If you go by the headlines about energy alone, you may have experienced a bit of cognitive dissonance. On the one hand, investments in renewable energy have more than doubled since 2018, supercharged by the Inflation Reduction Act (IRA). On the other, advancements in AI, particularly generative AI, have been accompanied by apocalyptic projections for energy consumption. Throw in the massive costs of decarbonizing the grid and transitioning to a green economy, and you’d be well within your rights to pinball between elation and abject despair.
Encouraging developments are flying below the radar but have the potential to dramatically reshape the vexing power generation–consumption dynamic. David Halligan, cofounder of Datawatt, knows something about this intersection. A seasoned veteran in renewable energy, he and his company have been pursuing projects with these twin considerations in mind. In this interview, David talks about the evolving market for renewables, the exponential growth of data centers, and how Datawatt is developing projects with the potential to benefit a wide range of stakeholders.
This interview has been edited for clarity and concision.
Scott: Talk a little bit about the journey that led you to found Datawatt.
David: I’ve been in renewable energy for 20-plus years, but I got my start by accident. I had originally worked with a conventional energy-development company. Next, I took a job with an Italian company called Enel that had just launched in the US; they had a couple of wind farms and a bunch of small hydro plants. I then jumped to First Wind, a pure entrepreneurial, angel-backed venture. There were about a half-dozen of us flying by the seat of our pants. We raised a lot of money through private equity and tried to go public. It was quite an experience. I realized I was more well-suited for life as an entrepreneur.
Fast-forward about 10 years. A colleague of mine from First Wind, Evelyn Lim, reached out about starting a new company. That became Datawatt. Our original vision was to develop an investment platform that would allow individuals or retail investors to invest directly in wind or solar energy projects—think Robin Hood for renewable-energy projects.
We realized we would need to find some projects to put on our platform. Given our backgrounds, we decided to try to develop the projects ourselves. We didn’t have billions of dollars behind us, so we had to be more creative and strategic about the opportunities we undertook. We specifically looked for projects that would be interesting to potential investors, could drive high financial returns, and potentially could solve other sustainability issues. We also recognized the opportunity to approach data centers or digital infrastructure as a power-consuming project, so we set about finding industrial lands to develop for data centers.
Today, there are three pillars of our business: power generation, power consumption, and a platform to invest in renewable energy. We still have visions of launching the platform to enable people to eventually invest in renewable-energy projects and maybe even in the development of data centers.
Scott: What was the light bulb that came on in siting power generation next to these large power consumers such as data centers?
David: We are in talks with companies that already have projects that either are operating or are in development and are thinking about how to sell power. Our thought was, “We could potentially build a data center facility and locate it as close as possible to your power project.” Cutting that distance down can be incredibly beneficial to the power project owner.
In developing data centers, we’ve looked at probably a couple of hundred sites. Less than half a dozen were truly good candidates. But the key ingredient is being in proximity to power infrastructure, either a large substation or transmission lines. Well, on the flip side of that, if you’re going to develop a wind farm or a solar project, you’ll want proximity to a transmission line or a substation. There’s a natural alignment from our generation side and the consumption side because they both need access to high-level power infrastructure.
Datawatt is a power developer with a track record of delivering $20 billion in renewable-energy projects, representing more than 15,000 megawatts of power. Datawatt leverages this expertise to employ a “power first” approach to identifying and transforming prime properties into hyperscale data center campuses.
Scott: How do you see the market for data centers evolving?
David: Five years ago, the typical data center might have required 10 megawatts of power load. Today, projects in development will consume up to 1,000 megawatts of power. At that level, the generation assets to produce power and the infrastructure needed to deliver it are just staggering. We think there’s a potential opportunity to bring renewables and data centers together.
I can see where the market is heading, and it’s hyperscale: a data center campus consisting of multiple million-square-foot buildings taking up 1,000 acres of space or even more. I am hearing of massive developments on tens of thousands of acres that involve building their own transmission lines and power assets. I think this trend in scaling started in renewables. The trajectory with data centers is going the same way because scale brings efficiencies. People like to deploy lots of money when they can solve big problems with these types of large solutions.
I also anticipate a split between the development of data centers for very fast processing in major metro areas—for example, autonomous-driving networks—versus centers for large language models and AI training, which can be located anywhere as long as they have sufficient power resources. The challenge for locating something in congested urban areas is they don’t typically have the infrastructure to supply power a data center requires. Local distribution lines aren’t sufficient to provide that level of power.
