Below, Andrew Webber, formerly an investment banker at Goldman Sachs and an investment manager at Wall Street firms like Surveyor Capital and Fortress Investment Group, and currently the CEO of Digital Power Optimization (DPO), taps into his experience to offer insights as to how data center loads can create significant benefits for hydro asset owners and operators.

In today’s rapidly evolving energy landscape, the hydropower sector faces both opportunities and challenges – aging infrastructure, shifting regulatory requirements, and volatile energy markets have only added new layers of complexity for hydro operators and investors. Meanwhile, the explosion of demand for digital infrastructure, fueled by artificial intelligence (AI), blockchain network security (like bitcoin mining), and cloud computing services, has created a powerful new opportunity for value creation: co-locating data centers with hydroelectric generation assets.

As someone working intensely at bringing together the data center and hydropower industries, I have seen firsthand how a strategic partnership between the two can deliver meaningful benefits for all parties involved.  At its core, co-location allows hydropower operators to generate stable, long-term revenues from digital workloads, while enabling data center operators to access clean, renewable, and highly reliable power at competitive prices.

One tangible example of this opportunity highlighted below is a midwestern hydro facility, where a flexible computing deployment utilized over 43% of the hydropower created in 2024, while producing topline revenues of $86.22 per megawatt hour, or 257% more than the $24.14 earned by selling into this grid. This differential created over $500,000 in incremental annual earnings before interest, taxes, depreciation, and amortization (EBITDA), effectively rescuing a marginally economic hydro asset and returning it to profitability. Many asset owners could create similar uplift at their own facilities.

CASE STUDY OF CO-LOCATION IN ACTION

In February 2025, DPO and Consolidated Water Power Company (CWPCo) announced a collaboration to develop a 20 MW power-dense AI computing facility in Wisconsin Rapids, Wisconsin. The project was planned and designed to leverage CWPCo’s system of five hydroelectric projects, as well as other in-place transmission and distribution infrastructure, to accelerate its deployment timeline and reduce up-front interconnection costs.

For CWPCo, the benefits are equally compelling. By supplying firm power to a data center that operates continuously, CWPCo could capture incremental offtake revenue without needing to materially overhaul or expand its existing distribution system. Just as importantly, the addition of a large, local load would enable CWPCo to allocate its transmission and distribution (T&D) charges over a larger volume of delivered energy, effectively reducing the cost per megawatt-hour for all other customers on the system. It’s a powerful illustration of how new energy consumers can actually lower systemwide costs rather than increase them.

An artist’s rendering of the proposed DPO AI data center.

THE MYTH OF THE “BAD NEIGHBOR” DATA CENTER

Despite the growing interest in data center-hydro partnerships, some myths and misconceptions still cloud the conversation. Perhaps the most persistent is the notion that data centers are just energy hogs that provide little local value while straining regional infrastructure.

This perspective often fails to consider the nuances of different types of data centers. The stereotype of the hyperscale cloud facility demanding hundreds of megawatts with little regard for local grid conditions may apply in rare instances, but in most cases, especially those involving regional or co-located builds, the picture is far more balanced.

In many cases, hydroelectric facilities were originally constructed to power loads that no longer exist. The closures of manufacturing plants, steel production, paper and pulp mills, and many other industrial operations over the past 70 years have left many hydro owners desperately seeking new load rather than having too much.

In DPO and CWPCo’s plans, the AI data center is being sized appropriately to make use of the power that is readily available (20 MW), so as to not cause new strain to the grid. It does not require new transmission corridors, prohibitively expensive upgrades, or land use changes beyond what is already in place. In fact, this project would enhance grid stability by offering a predictable, steady baseload demand, which helps absorb generation during off-peak hours.

Moreover, data centers bring tangible economic benefits to local communities, including capital investment, ongoing operations jobs, and increased tax revenues. In regions where industrial power demand has declined due to the loss of industry, data centers can serve as a 21st-century anchor customer.

A photograph of the Hatfield project during development in 1907.

BITCOIN MINING AS ENERGY ARBRITAGE AND GRID MANAGEMENT

While AI workloads are generally inflexible and require constant power, proof-of-work computing, such as bitcoin mining, represents an entirely different class of opportunity.  These operations are effectively low-cost modular data centers, which are able to scale their power consumption – up or down – and respond in real time to market signals or match intermittent generation assets.

DPO both deployed and operates a 1.8 MW bitcoin mining facility on behalf of different independent owners of a hydro asset in Hatfield, Wisconsin, where flexibility was a critical requirement. During dry seasons when hydro output is limited, and during periods of grid strain, the computing load can be curtailed, preserving generation for higher priority uses, often at premium pricing.

This approach turns the computing load into a dispatchable asset, serving both operational and financial goals. As noted above, this flexible computing deployment created over $500,000 in incremental profitability. Additionally, by curbing power usage during grid emergencies, the facility acts as a virtual peaker plant, reducing pressure on nearby utilities and contributing to overall grid resilience.

A look at the Hatfield site’s Application Specific Integrated Circuits (ASICs).

A SPECTRUM OF CO-LOCATION POSSIBILITIES

Hydropower owners and operators should not assume a one-size-fits-all model when it comes to data center integration. In some cases, a lower-cost, flexible computing facility may be the most practical solution, particularly for sites with seasonal generation, limited interconnection capacity, or rural land constraints.

In other cases, more sophisticated AI, cloud, or other high-performance computing (HPC) facilities may be viable if certain conditions are met: firm power, access to fiber, stable long-term land leases or outright ownership, favorable regulatory and tax regimes, permitting for back-up generators, among others. These facilities demand more robust infrastructure and longer development timelines but offer higher revenues and better long-term value for computing and energy partner alike.

In other situations, the challenges may outweigh the benefits. Costly T&D system upgrades, limited backhaul connectivity, geographic challenges, and concerns related to the site itself (flood zones, weather-related hazards, protected ecosystems) may render a site unsuitable. Yet, across North America, there are dozens if not hundreds of hydroelectric stations with the potential to participate in this new era of digital offtake and co-location.

A view of the Hatfield Dam.

A NEW PLAYBOOK FOR HYDRO ASSET VALUE

The co-location of data centers with hydropower generation is more than a novel idea – it is a pragmatic strategy that offers real, measurable advantages.

Through the creation of a premium market for renewable energy detached from reliance on subsidies or renewable energy credit programs, co-locating data centers with hydro could improve infrastructure utilization and spread system costs across a larger customer base, offering grid services and stabilizing effects during times of volatility.

Most importantly, co-location creates new pathways for hydro operators to unlock trapped value and reimagine the future of their assets.

For hydro owners, investors, and regulators seeking innovative, commercially sound solutions to extend the life and value of clean energy assets, this model deserves a closer look. The time has come for the hydropower industry to step boldly into the digital age, not as a passive energy source, but as a strategic partner in powering the technologies that will define the decades ahead.