By Howard Fischer
Capitol Media Services
PHOENIX -- Gov. Katie Hobbs wants Arizona to do more both to build more energy sources and curtail state electricity use, with at least one goal to ensure the state can attract more data centers and other large power users.
But the governor on Monday sidestepped questions about why Arizona would seek to locate data centers here, not just because of the demand on the electric grid but because of the massive amounts of water it takes to cool them.
And there's a lot of water involved.
The Environmental and Energy Study Institute says even a medium-sized data centers can use up to about 110 million gallons of water a year for cooling purposes, equivalent to what would serve 1,000 households. And larger centers can consume 1.8 billion gallons a year, enough to supply a town of up to 50,000.
And it was precisely that issue of water that caused the Tucson City Council to vote unanimously last month to abandon what would have been its role in annexing land to allow for construction Project Blue, a data center whose end user would have been Amazon Web Services.
That, however, hasn't ended the plans, with the project's developer and Tucson Electric Power asking the Arizona Corporation Commission to allow the utility to provide power to a site near the Pima County Fairgrounds without the need for Tucson's approval -- or water. But that still leaves the question of a source of water.
Hobbs, in forming a new Arizona Energy Promise Task Force, said she wants a report by March 1 for the state, with a specific goal to "facilitate data center and other large load customer growth.'' And she wants it done while "minimizing impact to ratepayers while preserving Arizona's competitive advantage.''
But at Monday's press conference she sought to turn away questions about data centers -- and, specifically, the question of whether they make sense in the desert.
"This is not just about data centers,'' Hobbs said in response to questions from Capitol Media Services. "This is about the high energy demand that we're seeing across industry that is growing our economy, creating jobs for Arizonans.
So why would she even suggest that Arizona that Arizona would want data centers -- as her executive order specifically mentions -- what with the water use.
"This is not about data centers,'' Hobbs responded. "This is about the energy we need.''
As to where that will come from, the governor specifically mentioned solar, wind, storage, advanced geothermal and nuclear projects.
Only thing is, it is the members of the Arizona Corporation Commission and not the governor who have oversight of utilities.
Commission members voted last month to repeal a 2006 rule about obtaining a certain amount of energy from renewable sources. Instead, members of the all-Republican panel said such decisions should be made by the market.
Hobbs said she doesn't necessarily see the commission -- and its constitutional powers -- as an impediment to her goal to bring more power to the state.
"We're going to partner with anyone who wants to be a partner on meeting the energy demands we need as a state,'' she said. But asked about whether her office has approached the regulators to be a partners, she responded, "I don't know.''
The executive order also directs the state Land Department to streamline the process of granting leases for construction of new power sources. And it directs all state agency to come up with plans to reduce their own energy consumption by 5% by June 30, 2027.
But the heart of the order comes down to the question of whether Arizona will have enough energy.
Hobbs said that peak demand -- the amount of energy needed when people and industry are using the most -- will increase by 40% in the next 15 years. And she wants to remove hurdles to building new sources to meet that demand.
The governor said it is important for the state to act.
There is, however, a political component behind that claim. She said that recent federal actions and directives from the Trump administration are delaying the federal permitting process for solar and wind energy politics, something the governor said "may have a serious chilling effect on the growth of Arizona's energy industry.''
That, Hobbs said, will jeopardize more than 151,000 energy related jobs and and $104 billion in private investment. She also is making the claim that those federal actions potentially will increase energy costs for Arizonans by $280 per household annually by 2035 "and leaving thousands of Arizonans without access to electricity.''
Gubernatorial press aide Christian Slater said all the estimates in the executive order come from public and private information compiled by the Arizona Commerce Authority, the federal Energy Information Administration as well as public utilities.
But Tucson Electric Power has never made such a claim of possibly being unable to meet demands. And it has said said it can meet its long-term energy needs even as it shifts away from coal-fired power plants.
Arizona Public Service has its own Integrated Resource Plan showing how it will deal with demand through 2038.
Hobbs said there's no reason the state should be without the power that it needs -- including for large users.
"We have incredible potential to deliver affordable energy to every business and family who needs it,'' she said. "We just need to unleash it.''
That, Hobbs said, means making changes to expedite the process.
"There are too many burdensome government regulations, outdated processes and unnecessary paperwork that stands in the way of common-sense solutions,'' the governor said. "This red tape kills jobs.''
There may be other interests driving this push to ease state regulation of new sources of power.
One of those Hobbs invited to speak Monday was Jim Shandalov, national vice president of NextEra Energy Resources. His company generates power to sell to utilities.
And Jeff Holly, president of the Arizona Building and Construction Trades Council, said his focus is about creating more construction jobs, something he said is dependent on attracting more manufacturing operations. That, he said, is tied to ensuring there is enough power to support those new plants.
"Arizona has become the central hub for building the future of technology,'' Holly said. "And that means thousands of quality union jobs for our members.''
That still leaves the question of water for industrial users.
Project Blue had an estimated water demand of more than 1,910 acre feet per year at full build-out, more than 622 million gallons, with plans to use potable water for at least two years while building an 18-mile pipeline to bring in reclaimed water.
But despite the city council rejection, Beale Infrastructure, the company promoting the project, is pursuing a work-around that would allow it to obtain the needed power from Tucson Electric, at least, initially, for a smaller data center. The issue of where it would get the water has not been resolved.
Whatever happens with the proposed Project Blue, data centers continue to spring up in Arizona.
Datacentermap.com says there already are more than 150 operating or planned in the Phoenix area, with nine in Tucson -- including Project Blue which is not dead yet -- and one in Nogales.
All this is taking place as APS is seeking a $570 million rate increase, up 14% overall. The company says it also is designing rates so that new customers, like data centers, will pay what it costs to serve their high electricity needs without shifting costs to existing customers.
Tucson Electric also has filed its own 14% rate hike request
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