Power, Not Latency, to Guide Computing at the Edge

This article originally appeared in Light Reading.

Data center operators are starting to shift their new construction projects out of hotspots like Santa Clara, California, and Ashburn, Virginia, but they’re not doing it to chase edge computing opportunities. Instead, they’re looking for locations close to available sources of power.

"There has been a surge in interest in secondary and new markets, to skirt some of the power challenges facing major markets, especially for latency-insensitive workloads, like AI training," wrote the financial analysts at MoffettNathanson in their takeaways from a recent investor conference in New York City.

Data center operators like DigitalBridge are looking to build new data centers in locations where the local utility can quickly provide the massive amounts of electricity needed for cloud computing, including AI operations, according to DigitalBridge CEO Marc Ganzi.

"There’s this whole next generation of cloud workloads that are showing up… but they’re not traditionally in Virginia, they’re not traditionally in Santa Clara. And you see that the customers are navigating to different places," Ganzi said during DigitalBridge's recent quarterly conference call, according to Seeking Alpha.

As Light Reading has previously reported, it can take up to two-and-a-half years for data center operators in Dallas to obtain permits for the power necessary to operate a new data center. In Atlanta that can stretch to six years and in Silicon Valley, seven. That’s because data centers, electric cars, bitcoin mining, and other power draws have maxed out electricity utility power production and transmission in many locations around the country.

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"The power challenge is not going away soon," wrote the MoffettNathanson analysts, citing their conversations with officials from DigitalBridge.

Edge Computing on Ice

The idea that cloud computing operations will migrate out of big data center hotspots like Dallas and Ashburn isn't new.

During the 2020s, many observers expected edge computing demand to force the construction of smaller, mini data centers in locations all over the country. Small, unmanned data centers in smaller cities – potentially at the base of cell towers – would be the only way to provide super low-latency services to residents in such locations. Otherwise, their Internet traffic would have to travel all the way to bigger data centers in Denver or Dallas, adding precious milliseconds to services like streaming virtual reality that need to be instantaneous.

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But demand for latency-sensitive, near-instantaneous connections hasn't developed, resulting in edge computing casualties like EdgeMicro, MobiledgeX, and Ericsson's Edge Gravity.

Companies investing in edge computing "have slowed down their investments a bit, just given the macroeconomic conditions that are out there. So it's probably a little bit further out than I originally thought it was going to be," said American Tower CEO Steven Vondran at a recent investor event, according to Seeking Alpha.

In 2021, American Tower spent $10.1 billion to buy CoreSite Realty, one of the nation's biggest operators of data centers, in part to tap edge computing opportunities.

Chasing Power

Demand is high for the cloud computing operations available in data centers, particularly amid AI hype. However, most early AI investments involve training operations that don't require low-latency connections. That may change as AI services shift to an "inference" model geared toward the speedy delivery of AI capabilities.

But right now, the hunt for power – rather than lower latency – is currently top of mind for most data center players.

"We're certainly navigating the new world as are others," said Andrew Power, CEO of data center operator Digital Realty, at a recent investor event, according to Seeking Alpha. "We're working with these utility providers and reallocating power, and we've shifted power around that we had idled at our substations and our suites to make sure we can deliver on our commitments to customers and also deliver growth capacity."

Some companies are turning to renewable energy sources like wind and solar for their power needs. But there's another option too: natural gas.

"For example, a data center may tap directly into a natural gas pipeline, if one is nearby, to generate power on-site," wrote the analysts at MoffettNathanson. "However, the operator would need to find access to uncommitted gas, which is not easy, and a rush toward this approach could quickly overwhelm a gas system, as happened in Ireland."