Power in the Data Center and its Cost Across the U.S.

by Michael Rareshide, on Oct 23, 2017 11:25:42 AM

Power is the lifeline of the data center. In data center site selection, the availability and more importantly the cost of power can be the most important decision driver, and it takes a staggering amount of energy usage to power, cool, and operate these raised-floor environments. Since power represents up to 70% of the total operating costs, many enterprise users and colocation operators focus their site selection on lower-cost power options.

The Natural Resources Defense Council has projected that the U.S. data center power consumption, which was 70 billion kilowatt-hours of electricity in 2014, will “increase to ~140 billion kilowatt-hours annually by 2020, the equivalent annual output of 50 power plants, costing American businesses $13 billion annually in electricity bills.”

Electricity rates vary significantly across the country, so the savings can be dramatic. In the latest U.S. Energy Information Administration’s Electric Power Monthly report, depending upon the state, the average industrial user can pay anywhere in the continental U.S. from a low power rate (including tariffs) below $.047/kwh up to almost $.15/kwh. The U.S. average rate is $.0733/kwh and this report only tracks state-by-state instead of by utility.

For a large data center user in the continental U.S., using the EIA’s report that significant delta between high and low for the “same” power translates to a difference of ~$878,000 annually as follows:


Per kwh


Annual Cost



1000 kwh


Rhode Island


1000 kwh





We have seen the large hyper-scale enterprise users such as Facebook, Google, and Apple announce new massive facilities in Iowa, Nevada, Washington, New Mexico, and Texas. Dozens of other submarkets across the US could have been considered for these data centers, since they certainly could match several important components needed, such as reasonable construction costs, favorable economic incentives, robust fiber capacity, and a secure environment. 

Yet the data center site selection matrix suggests that while meeting many of the IT decision-maker’s needs, the one constant that stands out in the finalist’s favor is reliable and cheap power.

Showcasing the range of utility rates across the states is the following table:

State Rankings based on Industrial Electricity Rates

Rank State Average Industrial
Electricity Rate
(Cents per kWh)
1 Washington 4.68
2 Montana 5.52
3 Oklahoma 5.58
4 Texas 5.70
5 Kentucky 5.73
6 New York 5.90
7 Louisiana 6.12
8 Illinois 6.29
9 New Mexico 6.29
10 Tennessee 6.31
11 Mississippi 6.32
12 Oregon 6.44
13 South Carolina 6.50
14 Arkansas 6.55
15 Ohio 6.56
16 West Virginia 6.60
17 Alabama 6.60
18 Pennsylvania 6.65
19 Georgia 6.68
20 Virginia 6.78
21 Wyoming 6.81
22 North Carolina 6.90
23 Utah 7.03
24 Idaho 7.36
25 Michigan 7.38
26 Delaware 7.42
27 Indiana 7.43
28 Arizona 7.43
29 Nevada 7.59
30 Colorado 7.66
31 Kansas 7.81
32 South Dakota 7.99
33 Florida 8.05
34 Maryland 8.08
35 Minnesota 8.11
36 Wisconsin 8.19
37 Nebraska 8.25
38 Missouri 8.30
39 Iowa 8.40
40 District of Columbia 8.45
41 North Dakota 8.66
42 Maine 8.95
43 Vermont 10.18
44 New Jersey 10.91
45 New Hampshire 12.19
46 Massachusetts 13.75
47 Connecticut 13.76
48 California 14.47
49 Rhode Island 14.85
50 Alaska 16.94
51 Hawaii 22.63

Source: U.S. Energy Information Admistration (EIA)

It is noted from this table that utility rates can be negotiable for very large data center users with prices generally lower than the above. And incentives from the utility provider can also have a 20%-30% impact on quoted rates.

Some regions have had a competitive advantage

Certain geographical regions have enjoyed considerable growth because they can deliver much more affordable power as compared to their competition. Silicon Valley’s data center market is concentrated in the city of Santa Clara where data center operators enjoy a significant discount exceeding 25% on its power with Silicon Valley Power over PG&E, which operates throughout the rest of the region including San Jose.

Eastern Washington over the past 12 years has experienced significant growth due to its cheap hydroelectric power which is sub-$.04/kwh. Located three hours east of Seattle the area includes the cities of Quincy and East Wenatchee where Microsoft, Dell, and Yahoo all built and then expanded their enterprise data centers. Since then, other enterprise groups followed with some wholesale colocation providers such as Sabey Data Centers, NTT Data, and CyrusOne.

Other markets, such as Reno, Nevada, and Hillsboro, Oregon, part of the Portland metro area, have seen significant growth since they have been able to capitalize on low negotiated power rates to cater to the data center and colocation operator.


Reliable power is the lifeblood of a data center and an important commodity. Datacenter capacity to meet the growing demands of both consumers and businesses will continue to grow. Certainly, many corporations may be compelled for other business reasons to be proximate to areas where power rates are very high. Those companies can still find solid regions to locate their data center operations or seek out excellent colocation providers and enjoy cheaper rates for the same power.

Topics:Data Center



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