Alphabet, the parent company of Google, will partner with utility provider Xcel to construct its first data center in Minnesota, accompanied by significant new renewable energy projects, as jointly announced on Tuesday. The facility will be located on a 480-acre site in the town of Pine Island, approximately 70 miles southeast of Minneapolis, with a population of around 4,000. Alphabet had not previously disclosed its involvement in the project. The center is intended to support artificial intelligence applications and Alphabet's broader cloud services.

The proposed Pine Island data center has faced community opposition but received support from the city council and has not yet broken ground. Data centers are encountering increasing political resistance across the United States, with some communities citing them as contributors to rising electricity prices and expressing concerns about environmental impacts. Such facilities also require substantial water resources for cooling.

Alphabet declined to disclose the projected electricity consumption of the data center. The technology firm stated it will cover all costs associated with necessary grid infrastructure. The Minnesota Public Utilities Commission must still review the agreement between Alphabet and Xcel.

"Alphabet is ensuring that our presence does not impose additional costs on other taxpayers," said Amanda Peterson Corio, Head of Energy for Alphabet's Data Centers, in an interview with CNBC. "We will fully cover our energy and electricity expenses and ensure that grid capacity is expanded to meet our demands."

Bria Shea, President of Xcel Energy for Minnesota, North Dakota, and South Dakota, indicated that the Pine Island data center will require additional transmission infrastructure. Corio confirmed that Alphabet will bear the costs of all new transmission facilities, even if the data center project does not proceed.

Under the agreement with Xcel, Alphabet will facilitate the deployment of 1,400 megawatts of wind power, 200 megawatts of solar energy, and 300 megawatts of battery storage to the grid. These renewable projects will be owned by the utility and are expected to become operational in 2028 and 2029, according to Shea.

Alphabet will also pay a premium for renewable electricity under a rate mechanism designed to protect consumers from infrastructure costs while accelerating clean energy deployment in Minnesota.

Local residents have formed a group named "Stop the Pine Island Data Center." The Minnesota Center for Environmental Advocacy filed a lawsuit in October challenging the project's environmental review.

As reported by local television station KTTC, the Pine Island City Council approved two preliminary development plans for the data center in December and endorsed financial incentives, including $36 million in tax abatements, in February.

City Administrator Elizabeth Howard stated that Pine Island is projected to receive over $130 million in tax revenue from the project, according to KTTC.

Minnesota has not traditionally been a major data center market, but large technology companies are increasingly showing interest in the state. Currently, Minnesota hosts 74 data centers. In comparison, Virginia, the world's largest market, has 570 such facilities.