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IBEW

Data Centers: A 21st Century Goldrush

IBEW is busy building data centers to keep up with the growing need for more cloud storage space

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by Guest Post on
Dec 15, 2021

This article was written by the IBEW Media Center.

In the 130-year history of the IBEW, there has never been anything quite like the explosive growth of the data center business.

Fifteen years ago, the entire industry barely existed.

A handful of IBEW locals saw a few hundred members building small-scale data centers in specific tech-heavy corners of the country like Silicon Valley, northern New Jersey and a few suburban Virginia towns west of Washington, D.C.

Today, data center construction has become a juggernaut nationwide, providing tens of millions of work hours from coast to coast, in small towns and big cities alike.

Statistics are hard to come by in this notoriously secretive industry, but there at least 10 data center projects worth $1 billion or more underway and thousands, most likely tens of thousands, of IBEW members at work on data centers every day.

"We have had about 500 to 1,000 members working on data centers for the last 10 years," said Columbus, Ohio, Local 683 Business Manager Pat Hook, "and we have at least 10 more years of work at the same level. It is half our hours."

Local 683 only has 2,000 members.

A single building in Chicago uses more energy than any Commonwealth Edison customer other than the 11-square-mile O'Hare International Airport, and it was gutted and rebuilt entirely by members of Chicago Local 134, according to Business Manager Donald Finn.

"There are four fiber vaults and three electric power feeds, which provide the building with more than 120 megawatts of power and about 50 generators throughout the million square feet," he said. "The amount of pipe and wire that went into that building is nothing short of incredible."

Atlanta Local 613 Business Manager Kenny Mullins estimates his local has worked about 25 million man-hours in the last five years and 65 million in the past decade on data center jobs. One project, the QTS Mega Data Center, will use 275 megawatts of power when complete and has two Georgia Power substations on site.

"Oh my God that thing is huge," he said. "These projects are blow-your-mind big."

The global heart of the data center construction industry is an unlikely corner of northern Virginia around Ashburn and Manassas, which boasts the largest concentration of data centers in the world. Due to its early status as an internet exchange point and the area's importance to the history of the internet, it functions as something of a global hub with more data center capacity than the rest of the country combined. Nearly 40% of Washington, D.C., Local 26's membership is at work on data centers and has been for a decade.

A single large signatory contractor, Dynalectric D.C. alone has built nearly 1,700 megawatts of data centers, more than the total in any single country except China and the U.S., according to CEO and 46-year IBEW member Paul Mella.

Because the main customers for data centers demand exceptional secrecy, reporting about them has been nearly impossible. The largest customers are the enterprise builders who build and own facilities for their own customers' use: Amazon, Microsoft, Facebook and Alphabet, the parent company of Google. They require non-disclosure agreements for all contractors and locals, and the independent builders follow the same policy.

Because of the secrecy, the scale of data center construction is highly debated and possibly unknowable. Industrial Info Resources, the bible for contractors looking to bid work in North America, reports that between $25 and $35 billion in contracts for data centers have been awarded in the last seven years. But another industry expert, CBRE, reported there was $20 billion in new construction in 2017 and 2018 alone. A single project in Atlanta exceeded $2.5 billion.

At least another $25 billion is under construction and contracts worth more than $40 billion have been announced and are in some stage of being bid.

But no one in the industry believes that captures anywhere near the true amount.

"The overall money spent on data centers, it would be a real guess," said Sabey Data Centers President Ron Rockwood. "This is not captured in any data we see."

Beyond corporate secrecy is the actual cloak-and-dagger nature of the vast array of government data center work, often involving the military or intelligence community.

Though the exact numbers aren't known, one thing about data centers is certain: They are enormous producers of demand for union electricians. As far as can be known, nearly all of that work is done by IBEW signatory contractors.

In northern Virginia alone, Mella believes the union market share on data center projects is about 97%. And it's a lot of work on each venture. While it varies based on design, Mella and Rockwood estimate that between 45% and 70% of data center construction costs go to the electrical subcontractor.

"Data centers are our new powerhouses," Mullins said of their near-constant need for manpower. "They have an intense concentration of cabling, wiring, data, power distribution, backup power, high voltages, substations, transformers — everything on a grid other than generation at multiple buildings on a single campus. And by the time we build out and equip Building 4, we have members working daily in Buildings 2 and 3 and stripping out and replacing already-obsolete chillers and servers in Building 1."

Business Development Director Ray Kasmark said the scope of the projects and scale of demand for skilled electrical workers put data centers at the center of his department's work.

"We have three priority industries we concentrate most of our effort on, where we see the potential for the largest, sustained growth in our hours: e-commerce, renewables and data centers. That's how important this is," he said. "And of the three, data centers is the most prolific market I have ever seen."

What Is a Data Center?

