'Left Behind': Power Woes Mute Data Center Growth In Northwest's Former Boomtowns

A flood of data center development in Washington and Oregon has slowed to a trickle as electricity becomes scarce. Local executives say solving these power problems may take longer in the Pacific Northwest than in other major data center markets.

The Pacific Northwest was one of the fastest-growing regions for data center development for the first four years of the pandemic-era data center boom, with areas like Hillsboro, Oregon, and central Washington transforming from data center hinterlands into key global digital infrastructure hubs.

But now the region’s once-blistering growth has all but ground to a halt, with the market’s power transmission infrastructure unable to meet the energy demands of continued large-scale data center build-out.

While nearly every major data center market is experiencing a similar power pinch, the Pacific Northwest’s path back to growth will be longer and more difficult than in most other industry hotbeds, executives said last month at Bisnow’s DICE: Pacific Northwest event, held at the Seattle Marriott Waterfront.

They said the region is at a significant disadvantage when it comes to building needed transmission infrastructure and that developers trying to navigate these constraints face obstacles unique to the market that will likely send most data center firms elsewhere.

“A lot of the opportunity in the Pacific Northwest has been taken up over the last few years as far as available power capacity,” said Adam Kramer, a partner in the data center group at Panattoni Development. “The conversation really has to be more about how the region is going to prepare to not be left behind in the next 15 to 20 years, as it's currently on track to do if there’s not major investment at the public sector level.”

The region's data center submarkets of Hillsboro, Oregon, north central Oregon, central Oregon and the Puget Sound area were seeing an influx of hyperscale campus build-outs just a year ago.

Hillsboro’s data center inventory jumped more than 600% between 2020 and 2024, according to CBRE. The central Washington data center clusters in Quincy and East Wenatchee have emerged as the country's top secondary data center market, with inventory doubling over the same period. 

Data center operators and tenants have been attracted by the region’s inexpensive and relatively low-carbon hydroelectric power and strong connectivity that allowed them to serve markets in the western U.S. as well as Asia. The Washington headquarters of both Amazon and Microsoft, two of the world’s four largest data center users, play a role as well.

Data center development in the Pacific Northwest has seen a higher percentage of hyperscale development than most other markets. 

Yet almost no new inventory came to market across the entire region in the second half of 2024, according to JLL, and the region’s thin pipeline suggests it is more than just a temporary pause. As tech giants are looking for gigawatts of capacity for a single campus, just 400 megawatts are in planning or under construction across the Pacific Northwest.

The development slowdown isn't due to lack of demand, JLL Senior Managing Director Conan Lee said. Vacancy rates in Washington and Oregon sit south of 1%, and hyperscalers still want to deploy in the region.    

The problem, Lee said, is power.

Any company looking to build a large-scale data center campus must wait years before the regional grid operator will even agree to provide the large blocks of electricity they need — a fact Lee says is making the Northwest less competitive with emerging data center hotbeds across the U.S.

“It's one of the most constrained markets in the country,” he said. “It can be a seven-year process before you receive your interconnection agreement. The problem with that is that everyone is looking to deploy in the next two to three years, so it has limited the Northwest's acceleration compared with markets like Ohio, Indiana, Oklahoma and places like that.”

While enough power is being generated in the region to meet demand, the shortages are a result of insufficient transmission infrastructure, panelists said.  Bringing back the data center building boom will require a massive investment in infrastructure to increase the region’s power capacity.

The Pacific Northwest is far from alone in facing such power constraints: Nearly every substantial data center market — from traditional industry hubs like Silicon Valley and Northern Virginia to emerging hotbeds like Columbus, Ohio — has had growth limited to some degree by insufficient grid infrastructure. 

But compared to other markets, DICE panelists said, the grid improvements needed in the Northwest won’t materialize anytime soon — if they happen at all. This leaves the region at risk of missing out on the artificial intelligence data center gold rush. 

“You can't make the economics work to go buy a really expensive piece of dirt and then sit on it for seven to 10 years. It just doesn't work,” said Matt Pfile, founder and CEO of Crane Data Centers. “It remains to be seen whether the grid will get upgraded. We believe that will happen, but it's going to be a longer-term solve, not short-term.”

Executives said several forces unique to the market have combined to slow the pace of infrastructure improvements. 

Northwest markets have a fundamental disadvantage when it comes to power infrastructure compared to Midwest markets like Indiana and Ohio that are absorbing an ever-larger share of hyperscale demand, Panattoni’s Kramer said. The Rust Belt markets rooted in industrial development have robust grid networks conducive to market expansion and the creation of a “data belt,” he said.

By contrast, the Northwest’s isolated data center clusters like Hillsboro and north central Oregon emerged primarily in agricultural areas with little existing infrastructure, making expansion a more daunting and capital-intensive task.

The glacial pace of transmission infrastructure improvements across the Northwest also stems from the fact that the region’s primary transmission provider, the Bonneville Power Administration, isn't a private utility but part of the federal government, Pfile said.

While power providers in other markets like Dominion Energy, Duke Energy or Southern Co. have a profit motive to build new infrastructure to serve new customers, the BPA has none of those incentives. The result has been underinvestment and a lack of urgency that Pfile says has put the region behind the eight ball.

Kramer fears this issue will get worse due to federal layoffs and buyouts that have impacted agencies tasked with advancing grid improvements.

“It is slowing down the process here to get more interconnection agreements and a lot of the perfunctory process, which has typically taken awhile,” Kramer said. “It's now taking even longer.”

It isn't just the federal government. Panelists said attitudes toward data centers at the state level in Oregon and Washington also present challenges to addressing the industry’s power requirements. 

While the political environment isn't hostile toward data center development in either state — and while there are differences between Washington and Oregon in many policy areas pertaining to data centers — neither state government has embraced the data center industry as a core element of the state’s economic development the way leaders have in places like Virginia, Georgia or Texas, industry leaders said. 

Elected officials have also voiced uneasiness in both states about the impact of the data center sector’s energy use. 

As a result, the states largely haven't wielded their authority or resources to help expedite the development of new power infrastructure. Panelists said they see little political will to streamline permitting or relax state-level review requirements that could allow new transmission to be built faster. And they see no appetite for allowing the use of natural gas generation to skirt grid constraints and get power to sites quickly, as developers are increasingly doing in other markets.

“Washington and Oregon are not leaning into data centers,” said Jim Footh, managing director for global data center investments at PGIM Real Estate. “Elsewhere, they’re very much rolling out the red carpet and making it easy to do business.”