New idea to power data centers might be a game changer

This is kind of what happened to Black Hills Energy when a huge new customer moved to town. Microsoft announced in 2012 that it wanted to build a data center in Cheyenne, Wyoming. Great news, right? Well, it wasn’t that simple.

Key Points

  • An energy company just came up with a great way to save money and keep energy reliable.
  • Instead of investing in a new power plant for a huge new customer, it will buy energy off the open market.
  • The customer will have on-site backup power that can also help keep energy reliable for other customers.

Imagine you own a bagel shop and you get a huge order. An order that doubles your business. But it’s so big that to make enough bagels for this new customer, you’ll have to purchase and install a new oven. Would it be worth it to invest in a new oven for that new customer? This new bagel customers says he’ll keep buying bagels for the next 40 years — or about as long as that new oven will last. If that’s true, then it would be worth investing in the oven to keep selling all those bagels to that customer. But what if he decides to start eating doughnuts or moves to another town? Then you’ll be stuck with a big, expensive oven and no one to bake for.

This is kind of what happened to Black Hills Energy when a huge new customer moved to town. Microsoft announced in 2012 that it wanted to build a data center in Cheyenne, Wyoming. Great news, right? Well, it wasn’t that simple. The data center would double the amount of electricity the small town would need. To meet that need, Black Hills could build a new power plant. But with no guarantee that the datacenter would stay, the company was hesitant to build something that could end up sitting idle if the data center left.

Black Hills Energy and Microsoft came up with an innovative solution. Instead of investing in a big, new power plant, Black Hills Energy would buy power on the grid and sell it to Microsoft. To make sure that the datacenter would keep running even if there wasn’t any power to buy, the datacenter would build natural gas generators that could ramp up quickly if needed.

That’s kind of like if you decided to buy extra bagels from nearby bagel shops that would normally go to waste, and sell them to your new customer. And since your customer is a carb-a-holic and can’t go a single day without a bagel fix, he agrees to build his own oven that you can use if you can’t find any bagels to sell him that day. Less risk for you, more reliable bagel supply for your customer. Everyone wins.

But what about your current customers? They worry that this new bagel-hog might hurt their bagel supply. What if he takes all the good ones and leaves you with the weird one with poppy-seeds? The good news is that having access to the new customer’s oven will actually help you make more kinds of bagels. And, you agree that if you ever run out of bagels, current customers will get first dibs and will always get the bagels at the best price. So if you score a great deal on bagels from one of your new suppliers, those prices go to your current customers and bagel boy gets the more expensive ones.

Similarly, Black Hills Energy will give their current customers the most affordable energy before Microsoft gets any. Plus, the natural gas generators Microsoft builds could someday be used as back-up power for renewable energy that needs quick energy sources to ramp up if the wind suddenly stops blowing or the sun stops shining.

The Wyoming Public Service Commission recently approved Black Hills Energy’s proposal to provide power to Microsoft this way. Read more about the Microsoft power project here, presumably while you munch on a bagel (without poppy seeds).


Sarah FolslandSarah is mom to the two cutest little girls in the world. Before choosing to make changing diapers and reading bed time stories her full time gig, she earned a degree in political science from The University of South Dakota, worked in the governor’s office as a policy analyst and dabbled in communications at her local utility. Follow Sarah on Twitter @EnergyMommy.

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