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THE FRONTIER LINE
Hosts Wayne Aston and David Murray explore the critical global pillars of infrastructure development and energy production, from traditional methods to future-forward advancements. The Frontier Line covers the latest industry news, energy innovations, and sustainability trends that are shaping the future. Through expert interviews with industry leaders in renewable energy, utility-scale battery storage, and waste-to-energy technologies, the podcast provides insights into the evolving landscape of energy efficiency and sustainable infrastructure. By focusing on the intersection of innovation and the politics of energy, The Frontier Line highlights transformative ideas and technologies poised to deliver cost-efficient, resilient, and sustainable solutions for global industries.
THE FRONTIER LINE
Amazon's Challenges- Zombie Data Centers, Power, Water and Labor Scarcity. Sequoia Capital Weighing In
What if the future of AI advancements hinged on solving today's power and infrastructure challenges? Unravel the complexities Amazon faces as it ambitiously plans to establish 240 new data centers by 2040. Learn how power shortages, zoning complications, and labor deficits pose significant hurdles not just for Amazon, but for the tech industry at large, as energy needs are set to triple by 2030. Discover why the fragile state of our current electrical grid has become a bottleneck for tech giants like OpenAI.
Explore the intriguing process of transforming retail relics into cutting-edge data hubs. It’s a tale of more than just space; it's one of necessary utility overhauls and strategic decisions on whether to convert or build anew. With skilled labor becoming a scarce resource, especially in rural areas, the challenge is to attract a new generation into trades vital for these grand projects. Delve into how Amazon and others are also considering leasing data center space as a quicker alternative to construction.
Dive into the evolving dynamics of skilled labor in a technology-driven world. Electricians, plumbers, and welders are finding their roles more critical and lucrative than ever as industries grapple with burgeoning energy demands. We ponder whether innovative solutions like micro nuclear reactors could offer sustainable energy paths for the future. Could a power "czar" be the answer to cutting through the bureaucratic red tape? Tune in as we speculate on the energy infrastructure of tomorrow and the potential shifts in leadership that might drive these changes forward.
Welcome. Welcome to the Frontier Line everyone. Hello Wayne, Good morning Dave, Good morning, Good afternoon, Good evening. Whenever you're listening to this, we'll cover it all. So today's episode because we're doing this, we've talked about this, because we're in this space we see a lot of articles, discussions. That's what we're doing Today. We're going to read one of those articles. That is just really a great article and it's touching on, kind of hitting all of the salient points of what's, you know, the growing pains of the cloud industry and in our electrical infrastructure and what it means and what's the implications and all of the things that I think you and I have both had, you know, express some angst over or we tried to shine a light on.
Speaker 1:This article is one of the better ones I've read in a while about covering using, you know, one example to cover all of the issues, and it underscores everything. So I, if it's okay, I'm going to read the entirety of the article here. So I will be your, I'll be your narrator on this, this article. So, as you're listening, you can just now, you know you get to, you know I'm your speechify, I'm here, I mean so. So this was in Business Insider India, but it really does underscore a lot of the stuff going on worldwide, and they referenced the article. They're really referring a lot to the Americas. So the headline was Amazon's AI data center dream runs into the reality of zombie facilities, higher costs and labor shortages. So that really just hits it right off, right out of the gate for us.
Speaker 1:So Amazon is spending heavily on data centers to support booming AI workloads, putting it on pace to build 240 new facilities by 2040, according to one estimate. These plans are increasingly running into physical constraints that are slowing the build out. According to an internal document, people familiar with the matter and emails obtained through a public records request Across the America's region quote across the America's region we are experiencing headwinds in power zoning and permitting water and workforce labor that are providing challenges to our long-term capacity growth. The internal document stated, referring to the America's market Amazon's largest as the biggest cloud provider. Amazon's largest as the biggest cloud provider. Amazon's predicament highlights broader problems facing the tech industry is generative, ai upends the status quo. While more companies want access to cloud computing for AI initiatives, there's only so much power, water and labor available to support these services.
Speaker 1:Amen to that it's not just an Amazon problem. Sequoia Capital General Partner David Kahn recently predicted data center delays across the sector. Quote the need for more power and a better functioning grid was clear before AI, he wrote in a blog post. Now it is becoming urgent. That couldn't be more true. I'll take that break that you know. He hit it right on the head. Absolutely. Energy demand is growing. It may be natural for a company like Amazon, one of the largest and fastest growing data center operators, to face these challenges when it is expanding at breakneck speed. Mark Wolfrat, president of the consulting firm MWPVL, told BI Business Insider that Amazon is probably rolling out even more than 240 data centers in coming years. That's because the cloud giant also leases space and buildings shared with other companies. Collectively, this building spree amounts to almost 75 million gross square feet of space. According to his estimates, that's the equivalent of roughly 27 empire state buildings. That is just massive, Massive amount. And that's just massive, wow, massive amount.
