Which cities are seeing the highest data center growth?

Data center growth is poised to completely transform the U.S. energy landscape, with some utilities viewing the moment as an opportunity, and others grappling with tech giants to find a solution that all parties can stomach.

But not every city is seeing the same interest. New analysis from Upwind centered on JLL’s 2024 report on data centers examined the state of data center growth in the U.S., highlighting the five fastest growing “hubs” for data center development. The data also revealed what factors seem to incentivize data centers the most when choosing a location.

According to a recent EPRI white paper, electricity usage by hyperscalers more than doubled between 2017 and 2021. This increase is expected to continue, with data centers projected to consume 5% to 9% of U.S. electricity generation annually by 2030, up from 4% today.

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In the U.S., data center demand is expected to reach 35 GW by 2030, up from 17 GW in 2022, McKinsey & Company projects. Grid operators and utilities expect to see significant load growth driven by electrification, new manufacturing, and data center development. According to EPRI, 15 states accounted for 80% of data center capacity in 2023, led by Virginia, Texas, California, Illinois, Oregon, and Arizona. That concentration creates economic opportunities for states hosting data centers, but could also stress the grid.

According to Upwind’s analysis, the following regions have the highest future power requirements, largely driven by data centers:

1. Northern Virginia: 11,077 MW 
2. Phoenix: 5,340 MW 
3. Dallas-Fort Worth: 4,396 MW 
4. Las Vegas/Reno: 3,812 MW
5. Atlanta: 3,125 MW 

On the other hand, data center expansion is beginning to slow in areas like the Pacific Northwest and Chicago, which Upwind attributes to geographic constraints and higher costs.

1. Las Vegas and Reno

While not highest on the list in terms of total expected MW growth, the Las Vegas and Reno, Nevada region is poised to expand its data center capacity by nearly 1000%. The region’s data centers are expected to soon require 3,812 MW to operate.

This quick growth is largely driven by “significant investments” in the region, such as Google’s $400 million data center in Nevada, Upwind said. Additionally, Upwind notes that another factor driving this growth is the Las Vegas electricity rate, which is 35% lower than the national average.

2. Salt Lake City

Salt Lake City, Utah will likely see its data center capacity grow 699%, with future capacity expected to hit 1,271 MW. Upwind notes that Salt Lake City’s status as a data center hub is thanks to Utah’s “attractive” tax incentives, affordable real estate, and a growing tech presence. The tax incentives have helped reel in big names like Meta and Google.

3. Phoenix

Phoenix, Arizona is expected to see a 553% growth in data center capacity, eventually reaching 5,340 MW. California, and thus Silicon Valley, are not that far away – but California’s “diverse but expensive” mix of energy sources, including a lot of imported energy, often pales in comparison to Arizona’s natural gas and solar, Upwind said.

Lower energy production costs are one reason why Phoenix has surpassed Silicon Valley as the largest primary North American market for data centers, according to commercial real estate firm CBRE.

4. Atlanta

Atlanta, Georgia is expected to see its data center capacity increase by 484%, reaching a capacity of 3,125 MW. A “massive” $1.8 billion investment from Microsoft is certainly helping, which will add three data centers with a combined power demand of 324 MW – a project that will effectively double the size of the existing data center infrastructure in the city, Upwind notes.

5. Dallas-Fort Worth

Dallas-Fort Worth (DFW), Texas will likely see its data center capacity grow by 355%, reaching 4,396 MW. DFW is particularly affordable, Upwind notes, ranking seventh among the top 20 metro areas in land costs for colocation data centers. These costs are up to 14 times higher in Silicon Valley, Upwind said.

The full dataset can be found here.