Lansing is considering a $120 million data center project in the city’s downtown.
The company called Deep Green plans to partner with the Lansing Board of Water and Light to use the heat the center generates for the utility’s hot water system.
BWL General Manager Dick Peffley says the utility first started working with Deep Green about nine months ago. He adds the BWL is looking for a 20-year contract with the UK-based company.
Peffley, when asked whether customer rates would increase: “Absolutely not.”
"There's no discounts here, and any infrastructure that's required, they have to pay for upfront, so our customers are made whole," he said.
The City Council is expected to vote next month on whether to approve the rezoning and property sale for the facility.
Peffley believes education is what will win community members and officials over on the proposed project.
That includes big promises about reductions in natural gas use, customer savings and a focus on clean energy.
"That, I think, sets Deep Green aside from some of the other data centers that we've heard about because the heat's just a byproduct. We are going to use that byproduct to help reduce our carbon footprint in our hot water utility," he explained.
But he says there will be "no hard feelings" if the City Council passes on the data center.
"We'll move on to our next one. So to us, it's a good project, but if it doesn't fit into the city's master zoning or what the city is looking for, we understand that," he said.
More informational events are expected to take place before the City Council's vote.
Interview Highlights
On committing that customers' bills won't go up
I think that certain utilities that may entice large customers come in do put their customer rate base at potential stranded cost or increased rates. We don't do that. These companies, large companies that are reaching out to us because of the BWL's reliability. So, it's the list price. There's no discounts here, and any infrastructure that's required, they have to pay for upfront, so our customers are made whole. There's no legacy cost if they leave day after they open for business, which we know won't happen in this case.
On what makes this project different from other data centers
The amount of heat that this data center will produce between the data center itself and the onsite generation, we are going to get that for free, and we will take and use that in our downtown heating district, and it will reduce the amount of natural gas that we have to burn by 25% in the heating side of the company. That's a big reduction in gas. You know, we don't want to burn any more gas than we have to. .... That, I think, sets Deep Green aside from some of the other data centers that we've heard about because the heat's just a byproduct. We are going to use that byproduct to help reduce our carbon footprint in our hot water utility.
On what happens if the City Council rejects the project
We'll move on to our next one. So to us, it's a good project, but if it doesn't fit into the city's master zoning or what the city is looking for, we understand that. We have plenty of other customers wanting to take our energy. We just go to the next one. It's that simple, no hard feelings for us.
Interview Transcript
Sophia Saliby: Lansing is considering a $120 million data center project in the city’s downtown. The company called Deep Green plans to partner with the Lansing Board of Water and Light to use the heat the center generates for the utility’s hot water system.
City Council is expected to vote next month on whether to approve the rezoning and property sale for the facility.
Dick Peffley is the BWL’s General Manager, and he joins me now to talk about this proposed data center.
Dick Peffley: My pleasure.
Saliby: So, when did the BWL first get involved in this project?
Peffley: About nine months ago, we were introduced to Deep Green, and we've been talking with them ever since.
Saliby: So, you're committed that customers won't see an increase in their bills?
Peffley: Absolutely not. [Referring to rate increases] I think that certain utilities that may entice large customers come in do put their customer rate base at potential stranded cost or increased rates. We don't do that. These companies, large companies that are reaching out to us because of the BWL's reliability.
So, it's the list price. There's no discounts here, and any infrastructure that's required, they have to pay for upfront, so our customers are made whole. There's no legacy cost if they leave day after they open for business, which we know won't happen in this case.
Saliby: So, that was another thing I was going to ask. A major fear from community members is that these kinds of companies will come in, make big promises, get tax breaks, end up leaving without really bringing any benefits.
So, you've received assurances from Deep Green that they're committed to staying?
Peffley: Yes, and since they're paying for all the infrastructure upgrades up front, we are made whole right out of the get-go here. It's not like we are paying off the infrastructure over time as they pass in their monthly bills. We are going to be fully compensated before we start the project.
Saliby: I know contract negotiations are ongoing in some ways, but how long does Deep Green want to stay in Lansing? Is this a indefinite or is this maybe a five-year contract, or something like that?
Peffley: We're looking for a 20-year contract.
Saliby: We've talked to several experts who have researched how to win community acceptance for these types of projects, and they found transparency is a part of that process.
Can you share, you know, BWL got involved about nine months ago with Deep Green, but plans weren't shared and weren't made public until it came up right before the Planning Commission last fall. Can you talk about the decisions behind that?
Peffley: Sure. The Planning Commission and Deep Green's involvement with the city is kind of a question for them. The Board of Water and Light was working with Deep Green to ensure that we could keep our customers made whole, wouldn't generate any rate increases, and also that we had ample energy to supply their needs. So, those discussions have been ongoing.
And since Deep Green is going to be a retail customer, their rate is a published rate. Any customer can log on to our website. We have at least 12 different rates, depending on the size of customer, they will get that rate. There's no discounts, and so that part of the contract is very easy. It's just an application fee, just like if a homeowner wants to sign up, they get on, they fill an application and we deliver power to them.
Deep Green has the same right as any other company to do that, but we are adding some stipulations in the contract that makes sure that the BWL and the BWL customers are made whole here with some funding upfront.
Saliby: This development failed to get explicit approval, let's say, from the Lansing Planning Commission, now it's in front of the City Council. What makes this project different, and how are you going to win public support for it?
Peffley: Well, we're doing a lot of education, because the amount of heat that this data center will produce between the data center itself and the onsite generation, we are going to get that for free, and we will take and use that in our downtown heating district, and it will reduce the amount of natural gas that we have to burn by 25% in the heating side of the company. That's a big reduction in gas. You know, we don't want to burn any more gas than we have to.
And the savings for that is $1.1 million a year that will flow through directly to the customers that use hot water. So, that's a big win for the city, the Board of Water and Light. So, that's one reason that we're really pushing hard for this is to capture that heat, and that, I think, sets Deep Green aside from some of the other data centers that we've heard about because the heat's just a byproduct. We are going to use that byproduct to help reduce our carbon footprint in our hot water utility.
Saliby: For you, education is going to win people over?
Peffley: Yes, I've been to at least four community events, and there's more to come. And we explained that to the customers. They understand that this is a very good deal for reusing energy that typically goes to waste. And we win a lot of them over that way.
And we also have explained that we are going to build generation onsite, and we hope to get that classified as clean energy. It's going to be fuel cell technology, and there will be the first plant in the state of Michigan built on fuel cell technology. So, that's new and innovative as well. So, those are two exciting things that you don't see with other projects at this time.
Saliby: What happens if the City Council doesn't approve this project?
Peffley: Then we'll move on to our next one. So to us, it's a good project, but if it doesn't fit into the city's master zoning or what the city is looking for, we understand that. We have plenty of other customers wanting to take our energy. We just go to the next one. It's that simple, no hard feelings for us.
Saliby: Dick Peffley is the general manager of the Lansing Board of Water and Light. Thank you for joining us.
Peffley: My pleasure.
The Lansing Board of Water and Light is a financial supporter of WKAR.
This conversation has been edited for clarity and conciseness.