Not that long ago, every working inside wireman in the IBEW had built something close to a modern data center on a vastly smaller scale: the many server closets that populated the average office building.

Businesses had IT departments that built and maintained individual networks of their own and all the company's data lived on hard drives, tape and optical disks in that room.

That began to change about 20 years ago when, as part of the original dot-com frenzy, billions of dollars were dumped into a national trenching campaign building out a fiber optic broadband backbone so wildly excessive that there were multiple, spectacular billion-dollar bankruptcies and a glut of bandwidth for nearly 15 years.

At that time a typical large data center was maybe $150 million, 150,000 square feet and was a specialized service for big banks and online-only companies.

Then, in 2007, the iPhone was released and, for the first time, a genuine consumer demand for cloud-based storage was born. At about the same time, Digital Realty built the first data centers measured not in square feet but in megawatts consumed by the servers, routers and HVAC systems on site.

With bandwidth cheap, online storage increasing and ever more apps and business management systems offering easy migration to the cloud, the race was on.

"That started the double-digit growth we have seen in the last decade, and I expect to see 12-18% growth in wholesale megawatts for the next decade," said Jeff Kanne, President and CEO of National Real Estate Advisors, which owns half of Sabey and manages a significant portion of the real estate investments for the National Electrical Benefit Fund and the National Electrical Annuity Plan, the IBEW's multibillion-dollar retirement funds.

Then the pandemic hit, and demand for online storage went stratospheric.

Hundreds of millions of office conversations shifted to Slack and Microsoft Teams. School became a daily appointment with Zoom and Google Classroom. And when the day was done, the screen stayed on. We binged, we streamed, we Facetimed.

Today, 100-megawatt, billion-dollar buildings on multi-building campuses may not be the norm, but they are far from extraordinary.

The cloud, of course, is the insubstantial term developed by advertisers to hide the silicon reality of the internet's memory banks: data centers. All those videos we upload to YouTube or Facebook or send to grandma have to live somewhere, often redundantly in many places.

"The deadlines the customers face are brutal. Every day they aren't operating costs them a fortune, and if their competition finishes first, their customers will walk. It has to be done fast, right and safely and only highly skilled tradesman can do that," Kasmark said. "If they can get it done a week early, they're doing cartwheels. It's millions of dollars to them."

Ten More Years of Double-Digit Growth

The data center is one of those places where the virtual world exists in reality. It is a component of the physical infrastructure of the internet along with trans-oceanic data cables and internet exchanges. While information only traverses the cables and exchanges, it lives in data centers. And as more businesses, people, and things — literally things like smart vacuum cleaners and refrigerators — collect and store data, the need for places to put them is skyrocketing.

How the decision is made to site a data center is basically the same for all customers, Rockwood said.

"They are built at the confluence of low-cost power, connectivity and talent. The biggest data centers add proximity to airports and stability of environment: No hail. No earthquakes," he said.

The top markets, where work has been nonstop for nearly 15 years, have been quite stable. First is Data Center Alley, the area between Washington's Dulles International Airport and Ashburn, Va., that formed one of the earliest and most important nodes of the early internet, itself a project of DARPA, the Defense Advanced Research Projects Agency.

The Pentagon, CIA and National Security Agency and a host of other "three-letter agencies" like the Defense Intelligence Agency and National Geospatial-Intelligence Agency are located within 50 miles of Ashburn. One of the first transatlantic fiber optic cables landed not far away in Virginia Beach and one of the first internet exchanges, MAE-East, was located close by.

The exchanges are where the networks run by telecoms, universities and other private networks all come together in a single location and interconnect — the "inter" in internet.

Fifty years ago, Ashburn and Manassas were little more than rolling hills and farms sprinkled on and around Civil War battlefields.

Today, the area is in many ways the physical location of the internet itself. Promoters of the so-called Digital Alley frequently say that more than 70% of all internet traffic travels through the servers blinking and glowing there.

After Northern Virginia comes, in order, Dallas, Silicon Valley — despite the high-cost energy and biblical threats of earthquakes and fires — Atlanta and the New York City area.

Over the next 10 years, Kanne said the undisputed champ will still be northern Virginia, but the most significant growth will be in locations with ample cheap, clean power, including Seattle, Portland, Ore., upstate New York, and north Texas.

This doesn't mean that the smaller markets won't see work.

The large enterprise data center constructors — internet companies that build data centers for their own online customers — often seek out smaller population centers with favorable power pricing and available land. Places like Forest City, N.C.; Altoona, Iowa; Papillon, Neb.; Albuquerque, N.M.; and outside of Columbus, Ohio, are just a few.

"We've built 30 data centers around Columbus," said Local 683's Hook. "One company has 10 buildings with room for 20 more. Another will have a total of 10 to 12 buildings on their first site, and we are just on Building 3 with two more sites planned."

