While a competitive tax structure was important, Las Vegas-based Switch Communications Group LLC had a different prerequisite before even considering opening a cloud-based data center in Michigan: reliable, renewable energy.
According to Switch Executive Vice President of Strategy Adam Kramer, “Michigan wasn’t on our radar” when the company was considering sites in the eastern United States for a massive new data center.
After showing interest in the former Steelcase pyramid facility in Gaines Township near Grand Rapids, Switch executives’ first meeting was with officials at the Michigan Economic Development Corp., The Right Place Inc. and Consumers Energy Co., Kramer said during the Michigan Energy Conference on Feb. 2 in Detroit.
“Our first question was: Can you get us our power needs? The second question was: Can you get us 100-percent renewable?” Kramer said. “If the answer was no, Michigan wasn’t going to be part of the site selection.”
On Jan. 21 — a month after Gov. Rick Snyder signed off on tax incentives the company sought — Switch announced that it would power its Michigan SuperNAP facility entirely with renewable energy.
Kramer declined to say what Switch’s energy capacity needs will be and where specifically the renewable energy will come from, citing ongoing negotiations with its utility, Consumers Energy. He did say the generation will come “off-premises” and that the company will not generate renewable energy on-site behind a meter.
“From our perspective, energy is our lifeblood,” Kramer said. “That meeting with Consumers is ultimately one of the most important meetings we had in determining whether it was a suitable location for us.”
Following that meeting, though, state lawmakers spent the end of 2015 debating whether to provide Switch — and other co-located data centers — with tax incentives. For its part, Switch promised a $5 billion investment and 1,000 new jobs.
The company said at the time that the incentives would make or break its decision to invest in Michigan, which it billed as the largest data center in the eastern United States. Switch operates the largest data center in the world in Las Vegas and is building a much larger one — at 6.4 million square feet — in Reno, Nev.
The Legislature and Snyder ultimately sided with Switch, despite protests from groups like the Michigan Chamber of Commerce and the Mackinac Center for Public Policy. The company plans to finish construction on the data center and offices in the pyramid building by the end of the year.
While its energy and incentive needs were each factors in getting the company here, Kramer called the issues “totally separate.”
“The argument over tax policies is about creating a level playing field with other states and so to make this a viable project for our clients, there has to be a level playing field,” he said in an interview. “As far as the site selection, to even get to this point, we wouldn’t have gotten to the point where that even matters had there not been renewable energy options for us here to begin with. If Consumers said, ‘There’s nothing we can do,’ then the tax policy doesn’t matter. If you can’t check off that first box, you’re not going to check the second one.”
Moving forward, Kramer said the company will be working with Consumers Energy on establishing a “green rider tariff,” a mechanism by which large energy users can purchase renewable energy from their utility within a regulated market like the one in Michigan.
“In the vaguest sense, we’re trying to make sure we have a renewable tariff that reflects the company’s — or any large consumers’ — commitment to making long-term power purchase agreements,” Kramer said.
He added that the company would likely work with Consumers to develop a tariff that could be presented to the Michigan Public Service Commission for approval.
Such a tariff could be an alternative for large energy users looking to buy renewable energy, a growing interest among corporations here. Right now, such users are limited under Michigan’s Retail Open Access law, which caps the amount of energy that can be purchased from alternative suppliers at 10 percent of a utility’s load.
Kramer also talked of creating an “ecosystem” around its facility in Grand Rapids.
“We’re looking for a place our clients can bring employees to live, work and visit when they need to come participate in the ecosystem,” he said. That community involves close proximity to research universities and cities.
Kramer said Switch executives were welcomed to Michigan with “open arms,” unlike the company’s experience in Nevada, where it’s had contentious fights with a utility over its energy supply.
“I truly have fallen in love with Michigan, as has our entire team,” Kramer said. “From the second we landed, we couldn’t have had a warmer welcome in Michigan.”