Speaker 2:And that's just wow, amazon, just under 75 million square feet of data center space that's not including operations facilities, logistics, warehousing any.
Speaker 1:Any of that's staggering.
Speaker 1:That it's staggering and one could argue that some of the the you know, like the open ais of the world, at their world, at their pace of growth, are going to have their own version of this. So this really starts to come home about how big of an issue this is. So in an email to Business Insider, amazon spokesperson said customers' energy demand continues to grow and the company is continuously working on ways to efficiently build and operate data centers to meet their needs. Quote nobody knows better than we do that building data centers is exceptionally complex and by embracing that challenge we've become really good at it over the years. The spokesperson added quote we're confident we can continue to build at a rapid pace to provide the cloud capacity of our customers' pace to provide the cloud capacity of our customers' needs. Quote. End quote.
Speaker 1:So doubts about electricity supply. Power might be the most scarce resource. Us data center electricity consumption is forecast to triple by 2030, according to Boston Consulting Group, much of it to power generative AI. Bernstein Research recently estimated that electricity demand for AI data centers could exceed supply in just two years without action.
Speaker 2:Let's pause there, because this this is this requires a significant amount of attention. Just what was stated right there. According to this Boston research group, 48 months, 48 months, three. So so by 2030, we're in 2020, where the we're rounding out the end of 2024, so within five years, the power demand could triple. Now we've heard about operation gigawatt and utah needing to double its power capacity. We responded to that saying well, that's for sure, but it's probably a lot more than that. That's probably more realistic Triple, but to say so, it's another interesting thing to say. Over the next 20 years, we think power demand will triple. That's one thing, but to say in this next quinquennial it's going to triple, yes, I don't even know. I mean, I don't know how anyone with all the modalities paces with that, but that's awesome.
Speaker 1:It's a staggering amount of capacity that will either need to come online there are some that are out there already online but then be built. And that goes to everything we've talked about since we started this podcast, which is our grid is fragile, our grid needs to be updated, and so to tackle any of these things, you have to solve that problem. You have to and none of these problems get solved quickly, not 48 months, quickly, right. So how this gets solved and it's why we're doing what we're doing is we do think there are ways to shortcut some of this and actually get to real, meaningful solutions that actually check a lot of boxes. So I'll continue on.
Speaker 1:At Amazon, electricity shortages have been a major concern and a topic of almost every leadership meeting in recent years. According to the people familiar with the matter, amazon is experiencing power supply issues in Oregon, ohio and Northern Virginia. According to the internal document from May, for example, it noted that Pacificor, amazon's Portland-based utility partner, has electricity shortfalls and generation constraints forecasted until 2030. Well, there you go. This is leaving Amazon with unpredictable energy supply in some markets and possible loss of bridging solutions that help maintain power during the early stages of construction. Huge, huge issue, huge, huge issue, quote. With the utility power headwind, we are seeing continued risk driven by transmission constraints, as well as unexpected changes to committed available generation, gaps in promised versus delivered incremental power and potential loss of bridging power as utility infrastructure projects are delayed.
Speaker 1:The document explained so zombie data centers. I don't think this is the first time we've talked about zombie data centers yeah, that's a new term. So in some markets, so-called zombie data centers exist. That's a term used by some Amazon employees who spoke with Business Insider about the electricity supply problems. These facilities are also described internally as operationally blocked. Described internally as operationally blocked because the data centers can sometimes sit idle as they don't have access to enough power to run them.
Speaker 1:According to people familiar with the matter, amazon spokesperson told Business Insider the company is not familiar with these terms, but said there are a very small number of cases where the company decides to complete data center construction before building power is available. These situations quote these situations are all managed as part of the standard course of business. The spokesperson added. Amazon Web Services CEO Matt Garman recently spoke publicly about challenges related to AI data center buildouts, including accessing enough GPUs and power. Data center build-outs, including accessing enough GPUs and power. During a podcast interview in August, he said customer demand is mind-boggling, which is requiring a lot of investment Quote. We're probably going to be tight for the next little bit of time. Garmin added Mosquitoes to the light.
Speaker 2:Nice hedge, yeah, good hedge A little bit, just a wee bit of time. Mosquitoes to the light next hedge?
