Lincoln company helping to power data centers

While Nebraska works to slow down data center development within its borders, a company in Lincoln is taking advantage of the data center boom.

Hexagon Agility, which specializes in making composite storage modules for compressed natural gas, recently received a $100 million order – its largest ever – for its mobile pipeline modules to supply natural gas to multiple hyperscale data centers across the U.S. The contract could grow to $125 million if an option is exercised.

Mobile pipelines are essentially semi trucks full of large tanks holding compressed natural gas. They can deliver natural gas to places where pipelines are either non-existent or can’t expand fast enough to keep up with demand.

That’s become important as the data center boom in the U.S. has begun to outpace the supply of energy needed to run them. With so-called “hyperscale” data centers now being built in rural areas and far-flung places such as the Arizona desert, the projects are running into situations where energy infrastructure is far behind. In many U.S. regions, power and pipeline infrastructure delays frequently exceed four years

"Data centers are being built faster than the energy infrastructure needed to support them,” said Philipp Schramm, CEO of Hexagon Composites, the parent company of Hexagon Agility. “This record mobile pipeline order reflects the increasing need for flexible energy solutions that can be deployed quickly, while permanent pipeline infrastructure catches up."

Hexagon’s mobile pipeline product is helping to fuel what’s called “behind-the-meter” power development, or temporary, dedicated power plants.

In some cases, data center developers have restarted decommissioned power plants. But in many cases, they have to create their own temporary plant from scratch, often using gas turbines.

Christopher Louney, a commodity strategist at RBC Capital Markets, reported in May that data center developers have announced approximately 101 gigawatts of behind-the-meter natural gas generation capacity. That would produce enough electricity to power more than 75 million homes.

A report earlier this year from energy market intelligence company Cleanview found that 25% of all data centers currently under development in the U.S. plan to utilize behind-the-meter power sources, at least initially.

That has all added up to a big opportunity for Hexagon, which is based in Norway but has a large manufacturing operation near the Lincoln Airport.

Chet Dawes, senior vice president of global engineering and research & development based in Lincoln, said Hexagon’s mobile pipeline product offers data center developers a way to move forward when they otherwise might have to sit and wait for a gas pipeline to be expanded or even built from scratch.

“They may need to upgrade a pipeline, if not establish new pipelines of gas supply, in order to start them up and be in that position, and some of that can take years to develop,” Dawes said.

“Whereas, you know, (with) our products, they could have a continuous gas supply without the pipeline in place until they have the permanent installation in place, and they can move ahead with timelines that otherwise may not be possible.”

Hexagon, which makes carbon-fiber tanks for storing and transporting renewable fuels, traces its history in Lincoln all the way back to 1963, when it got its start as Lincoln Composites, a subsidiary of Brunswick Corp. The Norwegian firm bought the company in 2005 and has continued to make tanks in Lincoln ever since.

The mobile pipeline product was created more than 15 years ago and has served large industrial plants as well as oilfields. In 2018, a couple of the modules were used at the Olympics in Russia.

Dawes said data centers are a natural new market.

“We created a product line to support high energy users, and data centers are one of those,” he said.

How long that new market might last is up for debate.

Louney, in his report, predicts that natural gas demand for data centers will continue to be strong through at least 2030.

"Beyond 2030, we anticipate zero-carbon energy sources will gain relative share, but natural gas is likely to retain a significant operational role based on current technology trajectories and infrastructure development timelines," he wrote in the report.

Data centers also are facing pushback from governments at the local and state levels. New York just became the first state to issue a statewide moratorium on data center development. In Nebraska, more than a dozen counties have approved moratoriums and several others are considering them. On Monday, Gov. Jim Pillen announced the state will no longer give tax incentives to data centers, and he cited water and electricity use among the reasons.

Dawes said he sees concerns about the amount of resources data centers use as legitimate, and while they are making great strides at becoming more efficient, there is still a ways to go.

"They're going to have to be more efficient than they are today, and I think they have been growing that way to counter some of that opposition," Dawes said. "I think, if you look back a few years, where those data centers were for consumption versus where they are now, they're much more efficient, but the demand has been outpacing that efficiency gain and growth. So, there's there's still some catching up to do from a sustainability standpoint of the growth.".