In industrial areas located relatively close to metropolitan areas that have experienced a downturn due to older industries leaving the space, the power infrastructure is still there, but the land may be environmentally challenged. You’re not going to site residential neighborhoods or hotels there, but these areas could be perfect for data centers.
Scott: Datawatt is developing an old coal mine into a renewable-power project. What could that mean for the community?
David: We connected with a coal mining group in southern Illinois who own thousands of acres of reclaimed coal sites. The land is low-yielding from a farming perspective, but it is well-suited for solar. So we were able to partner to develop that project and transition those lands that once provided energy from fossil fuels to energy from the sun. And in thinking about those projects and eventually where they would be selling power—and realizing the demand for compute and data centers—we thought those businesses would be well-positioned to be our customers. All things being equal, they would probably rather take power from what were former coal mines than virgin farmland.
Our relationship with our coal mining partners is strong. We’re working together to have these lands provide renewable energy for the future as well as property taxes for the local communities. Many of the residents have worked at the mines, so their livelihoods have depended upon coal mining. We think the right approach is to work collaboratively with all forms of energy to ensure that the communities benefit and there is a smooth transition for all stakeholders.
Scott: How has the IRA and its funding for renewable energy changed the market dynamics?
David: When we partnered with the principals of this coal mining company, for example, the investment tax credit rate was much lower than it is now. It didn’t benefit from some of the IRA’s policy implementations, especially for coal communities. Our first project has a projected capital cost of close to $1 billion, so that’s not an insignificant investment or undertaking. But it was before passage of the IRA, and power prices at the time were projected at roughly $30 per megawatt-hour. That’s relatively cheap.
On the flip side, now that we’re on the other side of implementing the IRA, the projects are obviously worth a lot more because there are more tax credits to be realized. The demand for power from digital infrastructure is driving power prices even higher. In this market, our prices are now in the range of $60 to $75 per megawatt-hour. There’s just been a massive flood of new projects that are all trying to connect to the grid. It was lighter fluid on a campfire.
We think the right approach is to work collaboratively with all forms of energy to ensure that the communities benefit and there is a smooth transition for all stakeholders.
Scott: Advancements in AI have been accompanied by headlines about the massive amounts of energy required to train and operate these offerings. How do you see this tension playing out?
David: The big tech companies are the tip of the spear of all this activity. They have the capital and people, and they are in a race to develop their AI models. I think they’re acutely aware that a lot of these AI tools can help solve problems in ways we never could have imagined—and at an efficiency and speed that we never thought [was possible]. On the flip side, the two most valuable commodities in the future are going to be compute and power. They may need to create their own power sources to fuel this growth and their ambitions. You’ve got people like Bill Gates who are looking at small modular nuclear reactors; in some cases, they’re looking at buying full-on nuclear plants. They’re developing sites that are planned as 10-year builds. They’re being built modularly to scale over time, and they need the power resources to meet that demand. Research firm Wood Mackenzie forecasts load growth specifically from data centers between now and 2030 to be 51 gigawatts.
I’m hopeful these companies will try to drive solutions that won’t worsen these issues for us and the planet.
Scott: Can you talk a little bit about your personal connection to renewable-energy sources?
David: What makes the renewable-energy industry so interesting and exciting is that you can undertake projects of any size and have a large impact. For example, we’re doing a two-megawatt solar project that’s going to help power a town in western Illinois. Everything that we’re doing around that deal is an interesting puzzle. At the same time, we’re developing more than 1,000 megawatts of large solar projects on reclaimed coal mines—obviously a far different scale.
We put the first large-scale wind farm in Hawaii. When you fly into the Maui airport, you can see these wind turbines that dot this ridge top. We put the first wind farms in Panama. We put wind on an old Bethlehem Steel site on Lake Erie near Buffalo. We’ve put wind turbines next to Whirlpool factories in industrial Ohio. We even put up a wind turbine that was powering a pump to an oil pipeline, if you can imagine. For all of these projects, the additional benefits are that we’re doing something good for the environment, investing in sustainability, and benefiting society in the future.
Behind the scenes
This interview is part of LEFF’s Into the Weeds interview series—a series that amplifies individuals whose work contributes to the achievement of the SDGs at every level. We’ll bring you insights from renowned experts and the leaders of global organizations and innovative local businesses. Scott Leff (he/him) is the founder and president of LEFF, for which Katie Parry (she/her) is the director of LEFF Sustainability Group.
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of LEFF or have its endorsement.