Speaker 1:Yeah good, hedge A little bit, just a wee bit of time. Mosquitoes to the light. Next headline, our next part of the article. The company is on the hunt for more energy. It's conducting power studies with utility partners to evaluate additional transmission capacity, which could result in more power allocation. According to the internal document, the company is also working on ways to reclaim stranded and retired power. The document said likely in reference to the practice of redeveloping old power plants that have become inactive for economic or sustainability reasons.
Speaker 1:Anything going on in Utah that rings a bell? Oh yeah, amazon has been more actively seeking partnership opportunities with third-party co-location data center providers. One of the people said at these facilities, amazon would simply lease space, transferring the need to secure power to the data center providers. One of the people said at these facilities, amazon would simply lease space, transferring the need to secure power to the data center's owners. Additionally, amazon has started looking beyond well-established data center markets such as Northern Virginia and Arizona as expanding into newer regions like Indiana. Crowded data center regions are running out of power and other resources, making newer locations more appealing.
Speaker 1:The company is also more aggressively pursuing alternative energy sources. Last week, amazon unveiled a plan to lead a $500 million funding round to develop small modular nuclear reactors, following an earlier announcement to purchase a nuclear power plant in rural Pennsylvania. Quote it's almost like mosquitoes to light we are attracted to power. One of the people familiar with this told Business Insider. Amazon spokesperson said the company's data center expansion strategy considers several factors, including system resiliency, latency, the availability of renewable energy and the local government's long-term commitment. Amazon is also constantly seeking ways to make its data centers more energy efficient by using carbon-free resources, in-house processors and natural air cooling systems. The spokesperson said Higher costs in Silicon Valley Next headline.
Speaker 1:In some cases, amazon is paying higher prices to get its new data centers up and running. One example is an Amazon facility in Santa Clara, california, in the heart of Silicon Valley. For the last two years, amazon has held talks with the city of Santa Clara to secure power for a new data center located near Levi's Stadium, the home of the San Francisco 49ers. According to a city council meeting held in July, amazon is in talks for a 15-year 20-megawatt proposal for the facility, under the condition that the company pays the full cost of the energy, whether it uses the power or not. Manuel Pineda, the chief electric utility officer of the city of Santa Clara said during the meeting meeting. During the meeting, amazon will have to pay up to 50% higher rates than normal and will be entitled to additional financial assurances to cover any contractual risks. Pineda said wow, yeah, as part of the deal, amazon also plans to use the 20 megawatt power agreement for a second building on site, which currently has no electric capacity. According to Pineda, amazon's spokesperson told Business Insider that this arrangement has not been finalized and that the project is progressing as expected.
Speaker 1:Amazon escalates Santa Clara delays. Next part of the article Amazon appears to be dealing with further delays in Santa Clara. On August 28th, an AWS employee wrote to a city official about another facility, a former Owens Corning factory that the company purchased in 2023. The email discussed delays at the site and noted that the problems were raising concerns internally at Amazon. Quote delays as significant as this unfortunately impact our ability to serve our customers, which has resulted in escalation, said the email, which was obtained by Business Insider through a public records request. The next day, another Amazon employee wrote to a Santa Clara City official. Quote this is time sensitive. End quote. The staffer said Quote AWS executives are highly concerned about the constant push in the results. End quote Straining water infrastructure.
Speaker 1:Another problem is water supply. A growing number of data centers rely on water instead of air to cool the servers and other equipment inside the facilities. This liquid cooling technology requires a lot of water. Amazon is quote straining local jurisdictions existing infrastructure end quote for water in some regions and is quote dependent on long-term infrastructure upgrades or building our own solutions end quote to mitigate the issue. The internal document stated there are zoning and permitting requirements too. Some local jurisdictions are not supporting the rezoning of industrial property for data center use and have stricter environmental regulations. The document explained Amazon is working proactively and that's a quote in the article or a quote in the document explained amazon is working proactively and that's a quote in the article or a quote in the document with local municipalities to solve these challenges as they impact its quote. Future capacity options end quote. The document added amazon is one of the world's most water efficient operators quote as its data center and its data centers are much more water efficient than the industry average, the company spokesperson told Business Insider. So now we've covered water, electricity cooling and now on to labor. So lack of available skilled labor is the next part of this.
Speaker 1:An even bigger problem may be a lack of skilled electricians to build and run these data centers. According to the internal document and people directly involved in these Amazon projects, electrical work is a major part of data center construction, but Amazon has struggled to find enough people to do the jobs, especially in rural areas. These people said Amazon has talked to local colleges, general contractors and labor unions in certain markets to increase the supply of electricians. One of the people said A shortage of skilled electricians is a growing industry problem.
