A Recommended Approach
Josh Olazabal is an independent consultant with more than two decades of experience at the intersection of utilities and finance. He has served as an energy and utilities consultant for McKinsey, IBM and EY, leading engagements in strategy, regulation, M&A and operations. Josh served as the lead fixed income utility and energy analyst for PIMCO, and as Senior Advisor for Markets and Finance at the U.S. DOE.
Flash back to the 2010 and 2011 timeframe, and my role as a buyside fixed income utility analyst in the wake of the Great Financial Crisis. Every quarterly earnings report was more of the same: utility executives talking about the need to manage costs and regulatory relationships in an era of generally flat load growth.
In conversations with utility management teams, however, one notable and nascent bright spot was starting to emerge: growth in demand for a relatively new asset class, large data centers to accommodate increasingly complex computing needs and large-scale applications. Notably, this initial growth was highly concentrated in the Pacific Northwest and Southeast (Virginia and North Carolina) in order to capitalize on lower power costs in those regions.
Now fast forward to 2024/25, and my role as a consultant for large data centers users and developers, focusing on how next-generation facilities can better integrate with regional power grids to capitalize on renewable penetration to reduce emissions.
The topic of data center growth — now fueled by an explosion in demand from artificial intelligence models and associated training needs — is absolutely ubiquitous. Seemingly, every investor day or analyst earnings call has the inevitable moment where a utility executive team is asked, “Will you be able to take advantage of this opportunity to grow rate base and earnings?”