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North America’s data centre announcements were once clustered in hubs like Loudoun County in Virginia, which is known as “Data Centre Alley”. Today, however, the hyperscale projects spread to areas previously considered too remote and the industry is making a seemingly endless string of announcements. According to fDi Markets, in the first 11 months of 2024, 145 data centre projects were announced across the US and Canada, representing $87bn in investment.
While these centres bring significant investment, their appetite for land and energy is reshaping local investment priorities.
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The driving force? Artificial intelligence (AI), whose applications — from the mundane (dinner party menu planning) to the transformational (finding a cure for cancer) — are pushing data centre demand to unprecedented levels. AI-powered computations require enormous energy for processing and cooling, with a single AI-driven search consuming nearly 10 times the energy of a standard one.
This surge is straining two critical resources: energy and land. Utility companies are struggling to expand power capacity fast enough, while regulatory hurdles and rising energy prices exacerbate delays. In the latest electricity auction by PJM, a grid operator for the District of Columbia, capacity prices jumped 800% from $29 in 2023 to $270 per megawatt/day. Governors from the surrounding states warned in a letter that the resulting $14.7bn bill, to be paid by residents and local businesses, could deter future economic development in affected areas.
Meanwhile, data centres are competing with manufacturing projects for large, well-connected land plots. Sites with features like rail access, essential for manufacturing, are being consumed by data centres which do not require such infrastructure. A recently announced Google data centre in South Carolina will be developed on a property marketed for a rail user.
Despite their economic benefits, data centres create far fewer jobs per dollar invested than manufacturing. According to fDi Markets, for every million dollars invested in US and Canadian data centres last year, a mere 0.15 jobs were created. Manufacturing projects over the same period created 0.84 jobs.
Proactive solutions are needed to balance these competing demands. Land with unique features, such as rail access, should be preserved for industries that depend on them. Regulatory frameworks must evolve to enable flexible energy solutions, and while the data centre industry’s nuclear-power partnerships and off-grid natural gas solutions have potential, implementation takes time.
While AI can help optimise energy use, reliance on power creates a paradox. Addressing these challenges thoughtfully can help AI fulfil its promise of transforming industries, empowering individuals and boosting productivity, while leaving adequate resources for North America’s re-emerging manufacturing sector.
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This article first appeared in the February/March 2025 print edition of fDi Intelligence
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