Speaker 1:According to last year's uptime institute data center staffing survey, more than half of respondents said they struggled to fill open positions due to demand outstripping supply. Wow, so for anybody, this is the other side of this market there is, you know, when you have shifting market, the demand for electricians is. It's not going anywhere, it's only going up. What? Five years, ten years probably, it's going to be incredible. So, quote for workforce labor we are seeing a lack of available skilled labor. Amazon has a total document stated which requires us to prioritize where we allocate these resources and we are becoming increasingly reliant on more expensive traveling, primarily electricians. End quote amazon spokesperson shared blog post detailing its training programs in the space. Adding quote aws has established a number of workforce development programs and collaborations with education institutions to help ensure a strong pipeline of talent end quote um that is it, that's a great article.
Speaker 2:It's it, just it really touches on everything you know one, one of the takeaways I really that there's like light bulbs coming on here is I've I've read many articles on linkedin and other outlets in the past year talking about I think we might have even touched on one episode of this whole conversion idea this converting old K-MARPs or old Costco's or old office facilities into data centers, and why that's such a bad idea. Many reporters have come out with what they see as this being a unique way to address the problem. It's really not. It's really a misunderstanding that if a Kmart was developed 20 years ago, it was never developed with the utilities capacity that a data center is going to require. And so it's not a square footage issue, guys, it's a power issue, it's a water issue. It's not a square footage issue, guys, it's a power issue, it's a water issue. And so you can't just buy an old office complex and convert that to a data center without a full overhaul on that utility systems, primarily water power.
Speaker 2:Fiber is another one. I would contend that all of these conversions don't have adequate fiber capacity. So building something from scratch to me feels like a less risky proposition, whereas land developers, we can kind of control that utility path and we can make sure that it's designed horizontally. Subsurface development supports what we intend to build.
Speaker 1:I think you raise an incredible point where an unexperienced or untrained eye, although well-meaning, would offer these ideas like oh, that seems easy, it's not. It's not an apples to apples comparison. Yeah, um, there is an incredible amount of infrastructure that has to go into these things to your point, from from the fiber that's laid in the ground all the way up, and then how you deal with everything from redundancy to, maybe you know, traffic law, everything I mean in and out of the facility, and there's so security being another one. How do you, how do you deal without, say, within an existing community where you have a costco, chances are you're running into zoning. I mean, there's so many things where it it. It sounds like a good idea and you could imagine that there might be a. You know a use case out there where that location just happens to check all the boxes, but more often than not it's a. It's a fool's errand yep.
Speaker 2:Well, I also really enjoy reading what you shared there in that article, dave, about how amazon is having to expand the mindset from we're going to build 240 data centers and 75 million square feet of new data center space to include coexisting and other data center facilities and leasing that space.
Speaker 2:Okay, that's a business model that we've embraced for some time now, which is the core of our data center initiative. Right, while we haven't been really focused on catering to the Amazons and Googles of the world, we recognize that everyone else, all of the other thousands of businesses that exist today that are not Amazon or Google or Meta still need data center space and compute power and all the things, and so to be able to meet that market, that seems like the opportunity of the century for us, and that's not even including all the new businesses that will be founded and come online in the next decade that are going to need it. So you read about Amazon and Google and what Meta does they're developing for their own consumption, for their own business model. They're not in the business of developing all of this data center capacity to cater to the masses necessarily.
Speaker 1:So that's an interesting when you hear something like that, being a developer, when you hear about labor shortages, I mean I'm curious. I think everybody would be interested. When you have to contend with that as a developer, what's your experience with it? I mean I'm curious. I think everybody would be interested. When you have to contend with that as a developer, what's your experience with it? Do you see you've had to build in rural areas and bring in people? Do you see this more as opportunity or a misunderstanding maybe of how to go get the labor pool, or is it just a real issue that you just have to figure out how to solve? What's your experience in that? I think that would be very interesting. I'm curious to hear that.
Speaker 2:No, it's a serious issue. We've had some really in-depth conversations with contractors here in Utah national builders like Big D Construction, for example, who who have shared this frustration of an a fundamental inability to entice high school and college aged folks to go into the construction trades in general. We're not talking about just electricians, talking about plumbers uh, electricians framers welders yeah, there's.
