Following a move by the city council, Sioux Falls could see its first hyperscale data center.
The Sioux Falls city Council agreed to change 160-acres of land between Sioux Falls and Brandon from residential to a light development area. The land in question was owned by Xcel Energy and sold to Gemini Capital, a Los Angeles-based company.
Gemini formed Gemini Data Center SD, LLC with plans to build a hyperscale data center. Data centers have been the buzz in South Dakota’s business community, as the state’s cooler climate is beginning to attract such projects to lower facility costs.
Typically, projects of this size speak in terms of billions of dollars, but Kyle Peters of A1 Development Solutions, a company representing Gemini Capital, said he’s not ready to commit to such numbers yet.
"A significant amount of capital will have to be put into this facility just in the wiring of the facility alone, not to mention the construction costs and the infrastructure costs," Peters said. "So it will be a very large investment, but I don’t want to venture to say just how much yet.”
As for energy usage, Peters said the company is still working on specifics.
“There’s been public comments made about that the goal is to get to 500 megawatts of power. So, I know that internally here for us that’s the goal, but I won’t speak to what they’re capacity or capabilities are beyond that,” Peters said.
That has some worried about the impact on nearby ratepayers. Theo Keith is the Senior Media Relations Representative of Corporate Marketing and Communications for Xcel. In a statement to SDPB, he said Xcel Energy structures contracts with data centers to “balance economic growth with the protection of existing customers in the event planned data centers don’t materialize.”
Such protections include requiring data center companies pay for the costs associated with supporting their projects and early exit fees.
However, Peters said a primary reason Capital Gemini looked to South Dakota in the first place is excess power the state has.
"That really is what drives these AI centers is the available power. It's very hard to find this many megawatts of power. It's extremely hard to find. So, site selection for these facilities is extremely difficult, so anytime that we can find a site that has this much power, I would say it's not a matter of if but when AI is likely going to be developed on it," Peters said. "That's just because it's such hot in demand and this administration on the federal level has said that they want to beat China in the AI race."
He said a lot of developers are looking to fill that need from President Trump and consumers.
Another issue that often comes up with data centers is water usage, as some across the country have led to issues for nearby water sources, as they required lots of water to cool down computer systems.
Data centers typically operate using one of two water systems: closed-loop or evaporative cooling systems. Evaporative cooling systems consume millions of gallons of water to cool the systems. Closed-loop systems, on the other hand, reuse the same water in a solution to cool the systems.
Peters said he doesn't have a 100% certainty on which system will be used because the project is just getting started.
"Most data centers and AI centers that are being constructed today are using the closed-loop cooling system just simply from an efficiency standpoint," Peters said. "So, I don't want to commit to anything, and none of us know the plan at this point, but based on where the technology is headed, I would say [the closed-loop system] is a likelihood but to be determined."
While the project is still in its infancy, the next steps are annexing the property and working through the zoning process. However, similar to other data centers looking to build in South Dakota, the project still needs state investments to make it a reality.
That could come in the form of state sales tax refunds.
