FAANG Coming to Town. Good, Bad but not Ugly

Bloomberg Businessweek March 2, 2020 pp14-17

“Who Pays to Make Big Tech Green?” “Companies like Google have leverage over local utilities as their power use climbs”.

Unbeknownst to many of us, the Internet, data warehouses and cloud computing consumes a massive and growing amount of energy. Companies like Google, Facebook and Amazon secretly negotiate with regional power agencies and local government to maximize incentives such as lower local tax and lower power rates. Given their status, as large and mostly passive consumers, they have massive buying power. Often, they locate near existing, closing or closed fossil fuel power plants smartly leveraging the existing transmission capabilities. That’s good for the locales and for the companies bypassing enormous additional capital expenditure.

Besides the FAANG (Facebook, Amazon, Apple, Netflix and Google) who benefits and who loses in these negotiations? Because the FAANGs buy green offsets the environment wins and Google shared an independent study suggesting that jobs and other economic impacts benefit the adjacent communities. Google became a zero carbon emitter in 2017 and Amazon plans to be in 2040.

However, as is planned for one site, in Becker Minnesota (2010 Population 4,538), the coal burning power generation plant will close faster than planned leaving the locality sooner with a 75% fall in property tax revenue. In return, Google will build a $600,000,000 data center in a way connecting the “Fourth Industrial Revolution” to this small town. Painful as it is from a tax perspective, that is an enviable exchange. It is likely though that local budgets will be slashed, some services will experience higher fees and taxpayers will increase their contributions.

Elsewhere [not part of the BBW report], the Mighty Moss power generating plant site, sulfur-oil burning and long shuttered by Duke Energy, in Monterey County California has been approved for Tesla battery plant. Details forthcoming.

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