Speaker 2:There's a whole list of what we consider skilled workforce, and it's also interesting to understand that the average age of a journeyman plumber, electrician is 52 years old. Okay, so these guys are nearing retirement age, while we fail to recruit or incentivize adequately folks, the younger generations. They prefer working tech jobs versus construction, and so it is a serious problem. And, having developed in more geographically challenged areas, there's a premium on that, and it's a double-digit premium to hire enough skilled workforce to travel and for extended periods of time. I mean you could have, for example, the Cape Station geothermal plant in Beaver that we've talked about quite a bit here in Utah. We understand that that's going to provide around 160 jobs when it's operational, but the construction of it is going to require 6,600 jobs.
Speaker 2:That's traveling journey, that's people coming from all over the US and maybe even internationally to come in and provide specific expertise and labor. And so we're talking about building workforce cities, housing, temporary housing to bring all of that transient workforce into Beaver County, utah, which is very rural. You can't rely on hotels, you can't rely on existing housing. You're talking about journeymen bringing their own trailers and trucks to town and setting up a campus of RVs to meet this demand. These are the things that we're considering Now.
Speaker 2:We happen to be choosing, for the most part in our flagship projects, very rural communities, and so the labor, the workforce to get that done has always been a consideration, and I can't say we've got all the answers, but I feel like relying on the big contractors who have relationship capital with the subcontractor base is a big advantage. This is going to weed out a lot of the smaller contractors who don't have the pull power. Because, going back to my first decade in business as a stone and tile contractor, I'll just admit that when business was good and there was high demand for my services, I would take projects in other states or where I'd have to travel and be gone for months on end, but I would charge a premium for that Right as you should have.
Speaker 2:Yeah, there would be a travel premium a per diem and my rate would go up significantly. Sometimes I would charge 30%, 40% more to take my crew which was a very skilled crew, to go perform those services. But one of the interesting things that I got caught up in as a contractor was I'd start counting the numbers of contracts I could get and I would overcommit. I would commit to five big jobs when I really only had a crew that could handle three jobs. So what we ended up doing is is, you know, spreading that crew thin and bouncing back and forth to jobs to try and manage the work demand, and not very effectively. Honestly, it caused every project to take longer to get done. That ended up equating to the owners more like in a commercial project. That means it costs more to that owner because all the contractors are dealing with this. All the contractors are taking a few weeks longer to execute that scope than it would have in an environment where they're not over-contracted.
Speaker 2:So when you have a scarcity of skilled workforce and an extreme demand for that same workforce, these are some of the things that we start dealing with as a developer. How do we combat that? How do we address that. Well, for me, number one having a general contractor that has the relationships but also as a developer or project owner sponsor, would be paying higher numbers up front, a higher percentage up front, or paying them a better wage or providing other ancillary benefits, like, hey, we're going to provide housing, hey, we're going to provide some recreational value to these guys while they're in town. Now we're kind of like a host to entice these guys. Why? So that they would prioritize our work over this other work that maybe wasn't as lucrative for them or enjoyable. So these are. There's a lot of considerations that go into enticing a workforce to go into a geographic, geographically constrained project area. That's a.
Speaker 1:So, in a nutshell, it uh, that's a.
Speaker 2:It's going to be a huge challenge oh yeah, and, and this is a complex issue and, by the way, by the way, I'll go back to a statement that I've shared before, which is it doesn't matter if you have all the money in the world, you don't just solve that you can't solve it necessarily writing a check.
Speaker 1:You can't just write a check and solve the problem.
Speaker 2:Yes, it requires boots on the ground, it requires relationship capital, it requires a deep understanding of a market and what's possible, and you don't just solve that with money. So that's why Amazon is dealing with zombie facilities. This is why Google and Meta are scrambling to find power, because you don't just send the power company the money. Like who do you even write the check? If you could write the checks, who would you write? Write it to?
Speaker 1:you're still talking about other things now one in a lot of these complexes and nuances that actually matter.
Speaker 2:Oh my gosh, yes, the devil in the details the details, the details of this matter when, when they talk about um, you know, when they try to minimize the delay potential and say, yeah, within five years. Well, what if three years of that five years is what's required to get new transformers on site, to put a substation in place, to condition power and get an interconnect. That's three years worth of the five-year estimated delay, so it's going to be more than five years yeah.
Speaker 1:So do you see? I mean I read this and I go, wow, this is, this is a. It's almost like it's watching a slow motion train wreck about to happen and hopefully it doesn't happen. But you just can't help but think that this is going to be really problematic and really really challenging to overcome and tackle. I know you know, we, we all speak transparently. We, we think we we're trying to solve it how you know when it kind of our on our you know what our purview and what we're dealing with. We're trying, we think we have good solves, we think we're we're recognizing all these problems. But you start reading some of the broader and bigger and realizing maybe how they're going to have an impact downstream on everybody. It becomes a really significant challenge.
