So they found this company called Saluna, and they're interesting because they actually don't require nearly as much internet capacity or water that a typical data center would they kind of consider themselves like a renewable or green data center. And so that's one project that's moving forward in a really interesting way. And the first round is they are going to be using that data center for cryptocurrency, and then future stages is going to be AI and so it's really just, I think, keeping up with consumer demand, business demand, industrial demand for access to the internet, access to the cloud.
SPENCER CIHAK: Now these data centers, they don't typically create a lot of jobs. You spoke a little bit about the economic benefit for wind farmers. What other economic benefits can people expect to come with these data centers?
KRISTEN MOSBRUCKER-GARZA: When I spoke to Willacy County officials, you know, they acknowledged that there weren't a lot of jobs created with a data center, because, you know, the company did ask for a tax abatement, right an economic incentive in exchange for this investment. But they know that the jobs that will be created will actually be pretty high paying jobs, and they are connecting their school system into, you know, routing future students to kind of train for those jobs. I think working on the workforce pipeline is one thing that's important to that community, and I feel like the other is that tax abatements in particular, roll off after a certain year. And so while the initial five years, 10 years will not be on the books, the general overall value that will be 2030, years down the line, will generate property taxes for the community. So, you know, there's sort of a little bit of a give and take there.
SPENCER CIHAK: Data centers certainly have been creating a lot of headlines nationally. Just from your coverage. Is there anything you think people need to understand about these data centers that they're maybe not hearing just from looking at a headline?
KRISTEN MOSBRUCKER-GARZA: I think that there's a lot of investment for data centers, but I think that companies really are mindful about the resources that it takes to operate them. Increasingly, I think that they're looking for efficiencies, right when it comes to water usage, you know, alternatives when it comes to building out internet infrastructure. Because one of the things is, if Saluna in Willacy County really does move forward with the AI portion, they'll actually have to invest in fiber optic cable in Willacy County. So as a result of the data center, that community might actually get better internet access, you know, like larger wires, essentially, which is something that would never have happened if a data center didn't get built there.
SPENCER CIHAK: For people with environmental concerns. Is there anything that they should be aware of? Are they speaking some truth? And the project in Willacy, it's considered a green data center project in Harlingen. Are there environmental concerns?
KRISTEN MOSBRUCKER-GARZA: I mean, at this point, I haven't heard from environmental groups. You know, certainly no one's really out. Are protesting it. I do think how the data center in Harlingen will handle the water issue will definitely make people pay attention. You know, like I said, we we are in a drought. We have a lot of water conservation projects going on and and I'm certain that folks who are being asked to conserve, you know, on a residential level, probably would like it to see a lot of water usage on an industrial scale.
SPENCER CIHAK: Kristen, it's been so fun to chat. For people that want to know more about these data centers, where can they learn more, and also, what's the timeline expected for these projects to be completed?
KRISTEN MOSBRUCKER-GARZA: Absolutely, so the Harlingen data center is in the early stages, so they are under contract for the land, but they probably wouldn't start construction for a couple more years, and so what I'm seeing is probably not till maybe 2030 the project in Willacy County is under construction, and they're moving pretty quickly. They are also they also have sort of a modular style that allows them to construct it efficiently, and so they're trying to get up online as soon as they can. My understanding is it will take about a year or so before people physically see them.
SPENCER CIHAK: Kristen, thank you so much for the time today.
KRISTEN MOSBRUCKER-GARZA: Absolutely, thank you.