DOWAGIAC, MI – A data center and cryptocurrency mining company based in Las Vegas says it will double its footprint in a small Michigan town and increase its energy needs in the coming years.
Local authorities say it’s just news to them.
The company, Hyperscale Data, Inc., has announced the plans in press releases but has yet to provide development plans, leaving officials in the city of Dowagiac, which has about 5,700 residents in southwest Michigan, with nothing to share with residents.
This leaves some unsettled, as a growing number of Michigan residents grapple with the possibility of adopting data centers, warehouses equipped with cloud computing servers and artificial intelligence.
Hyperscale Data Support, Alliance Cloud Services, LLC, is located in a former industrial building in Dowagiac, located an hour from Kalamazoo and about 20 miles from the Indiana state line.
It bought the facility for $3.8 million in 2021, according to Cass County records. It now has a small data center that is changing from Bitcoin mining to support growing AI and high computing performance requirements, according to regulatory documents from the company.
On Monday, March 30, the company announced that it has entered into a deal to purchase 48.5 acres to “expand its Michigan campus,” although it did not specify exactly where. Dowagiac was not named in the announcement, which said the purchase would be completed in 60 days.
“We have the same questions as you do. The town did not know about this operation. We learned about it the same way you did, from a press release,” Dowagiac town officials wrote on Facebook later that day.
It may be unusual for a business to negotiate with the city when buying or selling property, but Dowagiac also has no development plans to discuss to address residents’ concerns, according to City Manager Kevin Anderson.
The city had a similar experience last year when Hyperscale Data announced plans to increase its Michigan campus from 30 to 340 megawatts, enough to power about 200,000 to 300,000 homes. The expansion, which is part of a process to serve AI and more machine learning tasks, is expected to be completed in 2029, with the first phase coming in 2027, the company said in a press release.
“I don’t want to say it was a complete surprise, but the announcement that it was close and there were no plans coming up, or any of that stuff, kind of freaked us all out,” said Anderson.
City officials have not signed nondisclosure agreements with the company, he said, something data center developers require in other Michigan cities.
So far, the firm has not sent applications for permits or expansion plans to the city, he said, although the authorities have known for a long time that they planned to expand its data center, which would need to find a source of energy.
Such a plan could trigger public approval processes, Anderson said, but it’s hard to know exactly which until the formal application reaches city hall.
It is not known exactly when that might happen.
Hyperscale Data did not immediately respond to an email seeking comment on Wednesday, April 1. When an MLive reporter called, what appeared to be an AI chatbot took the message.
At 340 megawatts, the data center would be much smaller than the 1,400-megawatt project for ChatGPT developer OpenAI and cloud computing giant Oracle under construction in Saline Township, south of Ann Arbor, or Google’s proposed data center in Wayne County’s Van Buren Township, rated at 1,000 megawatts.
But unlike many other large data center proposals emerging in Michigan on land or undeveloped parcels, the Dowagiac project uses an existing industrial building called the Business Center of Southwestern Michigan at 415 E. Prairie Ronde St.
It has a long history in the city, once home to a furnace manufacturer and most recently a copper tubing company that closed in 2008, according to Anderson. Parts of the 617,000-square-foot building are already leased to several businesses.
Since the Las Vegas technology firm moved, some residents in a nearby residential area have complained about the constant noise coming from the facility.
The company repaired some equipment after the city raised concerns, Anderson said. Last month, city leaders enacted a noise ordinance with certain decibel limits, and Dowagiac will begin monitoring conditions and enforcing the rules as needed, he added.
Anderson said he can see the benefits of the data center expansion. It can prevent an old industrial base from deteriorating, increase the tax base, and create job opportunities. But that won’t come at the expense of the environment, he said.
The Dowagiac City Council has brought in outside experts to help plan and manage local data centers, in preparation for deployment.
“They want to make sure the right thing is done for the neighbors and businesses in this community,” Anderson said. And they are still motivated to study this subject until now.
Since the property is designed for industry, data centers are allowed. The company had to move to a smaller town to allow operations to begin there, Anderson said.
But how exactly the company plans to increase power availability for the project is unclear. It is currently operated by the Indiana Michigan Power utility, I&M.
Hyperscale Data said in a press release last year it had reached an “agreement in principle” with an unnamed local utility to increase available power by up to an additional 300 megawatts, to compete with the smaller city’s draw.
A spokesperson for I&M confirmed that it is working for the company, but said that I&M does not have “any agreements or commitments to grant them much of the said power.”
“We have a robust process to analyze major extensions to ensure we can serve all customers reliably,” a utility spokesperson said in a statement.
Since the high demand for computer systems can require significant investments in power lines and factories, many utilities are looking to create data center service agreements in a way that will help ensure that existing customers will not have to pay the costs.
I&M is currently seeking approval from Michigan regulators for a power rate structure to serve large projects such as data centers, including those types of security.
Hyperscale Data also said it has an agreement with SEMCO Energy Gas Co. in Michigan to design and engineer new gas distribution systems that enable an additional 40 megawatts of power generation at the site.
Tim Lubbers, a spokesman for SEMCO, referred questions about the details of the potential project to Hyperscale Data. He said: “We are responding to many requests for gas service throughout the country.”
The city of Dowagiac has reached out to Hyperscale Data for more information about its plan, but so far it doesn’t have much to share.
“I don’t have anything more than what they put in their announcements,” Anderson said.
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