Speaker 1:And just some of these power predictions I mean you and I have seen things all over the board like how much power is going to be needed in the US in the next decade and it vacillates and it's massive. There's no little amount. It's massive, yeah, and you can't build it fast enough. That's almost the case. You almost can't build it fast enough. I come back to it completely as an aside. But if I'm a 20-something wondering what to do I read an article the other day where they were talking about the new millionaire class and it was like the new millionaire class and it was all these skilled laborers that have been doing this for a while and have built really good businesses and make really, really, really good money. Absolutely, and I've said personally, you want to hedge against AI in the job. I mean, ai is going to affect a lot of the white collar jobs. Yeah, some of these jobs, if we don't traditionally blue collar jobs, are actually going to end up being the jobs AI can't touch. Yeah, ai is going to be driving the demand for them.
Speaker 2:And AI is not going to pull that electrical cable. No, it isn't, no way.
Speaker 1:I mean, they'll eventually figure out how to do robot. So far down the road, yeah, that it's not going to be in time for this. And so if you're, you know, if you're just coming into this business and you're going, what am I going to do? You know, if you, if you love electrical I mean if you want to get transferred in electric you know electrician, plumber, um any. You know welder, I know welders make and they've made for a long time amazing amount of money. Um, this it's, it's not going away in, in fact, it's just it's exploding the demand.
Speaker 2:You know what's interesting too about that, dave, as you say, that is, that it also occurs to me that electricians, plumbers, welders and I know there's others, but just those three, and mostly electricians and plumbers, mostly electricians and plumbers that that journeyman scope, by definition is is expanding rapidly. What? What are they installing? You know, we're not just talking about the traditional electrician running the electrical in the home. We're talking about these advanced systems, and it requires those, the contractors that'll rise up and make the money you're talking about, will be the ones that get specialized, that get specialized in advanced liquid cooling right, advanced hvac right, advanced electrical and networking right, it's so, it's, it's the one, it's those bigger. Well, it's probably middle market companies that expand in that scope to specialize in some of these cutting edge modalities driven by ai, driven by data centers, driven by advanced warehousing and logistics.
Speaker 1:So that's interesting I, I think it's gonna, you know, it's gonna be one of those markets that I, I would like personally to see a boom, because I think we I mean this is a completely unrelated topic we, we can talk about the value of, say, you know, advanced education and and, and our people getting their money's worth and what's the ROI, and we can argue across the board on that, but I think this all to me, this is kind of hard, that hard. That problem have we steered, you know, in the last 20 years? Kids away, 30 years, kids away from some of these jobs for whatever reason, because we were pursuing this and we're now left with you know, these are.
Speaker 1:These are actually really good paying jobs, oh yeah, like really good paying jobs that are somewhat, you know, predictable, depending upon what kind of a you know what kind of a, say, electrician you want to be. Do you want to be that electrician that flies out to somewhere? Do you want to be the electrician that's, you know, that goes and drives, you know 900 miles, you know overnight, to go and fix? You might, because of the money you can make? Absolutely, but it opens up all kinds of opportunities that are you know where, obviously what it means broadly for the market going forward. I think for a long time we've just poo-pooed not we, but I think, generally speaking, the blue-collar jobs, the skilled labor jobs, have been sort of like, eh, and they are turning out to be, as it turns out, really really valuable.
Speaker 2:Yeah, oh yeah. Well, it was also really a huge takeaway from the article, dave too was Santa Clara and charging Amazon 50% rate hike to power that data center and Amazon will pay it. They'll pay it Because they really are cornered right they have to really they.
Speaker 2:They have no choice but to expand, right. So I I definitely see a compression, uh in in their ability to expand. They're not going to be able to expand at the pace that they hope or maybe at the pace that will. That will correlate with the demand. The demands can outstrip their ability to meet that. But getting taken advantage of by power companies inside of jurisdictions that have a monopoly Right, that's a really interesting takeaway.
Speaker 1:Right there it is, and I guess what's the implication on the downstream of that? So what about the homeowner? You know if you only have so much power yet and you've got an Amazon willing to pay double. Ultimately, doesn't that put pressure downward on the entire, on every one of the people, every business paying for?
Speaker 2:power. I think it does 100%. I mean we already know California pays three times the amount for their per kilowatt rate than we do here in Utah. But how many power companies that have a monopoly in a jurisdiction need to see that example and say, well shit, maybe we just need to double our power rate? What are they going to do?
