This rendering from Rowan Digital is of its proposed data center, which would be a tenant of the Quantum Loophole campus in Frederick. (Rowan Digital rendering)

Maryland hasn’t been marketed as a prime location for data centers for reasons that range from finding accessible sites to utility costs to its regulatory climate.

Given the increasing need for data storage and the rise of artificial intelligence, the state is tapping that market. A Texas-based company called Quantum Loophole is developing the 2,200-acre Alcoa Eastalco Works smelting plant site in Adamstown, Frederick County.

The vision is Quantum Frederick, which is estimated to support approximately 48,000 jobs in the county during construction between 2023 through 2037, with more than $10 billion in local economic activity and $25.8 million in county tax revenues, according to a new study commissioned by the Maryland Tech Council.

It’s also hoped that the project will lead to further expansion in the state.

River crossing

From the perspective of Kelly Schulz, CEO of the MTC, “One positive of this situation is that Quantum has paid for the expansion of the fiber coming from Loudoun County under the Potomac River to Frederick County, which is the first stop in Maryland.”

However, there are issues. One concerns “barriers set up by the state,” said Schulz, such as one Maryland Public Service Commission ruling that Aligned Data Centers be denied the use of about 150 backup diesel generators at Quantum Frederick. “However, I think they will be addressed.”

Some people are concerned about data centers taking over agricultural and open space, especially since land in Northern Virginia is “getting more expensive and Maryland’s land is cheaper,” said Schulz. There are about 165 data center buildings (many of which house multiple centers) in Loudoun County; and about 42 and 29 centers in Prince William and Fairfax counties, respectively, comprising Northern Virginia’s famed “Power Center Alley.”

The move toward attracting data centers to Maryland “started to pick up steam several years ago,” when Schulz ran the Maryland Department of Commerce. In 2019, she led a group from the state to Silicon Valley to meet corporate executives and discuss their needs.

There was a main caveat. “They all asked about the personal property taxes for data centers and said they would consider coming here” if they were abolished by state lawmakers ― which they were in 2020.   

“And then we did get calls,” said Schulz, “so we’re having those conversations.”

Tax base boost

But there are other issues. For instance, the amount of power required by clusters of data centers can be overwhelming ― there was a supply issue last July in Northern Virginia ― which can call for diesel-fueled emergency generators, hence the Alignable issue; the PSC didn’t consider data centers “critical infrastructure.”

“We have to decrease such barriers,” said Schulz, “and come up with ways to generate emergency power for a cleaner future.”

All told that sounds like “a rather appealing method by which to generate additional tax base,” said Anirban Basu, CEO of Baltimore-based Sage Policy Group, which prepared a study on the topic for the MTC.

“In particular, data centers generate a lot of assessable tax base without creating substantial demand for public services, including public education,” said Basu. “Their development has been at the heart of Loudoun County’s emergence as one of America’s most prosperous counties. 

“Now Frederick County has an opportunity to become a data center hub, generating commercial tax base while helping to shield Frederick County residents from future tax increases,” he said. “Policymakers will need to carefully consider their policymaking regarding energy, however. Excessive regulation could drive up electricity prices rapidly for all users and snuff out Frederick’s prospective data center boom.” 

The regs

That potential is not lost on Victor Hoskins, president and CEO of Fairfax County Economic Development Authority. “Projects like Quantum Frederick will continue to set the stage for sustained economic growth in the Greater Washington region,” said Hoskins, “The diversity of our local economies is a true strength supporting the resiliency of our region and positioning us well for the future.”

Also on board is Mary Kane, president of the Maryland Chamber of Commerce. “The Quantum Frederick project is a catalyst for Maryland’s economic future, promising high-paying jobs, attracting investments and generating substantial tax revenues. Data centers play a critical role in our digital and technological economy, positioning our state as a leader in artificial intelligence and cyber industries.

“ (Maryland must focus) on becoming a highly competitive destination for the data center market, showing tech companies that we’re dedicated to supporting their choice to locate here,” said Kane. “To do this, a stable regulatory environment is crucial, as data centers favor states with streamlined processes.”  

As financially impactful as data centers can be, Lee Kestler, CEO of EdgeCore in Leesburg, Va., questioned the vision of widespread industry success in Maryland.

“Maryland as a whole has had successful technology (i.e. data center) concentration development in certain locations that are specifically based on the federal government,” said Kestler. “That concentration is not in Frederick County, but more toward the metro areas along the southern end of the I-270 Corridor.”

Therefore, Kestler is “not optimistic that development to (Maryland’s) rural west is necessary or possible,” he said. “They need to have access to the end users. It’s no secret the federal government and the Department of Defense have been dominant employers in Howard and Anne Arundel counties and have had the need, and have had such installations, for many decades.”

That opinion withstanding, Maryland’s effort forges on. Today, Schulz is part of a Frederick County Data Centers Workgroup that is preparing a report that is slated to be complete by March 1.

“Like all rural and small town residents,” the people of Adamstown “are fearful of any disruption to their lifestyle,” she said “That’s why this project has barriers” with sound, forestry, etc. “I think we’ve learned lessons from other places around the U.S. that have integrated these projects within their communities and can move forward.”