Data in the Cloud, Problems on the Ground

“Where does the water come from?” one Fallon resident asked. “What does it cost us?”

The questions came during an Aug. 8 presentation by Desert Research Institute Staff Research Scientist Erik Henzl of the Division of Hydrologic Sciences, who has been studying the water and electricity demands of data centers in Nevada. The answers are complicated, in part because the industry is growing faster than projections made just two years ago, while some of the site-level information needed to understand individual projects can be difficult to obtain.

Data centers are large facilities filled with computer servers and other equipment used to store, process, and transmit the vast amounts of digital information that power everything from websites and cloud storage to artificial intelligence.

Many Nevada residents, especially where data centers are being proposed, want to know more about the potential impacts on water and power, along with air quality, infrastructure, and costs.

According to Henzl, some project information is proprietary. He explained that he is not sure every developer is required to publicly disclose details such as a facility’s size and projected water use. Yet those details matter as Nevada becomes one of the fastest-growing data center markets in the country.

“I think another challenge is that the pace of this development, a lot of it is just so opaque,” Henzl said. “People try to find good information, but it’s either not publicly available or it does not exist.”

Power and water were the two concerns most often voiced by residents, and when it comes to data centers, the two are interconnected.

Henzl explained that NV Energy’s 2024 Integrated Resource Plan identified 12 new data centers requesting 5,900 megawatts of capacity. Just two years later, requested capacity has climbed to 16,530 megawatts, an increase of 180%. NV Energy now projects it will need to serve about 2.5 times its current electrical load by 2046.

“So that’s an increase from just two years ago at 5,900 megawatts, so a very steep increase,” he said, noting that even the 2024 projection represented annual electricity consumption equal to about 56% of all electricity generated in Nevada in 2024.

As for water consumption, data centers use water directly to cool computing equipment, but water is also consumed elsewhere to generate the electricity that keeps the servers running. For the 12 centers in the 2024 projection, DRI estimated annual cooling needs at approximately 5,000 acre-feet under a low-water-use scenario and 9,650 acre-feet under a medium-use scenario. Electricity generation would consume another estimated 12,450 acre-feet annually.

“The water needed for electricity generation exceeds the water needed on-site for data center cooling,” Henzl said, noting that DRI researchers are now updating that analysis to account for the much steeper growth identified in the 2026 IRP, with results expected by Oct. 1.

For rural Nevada communities, water is hardly an abstract concern. Many groundwater basins are already over-appropriated. Henzl pointed to Fallon as one example, where groundwater commitments exceed the basin’s perennial yield by more than 350%. Mason Valley, where the proposed hyperscale Monarch Data Center near Yerington would be built, is also over-appropriated.

Monarch also provides some perspective on the size of projects now being proposed. Henzl said data centers of 10 to 30 megawatts were more common a decade ago, while today’s hyperscale facilities increasingly reach 100 to 200 megawatts or more. Monarch is proposed at 1,000 megawatts, or 1 gigawatt.

Finding enough energy to serve projects of that size adds another layer. Nevada is already a net energy importer and does not produce natural gas in the state, although natural gas remains an important source of the state’s electricity generation. Where that power will ultimately come from is not always clear.

Grid constraints are also leading some developers to consider “behind-the-meter” generation, producing electricity on-site either while waiting for utility service or as a longer-term power source.

“The emphasis is speed to power, right?” Henzl said.

For example, Copia Power proposes a 500-megawatt natural gas plant and battery storage system to initially serve Monarch, while Tract has proposed temporary natural gas and diesel generation for two Storey County projects NV Energy cannot immediately serve.

Who pays for the infrastructure needed to serve the industry is already being contested. NV Energy is suing Tract over two Northern Nevada projects, arguing that costs created by large new users should not be shifted to existing customers and that questions involving electric service and rates belong before state utility regulators. Tract disputes NV Energy’s claims and says it has committed nearly $1 billion toward infrastructure improvements.

Henzl cautioned that data centers and developers are not all alike. Reclaimed water, more efficient cooling systems, load flexibility, and advances in computing efficiency can substantially reduce resource demands. What remains uncertain is whether those improvements, available water supplies, and new generation and transmission infrastructure can keep pace with development.

“I think one of the big takeaways for at least me personally in this work is the great amount of uncertainty that remains,” Henzl said. For communities trying to understand what that growth will mean for their water, energy supplies, and household costs, he brought the issue back to something much closer to home: “And ultimately, the concern is community preparedness.”