Speaker 1:What are they going to do? They're going to say yes or no. They're not going to go without power, right More likely than not. They're going gonna say yes or no. They're not gonna go without power, right more likely than not, they're gonna say yes.
Speaker 2:So this is where it falls back to legislators mediating. A serious problem like, like the, the, the population at large is at risk from an affordability perspective. Right, if they don't solve, yeah, they don't spike.
Speaker 1:That's If they don't get in and help solve it not as a regulator, truly, as you hope our government does they come in and try to regulate it so that it's not hurting the people, it's benefiting the people. So there's a balance there where there's a system that may be out of balance or might be getting way out of balance really fast, or might be getting way out of balance really fast.
Speaker 2:Maybe part of what happens there is municipal authorities and jurisdictions are not permitting Amazon to build those facilities.
Speaker 1:You could see that almost happening where you'd say if it's this demand, if it's this amount, then we're going to take a serious look and we're not going to do business with you, because we can't, we can't predict or we can't make sure that the that our citizens have enough power and we can't grow fast enough in order to do, you know to, to do that, and so we're going to try and protect ourselves. So then, what? So then, then, if you can't buy power, if you are a big, you know, if you're one of these, or water or water.
Speaker 1:This makes that, exacerbates that. This entire article of like trying to find where do you set up shop and continue to set up shop to meet not a magical demand, not a hey, we just pulled this number out of our asses. This is a. These are really smart people, really crunching numbers saying you know, we, we, we, we think this is where the power demand. And my guess is you know we, we, we, we think this is where the power demand and my guess is you know you. I think you mentioned it. This is these are probably conservative estimates.
Speaker 2:Yeah, yeah, I don't think anyone understands the full implication just yet. I think everyone's making guesses and you hear double, you hear triple. So those are big, those are big, but those are huge numbers to throw around, considering the horizon that they're, that they're forecasting it in Right, double, triple in a five-year horizon. Come on man, I mean, how do you even do that when you're talking about? And the other interesting thing that comes out of this was they touched on the need or the dependency of grid expansion or interconnection. Yeah, okay, there was that part too.
Speaker 1:It was sort of like, and also we have expansion or interconnection. Yeah, okay, there was that part too. It was sort of like, and also we have this to deal with.
Speaker 2:Yeah. So again, those are issues that cannot be solved with money. You can't. It doesn't matter if you can stroke that check you're still. You still got bureaucracies and other stakeholders in that equation that really hold the cards on whether that new transmission line gets done or whether we upgrade this line or whether we can get an interconnect in that jurisdiction. All of those nuances are real.
Speaker 1:Are very real. You and I were talking about. This reminds me having owned an older home. Oh, you and I were talking about, you know, this reminds me, you know, um, having owned a older home. Oh, yeah, uh, you know, and I, you know, to kind of help put it in perspective, and I, you know I'm assuming people listening, you know, probably already understand this, but we're really dealing with, uh, you know, our grid is very much like that 1930s or forties home.
Speaker 1:You know, it's got the cloth wiring, it's got all this stuff, it's, it's got all this stuff, it's, it's, it's a, it's a frankenstein, usually in more than modern homes, where you know, maybe they've upgraded the power service, they've upgraded, you know the panels, but you still have a lot of the same lines right through the walls. And now you're bringing in on that. You have to change your code, not because I mean a level right and and just having to deal with some, you know, some really, really old infrastructure. So, at the end of the day, you all of this still has to deal with a very old infrastructure that, as you just said, also faces regulatory hurdles everywhere you look.
Speaker 1:It doesn't matter. They'll say, okay, we solved this. Oh well, then there's this Well, yeah, then we can't get the interconnect because this jurisdiction doesn't want to work with this, or this company doesn't want to work this, and that's not just a hey. We made a phone call that in and of itself could be a month's long process to get a no, yeah, and then to get a no, and then that stops everything dead. And then you've got to. How do we solve for that no, how do we go around that?
Speaker 2:And you know, you start hearing 48 months, five years, like yeah, this is going to be interesting, oh, yeah, yeah, you know, it's fun to imagine a future where we just wave our wand and we say, yep, we're going to build data center, we're going to build 240 data centers that are all going to have many micro nuclear reactors attached. There's no connection to the grid. Yep, it's self-supporting, it's sustainable, there's no emissions, it's perfect. Right, that's what a fun.
