Construction: Billions for Bytes – Lane Report | Kentucky Business & Economic News

This post was originally published on this site.

A construction boom for data centers to power artificial intelligence-enabled projects has begun in Kentucky, underscoring the importance of inexpensive electric power and water for these developments.    

Kentucky legislation passed last year allows for Jefferson County to benefit from a 50-year tax exemption for equipment in new data center projects and this type of legislation may be considered for other less-populated areas of the state, Senate President Robert Stivers told The Lane Report earlier this year. (However, no new bill had been filed at the time of this story).    

The existing legislation — the key section is an amendment to HB 8 in 2024 — requires an investment of at least $450 million by the owner, operator or co-location tenant or if a project organizer makes a minimum capital investment of $150 million, within five years, in cities with a population of 500,000 or more to receive the incentive. That 50-year exemption waives sales-and-use taxes on the sale, purchase, use, storage, consumption, installation, repair and replacement of data center equipment. There is a 15-year exemption for site development work.  

A first beneficiary project was announced in January 2025 in Louisville. The 153-acre hyperscale campus is a joint venture by Powerhouse Data Centers, a division of American Real Estate Partners (AREP), and Poe Cos. It is slated to be available for operations in late 2026.   

Data centers are clusters of networked computers that require a significant amount of electric power to run and cool thousands of computers. Powerhouse and Poe’s project includes collaboration with Louisville Gas & Electric to provide 400 megawatts of capacity for Kentucky’s first cutting-edge data center campus, of which the first 130-megawatts will be available by October 2026. The partnership is considered to be an important player for the region.  

“This is the first data center project for Poe Cos. and we’d like to do more,” said President Hank Hillebrand of Poe Cos. in Louisville. “Each data center project is quite impressive for the economic development it brings to the region. For new data center projects in our region, expect several billions to be spent on scaling infrastructure, site work, real property improvements and equipment. This, in turn, will eventually translate to tens of millions of dollars (in tax revenue) for city and state government and even schools. The number of those employed over the new few years on this project will be from several hundred to 1,000 just in construction.”     

Once the development is complete, Hillebrand said, several hundred full-time jobs will be created at the facility to run the location and there will be access to run AI infrastructure.     

Major impacts on infrastructure  

In the next 10 years, 9% of the total electricity use in the U.S. is expected to be for data centers — double what it is now, according to Electric Power Research Institute. Goldman Sachs estimates that with that growth, data centers’ power demand will increase 160% by 2030.  

“We are in constant discussions with those interested in locating data centers in our service territory,” said Chris Whelan, vice president of communications and corporate responsibility for LG&E and KU. “Some of the discussions are in advanced stages, while others are in their infancy. Over the coming years, we are forecasting that increase in data centers locating in our service territory will be the largest driver of growth in energy demand.”  

Jefferson County and Kentucky in general has emerged as a location for low-latency peering for fast response times, thanks to its placement at the crossroads of the Midwest and the mid-Atlantic. Low-latency peering is a method of connecting networks to exchange data directly and improve network performance.   

Kentucky currently has 22 identified data centers, according to the DataCenterMap.com website, a market intelligence firm.    

Large investors are also taking note. They include Blue Owl Capital, a leading asset management firm that has reported interest in Kentucky for sustainable data centers in recent months, Data Center Frontier said in late January.   

“Most of the growth in construction across the U.S. is coming from data center construction. Data center construction is a highly lucrative area for construction companies,” said Oliver Roe, president of construction for The Koetter Group, an Indiana-based company that operates in Kentucky.  

“The company is bidding on data center projects and hopes to land one in 2025. These projects are often at $1,000 per square foot to build, so (they are) expensive compared to other construction projects,” Roe said. “For the next few years, you can expect to see data centers be bigger, more sustainable and more expensive. Multistory facilities are more efficient for servers to communicate and transmit and, yes, they are major users of electricity and need access to water.”  

Sustainability is often built in to new data centers. Soluna has built its Project Sophie data center in Murray, Ky., as the state’s first green data center. It went live in late 2021 and offers a greenfield, 25-megawatt capacity for manufacturers and startups. Originally, its focus was in the bitcoin mining hosting area, but it advanced the facility for AI in recent years and plans to do more in AI cloud business areas.    

The Sophie site is operating at 65% capacity due to an equipment failure within the utility substation during a recent cold snap, according to their own recent report. All repairs are to be complete by early March.  

Data centers, AI altering economy  

Giant tech companies like Meta and Google are moving fast to establish their footholds in the region with large-scale data center projects.   

Google began development in April 2024 through a general contractor, Atlanta-based Holder Construction, on a $2 billion data center in Fort Wayne, Ind., that will power its global AI and cloud infrastructure. The Indiana Economic Development Corp. offered Google a 35-year data center sales tax exemption for the first $800 million invested, with options to extend up to 50 years.   

Meta, which owns Facebook and Instagram, announced a new data center campus in Jeffersonville, Ind. The contract, won by Turner Construction, will support up to 1,250 construction jobs.    

According to a 2017 report from the U.S. Chamber of Commerce’s Technology Engagement Center, a typical large-scale data center generally employs as many as 1,688 local workers while in construction, providing up to $77.7 million in wages for those workers; produces approximately $243.5 million in output along the local economy’s supply chain; and generates $9.9 million in annual revenue to state and local governments.  

Data-center-related jobs in the U.S. increased 20% between 2017 and 2021, growing from 2.9 million to 3.5 million. That far exceeds the 2% rise in overall U.S. employment, according to accounting firm PwC. According to a CBRE Research report in 2023, each direct job in the U.S. data center industry helps to create an average of 7.4 ancillary jobs for the U.S. economy.  

A February 2025 article in The Economist magazine estimated there are currently 11,000 data centers around the world, with the Americas representing about 50% of total capacity.  

Before the rush for AI data centers, there was a boost in the use of electrical and gas power in Kentucky for cryptocurrency mining for and with Chinese companies. But that path has not been smooth. Legal disputes have been filed by Kentucky players for a variety of reasons — including unpaid bills — and are underway against various Chinese companies.  

Because cryptocurrency mining centers are loud, they generate “not-in-my-backyard” opposition. Still, proposed bitcoin mining deals continue to come up in the state. The Kentucky Public Service Commission rejected a cryptocurrency mining deal in late 2024, maintaining that prices for power could be impacted for residents in rural counties.    

As the heightened buzz and value around construction of data centers for AI purposes continues, the impact on the types of jobs supported by AI continues. Tech trend tracker Gartner Inc. predicts that by 2026, 20% of organizations will use AI to flatten their organizational structure, eliminating more than half of current middle management positions.  

In the South, some state governments are placing restrictions on the construction of data centers. Though Metro Atlanta is a prime location for data centers, last year data centers were banned there in certain locations and more restrictions may be coming.