Microsoft holds up rural Washington as data centers ‘gone right,’ but does the model still work?

As data center backlash builds nationwide, Microsoft is pointing to Quincy, Wash., as Exhibit A in making the case that it’s a company communities can trust. But it’s not clear whether the conditions that made things work 20 years ago in the rural city still apply today.

On Thursday, Microsoft celebrated the community as the home of its first data center, hosting a public party and awarding $210,000 in grants to local organizations. Over its two decades in Quincy, the company has created jobs and contributed to property taxes that helped fund infrastructure including a high school and police station. The local poverty rate more than halved over 10 years, dropping to 13% in 2023.

“The story of Quincy, Washington, and Grant County is a story of data centers gone right,” Microsoft President Brad Smith said in a GeekWire interview.

However, much has changed since Microsoft flipped the switch on its first server there. In the mid-2000s, the region enjoyed surplus, accessible and affordable energy from hydropower, and statewide droughts were an anomaly. That’s no longer true.

Communities across the country are growing anxious about the rapid deployment of energy-hungry data centers driving up utility bills and straining local water supplies, which the facilities use for cooling. Seattle is considering a one-year moratorium on the computing infrastructure, while Denver; St. Charles, Mo.; a county near Dallas and one in Arkansas have recently approved bans.

A March Gallup survey found that seven in 10 Americans oppose the construction of data centers for AI applications in their local area, with nearly half strongly opposed.

So is the Quincy model still relevant?

Smith says yes — with caveats.

The formula for success “may need to be a little bit different,” he said. To that end, the company launched its Community First AI Infrastructure Initiative in January, pledging to be a good neighbor wherever it builds. That includes paying for its own electricity and forgoing local incentives such as property tax breaks.

In practice, though, it’s more complicated.

Quincy has become Washington’s data center hub, with Microsoft as the largest operator and other tech companies continuing to build there. To meet rising demand, the county’s utility wants to add six new transmission lines — a project affecting private owned properties and estimated to cost $260 million, the Seattle Times reports. It’s unclear who will bear those costs and to what extent. Microsoft has committed more than $2.6 million, according to the Times.

Earlier this year, state lawmakers pursued legislation requiring data center operators to cover costs associated with energy deployment and generation — a measure that could have quelled some of the public concern about the facilities. The bill passed the House, but died in the Senate after Microsoft publicly opposed it.

The company expects to spend $190 billion in capital costs this year, largely on AI infrastructure.

Smith said Microsoft supports state-level legislation broadly, but stressed the need to ensure that the benefits of data center developments flow to local communities and that rate payers are protected. He pointed to efforts underway in La Porte, Ind., and Cheyenne, Wyo., as promising new projects.

“People are smart,” he said. “They have a way of sniffing out whether a developer of data centers is going to be responsible or not, and they’re insisting that people be responsible — and I don’t think that’s the least bit inappropriate.”

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