Project Loon: Google’s Hermantown Data Center Through a Developer Lens
- Yoann Hispa
- Mar 4
- 4 min read
The secret is out. After months of speculation surrounding “Project Loon,” Google has officially been revealed as the developer behind the proposed $650 million data center campus in Hermantown, Minnesota.
While local headlines focus on community pushback and environmental lawsuits, energy and data center developers should be looking at the "why" behind the site selection. In a market where power is the ultimate currency, the Hermantown project is a masterclass in infrastructure-first site selection, and a cautionary tale in regulatory transparency.
The Magnet: The Arrowhead Substation
The MPR News report highlights that the 400-acre site sits directly adjacent to Minnesota Power’s Arrowhead Substation.
For developers, this is the "Golden Ticket." The Arrowhead Substation is a critical regional hub with existing connections to wind, solar, and hydro. By siting here, Google minimizes the need for miles of new high-voltage transmission lines, significantly reducing both CAPEX and the "time-to-power" window.
Google’s contract with Minnesota Power opens up a pathway coined as a ‘Clean Energy Accelerator’ where there is a perfect balance between high energy demand for the facility and a renewable path to that power. Triggering the development of 700 MWs of renewable energy, the campus is able to utilize demand flexibility without shifting costs to consumers. The addition of 400MWs of battery storage also acts as a shock-absorber, ensuring stability during volatile LMP fluctuations, improving grid reliability for everyone.
While Google is responsible for transmission costs for this project, the fixed costs of maintaining the grid are spread across a larger revenue basis, ensuring stability in rates for consumers over time across what we know to be a fluctuating grid.
The Energy Mix: 24/7 Carbon-Free Energy (CFE)
Google isn’t just buying power; they are reshaping the local grid. Alongside the Hermantown announcement, Google committed to funding wind farms and battery storage in partnership with Minnesota Power. This follows a similar 1,900 MW renewable agreement for their Pine Island site. Google has also pledged $5 million in energy impact funding to 'help bolster Minnesota Power’s energy affordability and efficiency programs for low- to moderate-income residential customers'.
This "colocation of load and generation" is the new standard for hyperscalers. Developers are no longer just building "shells"; they are acting as catalysts for utility-scale renewable deployment.
The Cooling Pivot: Air vs. Water
A major point of contention in Hermantown has been water usage. Google has mitigated this by proposing advanced air-cooling technology, stating they will only use water for domestic needs.
Ultimately the facility pledges to only use water for logistical purposes such as fire security and in-house uses. Google’s request for 50,000 gallons of water a day matches up to the demand of a ‘light-industrial building’ vs asks for a hyperscale data center, which could be anywhere between 300,000 and 5 million gallons a day. Furthermore, Google owns costs for all additional pipeline development, which will then be turned over to the county to be publicly owned. Not only does this model reduce costs for the consumer by providing development that would otherwise be tax funded, but also signifies a shift to community-based data center development thereby opening up areas nearby for residential use and access to water.
For developers, the move to air-cooling is a strategic response to the increasing difficulty of securing water rights. However, air-cooling in northern climates like Minnesota leverages the "free cooling" of the ambient environment, but it can also increase peak electrical load during summer months compared to liquid cooling.
Northern Minnesota’s grid is able to leverage wind and electrical energy and promises ‘free-cooling’ for over 90% of the year. Compared to Southern Minnesota or warmer markets such as Northern Virginia, the grid costs increase due to high demand and heavy reliance on liquid cooling infrastructure. Google’s initiative allows them to build the stability they need, considering a slightly volatile LMP trend in the area, the developers are able to capture lower prices without risking uptime. Compared to Virginia and Southern Minnesota, more saturated markets and higher demand lead to higher prices and a longer pathway to power.
By leveraging their ESA with Minnesota Power, Google is able to open up a ‘green pocket’ for data center development where arbitraging BESS LMPs mean storage and charge during over-production of wind power. Coupled with Form Energy’s Battery Models, the fuel cells on site would enable higher storage capabilities across extended time periods. Discharging power when the grid is stressed during peak hours ensures this model not only reduces OPEX for Google, but translates directly into higher PUEs for the facilities since energy is more efficiently distributed. Ultimately, this means lower costs for a higher MW operational scale.
The Bottom Line: Lessons Learned from Google's Hermantown Development
Google’s move into Hermantown confirms that the "Grid-First" approach to site selection is no longer optional, it is the industry standard. As hyperscalers hunt for the next 500MW+ offtake, the winners will be the developers who can map the grid with the same precision Google maps the world.
Google’s meticulous planning and partnership with The City of Hermantown reshape data center development for all. Using an AUAR (Alternative Urban Areawide Review), the city has been able to plan for all environmental scenarios with the tech giant before the project hits the ground running - ultimately shifting data center development to a community based project that prioritizes collective growth for all parties involved.
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