Hook says it is difficult to explain what the boom has meant for his local.

"In 2015, we were still coming out of the recession. Three projects cleared our books entirely, Hook said. "Now we are seeing our members working 50 to 60 hours a week, sometimes two shifts, with 100 to 300 members on each project with multiple projects. It is a tremendous organizing opportunity for us."

Next door, Newark, Ohio, Local 1105's jurisdiction includes another dozen data center campuses, including two worth a combined $1.3 billion. Another company has announced plans for 12 more data centers in central Ohio with a cost it chose to keep to itself.

Across the country, a similarly huge investment landed in a smaller market. A single enterprise data center builder has announced investments of at least $1 billion for a multi-building campus in the jurisdiction of Albuquerque Local 611.

Nearly 450 members have been on site for five years and Local 611 Business Manager Pete Trujillo said they expect to be there for 10 to 12 more.

"We are already back in replacing HVAC and servers in the first building before we have finished half of the planned campus," he said. "It's like painting the Golden Gate Bridge; by the time you get close to done, the first part needs repainting."

The inside and outside construction local has seen additional work from the bottomless demand for power. In the site purchase agreement, the company committed to constructing three new high voltage transmission lines to the site and signed a power purchasing agreement that will allow the construction of a new grid-scale solar installation in the state. All that work has been going to members of Local 611.

Sabey plans a similar project combining a data center with solar generation in the near future, Rockwood said. While details remain secret, he said that the project will be the world's first net-plus data center, producing more power than it consumes. And, again, every electrical worker on it will carry an IBEW membership card.

That same enterprise data center customer putting so much of Albuquerque's IBEW membership to work recently announced plans to build an $800 million data center in Gallatin, Tenn., along with 220 megawatts of in-state, new solar generation to run it. It also announced another $800 million facility outside of Dekalb, Ill., powered by 100% new construction of wind and solar. The company's prediction is that, at peak, there will be close to 1,000 tradesworkers on the Tennessee project alone. Historically, the company has only used union electrical workers on its projects, and that is expected to continue to be the case.

The Lifecycle of the Data Center Construction Project

Data centers are a new kind of construction, a new industry, but the skill set that goes into building them is not terribly different from the everyday work IBEW electricians do on any commercial or industrial job: pulling wire, bending conduit, building panels and substations.

What differentiates data center projects is the speed and the scale.

Brian Brobst, vice president of preconstruction at signatory contractor Rosendin Electric, has been involved in designing and building data centers for more than three decades. He said the speed of projects is often limited by the supply chain shortages of equipment — anything with a chip and the specialized cabling trays are particularly slow — but it is accelerating, nonetheless.

The demand for cloud services, spurred by the pandemic, means there was no time for delayed construction.

"As soon as the center is finished, the demand is there and the company starts making money, so the need for speed is more imperative than the need to hold costs down, all things being equal," Brobst said. "In the last 24 months we delivered 32 megawatts of data center from scratching dirt to commission in six months."

On that job, he said, they peaked at three shifts.

This has involved more prefabrication, including at Dynalectric jobs, using complete computer models to precisely bend most conduit off site. This, Rockwood said, will lower construction costs, without lowering labor costs.

And then there is the scale. Brobst said it isn't even helpful to think about the work in terms of buildings, or even megawatts.

"There are no one-offs. Every project has X number of additional phases and there are 10 projects on a single campus, multiple buildings with multiple phases," he said. "They are programs, not projects."

That makes managing and recruiting a skilled work force a significant issue, Brobst, Mella and Rockwood all agreed. And while the technology is changing radically, most of that change is happening inside the servers, meaning demand for trades workers is not likely to go down soon, Rockwood said.

All of them spoke about the importance of the IBEW's hiring hall meeting the demand for workers.

And they all spoke about the importance of bringing the next generation of skilled trades worker into the IBEW.

"If I were an electrician, what I would want to know is, 'Am I being taught the right things to maintain a career?' The simple answer is yes," he said. "The key for electricians and contractors is quality. You have to be good at your job. Apply what you know well and you will kill it and this industry will make sure you do."

Brobst agrees. "I don't have a crystal ball, but looking at the markets, all indicators are that we have years before we have to be concerned about this market dipping," Rockwood said. "The message we want is that there is a tremendous opportunity for electricians to work in this environment and grow. There is so much work."

Kasmark, though, wants to leave organizers, international representatives and business managers with a warning: Demand for electrical workers is growing everywhere and we need to ramp up or we will lose even as we gain.

"When big opportunities came along in the past, we walked away from other work and focused on all the OT and hours on the shiny new thing. We cannot afford to do that again," he said. "For the first time since I was in college, we have more work than workers and will do for the near future. We have to ramp up apprenticeships, ramp up organizing, bring in open shops. We can't gain with one hand and give it all away with the other."

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