Hyperscale data centers significantly impact local economies, according to a recent study on data center economics. Conducted by Justin Ross, a professor at Indiana University, and Saurav Roychoudhury from Capital University, the research highlights the substantial economic benefits brought by such centers.
The study, funded by the Northwest Indiana Forum, analyzed the economic contributions of hyperscale data centers in Northwest Indiana. According to Ross, this research is the first academic analysis focused on the local economic effects of these facilities, like the Microsoft data center being built in LaPorte.
The Microsoft data center is projected to generate $16.1 billion in regional economic output over two decades. It is expected to support 14,651 construction job-years and 2,090 ongoing jobs once operational. The annual worker earnings are estimated at $176 million once the center is operational.
Even larger in scale, Hobart’s data center, with a 1.5-gigawatt capacity, will contribute a lifetime regional output of $24.2 billion, along with 21,979 construction job-years, as per the study’s findings. Ross emphasized the careful and conservative approach of the input-output modeling used in their research.
Despite some criticism, such as from Michael Hicks of the Center for Business and Economic Research at Ball State University, who questioned the lasting economic impact, Ross remains confident in the positive long-term contributions of hyperscale data centers.
Hicks pointed out the potential downsides, such as limited job creation beyond construction and the absence of significant R&D opportunities. He also criticized state tax policies, particularly in Indiana, for offering excessive subsidies. Hicks indicated that data centers might not lead to substantial job creation or development of local ecosystems.
However, Ross argues that the industry is rapidly evolving, and the effects can vary. The expanding energy needs of data centers have driven NiSource to establish a separate division catering to high-energy consumers. This approach aims to ensure existing customers eventually benefit from potential cost reductions as new centers come online.
Ross and Roychoudhury’s study also notes external factors like energy inputs and supply chain dynamics as crucial variables in determining the comprehensive economic impact. Adjustments in regulations to enhance solar and wind energy production might play a role in these dynamics.
Overall, the research underscores the significant yet complex influence of hyperscale data centers on local economies, calling for adaptive strategies to maximize their potential benefits.