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Business Environment
Demand in the DFW market often originates from companies with a large presence in the area. However, many companies outside the area evaluating the DFW Texas data center market find it appealing. Data center users find the Dallas/Fort Worth market attractive for a variety of factors. Here’s an overview:
Connectivity
Multiple carriers’ fiber networks blanket the DFW Metroplex connected to a robust last-mile infrastructure. Alpheus (a regional fiber provider based in Texas), CenturyLink, Cogent, EarthLink, FiberLight (another regional player based in Atlanta, GA), Level 3, Sprint, Verizon, Windstream, and XO all serve the Metroplex. Long-haul fiber from multiple carriers connect the urban centers of both Ft. Worth and Dallas. Telecom giant AT&T relocated their world headquarters to downtown Dallas in 2008 and the company’s long-haul fiber is prevalent in DFW. AT&T fiber runs through the Alliance Airport area (home to the new Facebook data center) south to downtown Fort Worth, then west to downtown Dallas, and winds up into the northern suburbs of Carrollton and Lewisville – an area with several large colocation data centers. To the east in Dallas’ northern suburbs of Richardson and Plano, enterprise-grade fiber infrastructure attracted the majority of DFW’s new data center construction in the past five years.
Power
Texas is unique in that it is decoupled from the interconnected power grids serving the eastern and western United States. Among the contiguous 48 states, Texas is the only one that has a standalone electric grid entirely within the state. This means that with few exceptions, Texas produces the electricity consumed within its borders and therefore is not subject to the Federal Power Act, a Depression-era law where the Federal Power Commission oversees all interstate electricity sales. The Electric Reliability Council of Texas (ERCOT), a nonprofit corporation governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature, is responsible for managing 90% of the electricity in the state of Texas.
The State of Texas introduced competitive electric markets in 2002, creating a system where electric generation and supply is a retail business competing for customers while the transmission — often the incumbent owners of power lines — remains heavily regulated. The confluence of a competitive market, the abundance of in-state power sources (notably natural gas), and a standalone power grid have driven power costs in the Dallas/Fort Worth market down over the past few years. This low-cost power makes DFW more competitive, attracting both regional and national transactions.
On the renewable energy front, Texas has a growing supply of wind energy, which accounted for 18 percent of the electricity generated in Texas during 2017, up from 10 percent in 2015. The availability of renewable energy options is crucial to the DFW region’s aspirations to emerge as a player in hyperscale deals.
Due to its intermittent nature, wind energy can be challenging to integrate into power grids. Texas has some advantages on this front, as it has an abundant supply of natural gas plants, which can adjust their power output more quickly than coal-fired plants.
