Microsoft's data center will use water wisely. But how smart is it economically?

It sounded big.

“Governor Ducey and Microsoft will make an announcement today regarding the company’s economic development plans in Arizona,” read the press release.

Five hours later, Microsoft unveiled additional details about the three data centers it had already announced building in the west Valley – a project that will net a whopping ... 110 permanent jobs?

Oh, they’ll be good jobs. Microsoft jobs.

But excuse me if I don’t get out the ticker tape.

Microsoft is using water, solar wisely

OK. Maybe I’m being too harsh on Microsoft.

The tech giant also announced that its data centers will be fully powered by solar – from local manufacturer First Solar, no less. That is a big deal, because data centers require a lot of electricity to keep those servers running.

Incorporating solar will offset the data center’s demand on the power grid, though it's unclear whether it'll use batteries to store that power for when the sun's not shining. I was unable to reach officials at Microsoft to confirm.

The company also announced an initiative to use a lot less water than typical data centers, which are water hogs. Brian Janous, who manages Microsoft’s sustainability effort, told AZ Big Media that it will “use zero water for much of the year.”

I'm not fully sure what that entails, presumably a lot of water recycling and offsets. The company did announce that it will invest in a water-conservation project to help prop up water levels on Lake Mead. Its data centers also will be LEED certified and part of a robust recycling initiative.

Clearly, Microsoft is trying to be a good corporate citizen, to minimize its impact on what it recognizes are scarce (and precious) resources.

And that’s a good thing, because there is no shortage of water- and power-intensive data centers coming to the Valley, including another mega center serving Google in Mesa. Perhaps Microsoft’s example will pressure its peers to follow suit.

But are data centers really all that?

But are data centers really something we should be excited about?

If you read the economic-development studies, yes. They argue that while data centers don’t generate a ton of jobs, they do generate a lot more than your typical corporate headquarters in construction sales taxes and taxes on power consumption, among other things.

That’s because data centers typically cost way more to build, equip and keep running. (It takes a lot of energy, after all, to store all those tweets, pictures and documents we send to the cloud.)

A 2015 CBRE white paper argued that offering incentives to a $1 billion data center has the same impact of offering incentives to a 1,700-job corporate headquarters.

A 2017 U.S. Chamber of Commerce study found that the average data center generates $32.5 million in economic activity, including an average $9.9 million in state and local revenue during construction.

And a 2018 Oxford Economics study found that Google’s data centers alone have a greater job multiplier rate than scientific research and development services – an industry Arizona has heavily courted in hopes of growing high-quality jobs.

I wouldn't put my money on it

But, man, I’m still dubious. Microsoft’s west Valley data centers are expected to generate $20 million in economic impact, as well as 1,000 temporary construction jobs.

By comparison, Intel’s semiconductor factories in Chandler have a $5.5 billion impact and employ more than 10,000. They also spin off a lot of regular contractor work for local suppliers – the kind residents can depend on to pay the bills.

I know. Finding or growing another Intel is hard and rare – especially in Arizona, which doesn’t have a strong manufacturing base. And there are good reasons to put data centers in a desert place like this, far insulated from earthquakes, hurricanes, tornadoes and other natural disasters that could wreak havoc on what’s supposed to be always-on cloud storage.

But is that enough to justify offering incentives, particularly when data centers take up so much real estate and their major payoff comes from construction and power usage (the latter of which Microsoft aims to mitigate)?

Chamber of commerce types will tell you this is an “in” – that if we woo Microsoft, Google and Apple with data center space, they will move other parts of their operation here.

They also have huge corporate giving initiatives. You can regularly tap these guys to fund important philanthropic efforts.

I get that. But even if they are built to use less water and power, it seems like a big gamble to hope data centers will spur anything greater for Arizona long-term than big buildings with few workers.

I certainly wouldn’t put my money on it.

Reach Allhands at joanna.allhands@arizonarepublic.com. On Twitter: @joannaallhands.

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