Speaker 1:That's a great thing to imagine yeah, that's 10 or 15 years at at easy away, you know, uh, and that that comes back to regulation, regulation, regulation. Yeah, there's a big push. They want to make this happen very quickly. Even the federal government has made moves to say we want to quicken the process of getting maybe some of these small nuclear reactors that are wholly different than the reactors of the past online quicker and get them tested, because they also see this as a possible solution. But, yeah, ultimately that would be I think that's what everybody would hope for is that you could be self-sustained wherever you are and not impacting the environment around you, not being a tax on the water. So, having cooling systems speaking of data centers, having cooling systems that are not water dependent, having energy that is not dependent upon you know, either electrical or gas, or coal, or even wind or solar, but is you know another very clean version that doesn't have that impact? I mean, that's what everybody wants, but it's a long ways away. Yeah, it's a long ways away.
Speaker 1:I just again, you know, coming back, this article really did touch on all, most of the all, if not most, I guess, of all, of the issues that you know we're running into, we're seeing in this.
Speaker 1:Do you think that a national point of view, there needs to be serious consideration of creating not to create more bureaucracy, but creating a whole office to perhaps tackle some of these issues Like this has gotten big enough and complex enough to where you've got to have inter agencies talking to one another and you almost need an intermediary to be able to talk to all the key players. Right, do you think? Do you feel like that's that's where we're getting like, even on state levels, where there needs to be serious consideration given to okay, I need a, I need a power czar I need. There needs to be serious consideration given to okay, I need a, I need a power czar, I need somebody, which perhaps we have in parts, but that, like, we're going to give it power, we're going to give a direction to start, so that it can maybe start cutting through some of the red tape some would argue maybe creating more red tape. Do you? What do you think about?
Speaker 2:that? Yeah, I think it's definitely coming. I mean, um, you know we have jigar Shah running the Department of Energy. Yeah, the Department of Energy seems to be doing a great job, at least supporting the initiatives of this administration in the renewable energy space. So you know billions and billions of dollars being spent on these renewable energy initiatives. That's a step in the right direction. But I do think that it feels inevitable.
Speaker 2:Trump will be the next president. It feels inevitable that he will bring Elon Musk into this equation. Okay, even if Elon and based on what we're hearing in the news, which you can't rely on, but based on what's out there Trump thinks that Elon could come in and help audit the government itself and clean it up and maybe eliminate some of these three-letter agencies. If that's all happening, I can't help but think that a data center, department of data centers, department of the data center task force how does Elon not head that up? I think it's inevitable. It's such a threat to national security, it's a threat to the military, it's a threat to the population, if it's not all really well thought out and planned and coordinated on a federal level, that that that definitely has collaborative connectivity with local municipalities. Right, it would be a top-down task force that does translate into these rural communities all over the nation. I mean, I think, I think it's probable and needed.
Speaker 1:It feels like it. I mean I, I look at, I mean again, you know, you said the department, look at the department of energy. I just don't, I don't see, I see that it it something. It's going to take more than just kind of where they are. And I'm not, you know, I'm sure they would, probably they'd say that, hey, we're actively involved in all these solutions and that's fantastic. It just seems like we're missing. It feels like to me we're missing something. We're missing like we need a rallying point to where it's it. Somebody wrangle all of this and it is.
Speaker 1:And it's not just about energy. Yeah, it's about what the energy is actually energizing. It's, yeah, it's so, it's. It's it's grid. Yes, that's department energy, but then you talk about data centers. That's not department, that's not D Lee, and it is in terms of the power, but it's, but that's part of the issue. Yeah, and this comes back to is a, is it an AI? Is, and this comes back to is it an AI? Is it an office? Is it a department? Again, not wanting to create more layers, but really I mean, here in Utah we've created an office of AI, and why? Because I think they recognize that AI as the umbrella thing is going to impact all of these different sectors of of government and life, and so you need to have somebody sort of coordinating all that that's going on. And I mean you look at this to your point. I mean you look at the national need and it's not just about the energy per se, it's also about why why we need the energy, and then it's, and then it's everything else in between.
Speaker 2:So I anyway. Well, why we need the energy, and then it's everything else in between. Well, I could see something like that on a national level that could bring real legislative measures that could actually make a dent in this, such as okay, if you're going to build a data center and be permitted for that, you have to have on-site power production In order to do that. You're talking about deregulating states. In order to do that, you're talking about decentralized power solutions that are not grid-reliant, and so this is a far-reaching situation legislatively, but I think that's possible. So it'll be fun to see where we're at in two years, how predictive we are, if we're right or wrong about the direction of this whole equation, won't it?
Speaker 1:It'll be very, very interesting. Well, thanks everyone.
Speaker 2:We've hit our time we have. Yeah, it's been fun. Thank you guys for joining us today. Until next time on the Frontier Line.
