New data centers have to go somewhere, says Michael Natelli, general manager of Natelli Investments.
The computing and storage required by artificial intelligence have driven deals across the United States, and developers are entering the industry with construction plans before they’ve secured end-user customers. Analysis last month by the real estate investment firm CBRE found data center demand in North America still outpaces supply.
But does this mean a large one should be built in western Wake County?
Natelli believes so. His family operates a network of three Maryland-based development firms— Natelli Communities, Natelli Investments, and Natelli Holdings — which have completed residential and commercial projects across the mid-Atlantic region, including a half dozen in North Carolina. The family now has designs to construct three data centers in the Tar Heel State, including the “New Hill Digital Campus” on 189 acres of farmland outside the town of Apex.
In September, Natelli Investments asked Apex, a fast-growing town of around 80,000, to annex and rezone this land. The firm wants the site’s four projected 70-foot-tall server buildings to be cooled with water from the local municipal wastewater treatment plant and powered by the nearby Shearon Harris Nuclear Power Plant.
“There are very few places that have those puzzle pieces like this site does,” Michael Natelli told The News & Observer in an interview Thursday.
Later that day, Natelli went before the Apex Environmental Advisory Board for the project’s first public meeting. North Carolina data center proposals have been met with local resident pushback in recent months, from Edgecombe to Mecklenburg counties, and New Hill has been no exception. At the Oct. 16 meeting, residents displayed their objections by wearing red and clapping when board members raised doubts about the data center’s ability to mitigate environmental impacts like noise.
“I know what sound engineers do,” board member Sean Crowell said. “And sound engineers represent the people that they’re working for. They’re not working for us.”
Opponents have formed the Protect Wake County Coalition, and circulated a petition against the proposal that had over 2,000 signatures entering Thursday’s hearing. After more than 90 minutes of discussion, the board recommended 20 conditions for Apex to consider as it weighs rezoning, including requiring greater setbacks, a tree replacement program, and specific sound tests.
Before the meeting, Natelli visited The N&O office to defend his proposal, answering questions about speculative data center developers, energy costs, and the project’s critics.
“If you’re not going to do a data center here, I don’t know where else you do one,” he said. “And I recognize that despite me feeling that, people are not going to want it no matter what.”
This interview has been edited for length and clarity.
N&O: What about North Carolina makes it ripe for data center development?
Natelli: You want to be in a place that is welcoming to business. And North Carolina is a place that has historically been like that. From many different points of view, from kind of the regulatory environment, from kind of the processes that you need to go through to get things approved and permitting, from like a tax incentive standpoint, it’s a competitive market for businesses to be in.
And (data center development) is becoming so much more about the power. The power story is sort of driving everything. And you’ve got a utility system here where Duke Energy controls the generation and the transmission. You have an integrated utility that you’re working with, which is unlike how it is in many other places. And you’ve got a lot of clean power, with the nuclear facilities. And so, there are a lot of positive things that support the industry.
N&O: How much more power do modern data centers require than previous versions?
Natelli: The megawatts needed to serve a facility like this, compared to like 15 or 20 years ago, it’s much different. This is 300 megawatts. If we were doing something of this scale 20 years ago or 15 years ago, we’d be well under 50 megawatts. And so the scale is much greater. The processing power today is much greater. And so it’s just all at a totally different level.
N&O: Duke Energy isn’t going to want to commit until they know this isn’t just a speculative project. But your potential end users want a clear plan and commitment from Duke before agreeing to come to your data center. So how does that sort of chicken-or-egg coordination work?
Natelli: The way Duke is handling it is they are requiring major upfront deposits before they do anything. They need to look at impacts to the system, what upgrades they need to make, time it’s going to take to order materials. There’s a long lead time. They’ll get back to the applicant, which is us in this case, and say, ‘Here’s what we can do. If you’d like us to move forward to the next step, you need to post a massive deposit that could be in the tens of millions or even more.’
That’s how they’re sort of weeding out the speculators versus the players who are real in this space.
N&O: You’re asking to use North Carolina’s energy load. But the way data centers work, it could be for a company that’s servicing an end user in Seattle, sending something that gets routed through here and then to Florida. What’s your response to that dynamic, of our energy being used to benefit outside users?
Natelli: There are a couple of things to point out there. The first thing is, there’s a massive economic benefit to the locations where (data centers) go because of the tax revenue. There’s going to be this ongoing tax revenue to the town of Apex.
There are a lot of construction jobs to build these facilities. And then a lot of businesses that support the data centers on an ongoing basis. The servers inside are getting replaced every few years. There’s maintenance and electrical technicians that need to be in there.
All the tech companies and health care companies are utilizing AI too for their businesses and figuring out, how can they be more productive, how can they advance what they’re doing? These (data) facilities are helping them out too. And so there is this global productivity increase I think will happen that’ll support Apex and Raleigh and other places as well.
N&O: Playing devil’s advocate, a manufacturing plant on this site would employ more people than a data center. Should the town hold out for a project like that?
Natelli: There are pros and cons to any use. If this doesn’t move forward, I don’t think it’s going to stay as farmland. This was marketed for sale (for light industrial use), and I’m not sure residents are thinking that way. I think for a lot of people, it’s, ‘We want to keep this as what it is. We don’t want a data center here.’
I do think the decision for the council and the community, is not, is this going to stay how it is or be a data center? It’s — is this going to be a data center or some other industrial use that will have its own set of pros and cons?
Reaction to local Wake County objections
N&O: In terms of local protests, what is the most common concern you hear from residents?
Natelli: There are probably three buckets. The first is the concern about sound from the backup generators and the cooling equipment. Second would be the kind of impact on utility system and the rates that Apex residents would be paying. And the third is concerns about the emissions from the generators and what kind of health impacts those might have on neighboring properties.
We got a sound consultant. They’re evaluating the baseline sound in the area. They’re evaluating what the projected sound would be with this layout. And then we’re going to design in the attenuation measures that we need to meet the requirements that Apex is going to require.
N&O: And then on the concerns about rates going up?
Natelli: Apex has their own distribution. We’re not touching that system. We’re tying right into Duke Energy transmission. And so, we’re not influencing the rates that Apex is going to charge residents for their retail rates.
What about the wholesale rates that Apex buys their energy for? I think that’s another question, and whether or not we do something here, that’s a question that I don’t have an answer for, because the (N.C.) Utility Commission and Duke Energy, they’re still trying to figure out the process for moving forward and how they accommodate that.
N&O: Are there lessons you’ve taken away from other local data centers across North Carolina or in Maryland? Whether they were successful or stopped.
Michael: For starters, I agree that data centers should not just go anywhere; you need to have the right pieces in place . And I feel like those pieces are in place here.
Then there are other places where clearly a speculator was coming in and trying to get something approved in a spot that really didn’t make sense. It does sort of paint a broad brush over the whole industry. And it makes it harder to sort of get down into the details of each project.
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