Microsoft Announces Initial $1 Billion Investment in Ohio Data Centers

Researched by Industrial Info Resources (Sugar Land, Texas)--With billions of dollars' worth of data centers in operation or under construction throughout the U.S., Microsoft Corporation (NASDAQ:MSFT) (Redmond, Washington) doesn't appear to be slowing its construction streak, this week announcing that it would make an initial investment of $1 billion in three data centers in Licking County, Ohio, to support its Azure cloud platform. The Greater Columbus area where the data centers are located has become somewhat of a hotspot for the energy-intensive facilities, with e-commerce giant Amazon.com Incorporated (NASDAQ:AMZN) (Seattle, Washington) also planning a large campus near one of the Microsoft locations. The influx of power-hungry data centers is causing Ohio utility American Electric Power (NASDAQ:AEP) (AEP) (Columbus, Ohio) to propose agreements with the data providers regarding funding for the increased infrastructure that will be needed to power the facilities.

Microsoft announced the three proposed data centers earlier this week for sites in New Albany, Heath and Hebron. Microsoft says it will initially develop one building on each campus with the potential to build several more at each site, putting the projects into the multibillion-dollar range as the years pass. Microsoft said its initial $1 billion investment in the three sites would include $700 million in building costs and $300 million in machinery expenses.

The three sites are in different states of readiness. New Albany has approved Microsoft's plans to construct a 245,000-square-foot building, with the potential to add further buildings. Microsoft says it plans to begin work at the site in July, aiming for completion in 2027, when recently approved incentives, worth an estimated $72.5 million, from the Ohio Tax Credit Authority, begin. New Albany unanimously passed a resolution giving Amazon a 100% property tax abatement for 15 years.

The locations in Hebron and Heath are pending approval, but earlier this year, Microsoft suggested it would like to begin work on the Heath development next summer, with the first of five buildings completed in 2028. Work on the Hebron site, which will include up to six buildings on a 215-acre site, could kick off in 2026. Subscribers to Industrial Info's Global Market Intelligence (GMI) Industrial Manufacturing Project Database can learn more by viewing the related reports on the New Albany, Heath and Hebron projects.

If there's an issue with the Microsoft projects, it is the overall popularity of data center construction in central Ohio, causing AEP to scramble to meet the demand from the new facilities as well as its existing customers. New Albany, in particular, has attracted a great deal of data center activity. Facebook parent Meta Platforms Incorporated (NASDAQ:META) (Menlo Park, California) has had a campus there for a few years, and Amazon is proposing a facility in the area. Amazon has proposed a complex of up to 18 buildings in New Albany, with construction of the first two set to begin this year. Subscribers can learn more by viewing the related project reports.

On October 2023, AEP filed a settlement agreement that proposes new large data center customers to pay for a minimum of 85% of the power they expect to use each month, even if they use less than the anticipated amount. The money would be used to cover the cost of infrastructure needed to bring electricity to those facilities. The deal also requires the data center companies to prove their financial viability (to keep up with the payments) as well as pay an exit fee if their project is cancelled. AEP said the agreement could be in place for up to 12 years, including a four-year ramp-up period. Earlier in the month, a group of data center companies proposed paying for 75% of the estimated required power, but AEP and state agencies do not support this proposal, instead backing the 85% payment scheme.

A look at Power Industry project activity in Industrial Info's Ohio Zone 3, home to Licking County (and Columbus), reveals several proposed solar power plants, but few that are currently under construction. For its part, AEP is underway with or has proposed nearly $1.5 billion worth of power transmission projects in the region. Union Ridge Solar LLC (Dallas, Texas) plans to begin construction of a 108-megawatt solar farm in Licking County this year. The plant will use an estimated 250,000 bifacial solar panels and is located near AEP's 138-kilovolt (kV) Kirk substation, where the electricity generated by the facility will be transferred. The solar farm is expected to be completed by the end of next year. Subscribers to Industrial Info's Power Project Database can click here for more details on the project. The project remains the only power generation project in Licking County deemed by Industrial Info to have a high probability (81-99%) of moving forward as planned.

For its part, AEP is expected to start work on a new substation and transmission line project in Licking County this year. The 138-kV Green Chapel substation will be located in Johnstown and will be connected to the grid by 2.6 miles of overhead, double-circuit transmission line. The project is expected to be completed in early 2026. Subscribers can click here to learn more. AEP plans to construct a 12.5-mile overhead single-circuit transmission line leading from the Vassell Substation in neighboring Delaware County to the newly proposed Curleys substation in Licking County. Work on both the substation and new line is expected to begin next year, putting the projects on track for completion in 2027, as the first phase of Microsoft's New Albany data center nears completion. Subscribers can learn more by viewing the reports on the transmission line and substation projects.

Subscribers to Industrial Info's GMI Database can click here to view reports for many of the projects discussed in this article and click here for the related plant profiles.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).