Data Centers in South Dakota

South Dakota – High Resilience and Clean Power for the Midwest

Executive Summary

South Dakota is a strategic choice for organizations prioritizing physical security and sustainable energy. Its exceptionally low natural disaster risk and aggressive tax incentives make it a premier site for resilient disaster recovery and long-term compute storage.

South Dakota: At A Glance

Network & Connectivity Ecosystem

South Dakota maintains a stable infrastructure purpose-built for regional financial services and healthcare providers. While it is not a global carrier hotel, the network supports high-uptime enterprise operations.

Carrier Density & Carrier Neutrality: There are over 4 carriers active in the state as of September 2025. This density provides sufficient path diversity for localized workloads and secondary site requirements.

Direct Cloud On-Ramps: There are 0 direct cloud on-ramps within the state as of September 2025, enabling access to 0 cloud regions locally. Organizations requiring private links to AWS, Google Cloud (GCP), or Microsoft Azure typically extend circuits to nearby hub cities such as Minneapolis or Omaha.

Internet Exchange Points (IXPs): Public IXPs are limited within the state borders. Most peering occurs through private interconnects or by routing traffic to the nearest national hubs to ensure efficient transit.

Bare Metal: Dedicated hardware services are available for regional needs through providers such as Hivelocity or phoenixNAP. These options provide reliable, dedicated resources for localized workloads that require high performance.

Power Analysis

South Dakota offers a compelling energy profile for operators prioritizing sustainability and predictable costs.

Average Cost Of Power: Industrial electricity rates are $0.23/kWh as of September 2025. The power mix is predominantly renewable, leveraging significant wind and hydroelectric resources. This clean energy profile helps operators meet environmental targets without sacrificing grid stability.

Power Grid Reliability: The local grid is well-engineered and supported by multi-substation redundancy in major data center corridors. This infrastructure is resilient enough to maintain operations during the extreme weather conditions common to the Great Plains.

Market Access, Business & Tax Climate

The business environment in South Dakota is built on long-term fiscal stability and specific support for the technology sector.

Proximity To Key Business Districts: Data centers are primarily located near Sioux Falls and Rapid City, supporting a high concentration of financial services and healthcare companies. Proximity to these sectors allows for low-latency processing of financial transactions and insurance data.

Regional Market Reach: South Dakota effectively serves the Upper Midwest, covering the Dakotas, western Minnesota, and northern Nebraska. It is a preferred site for secondary infrastructure for firms based in higher-risk or high-cost metropolitan areas.

Tax Advantage For Data Centers: South Dakota provides aggressive certification-based tax exemptions for qualified data centers, including sales tax relief on equipment for up to 35 years. These incentives significantly reduce the long-term financial burden of hardware refreshes and facility expansions.

Natural Disaster Risk

South Dakota maintains a very safe profile for physical infrastructure with a FEMA NRI Score of 14.92, which is categorized as Low as of September 2025. This makes it a top-tier choice for organizations with strict security requirements.

The primary natural hazards as of September 2025 include:

• Strong Winds
• River Flooding
• Wildfires
• Winter Weather
• Heat Waves
• Drought
• Ice Storms

Other natural risks, such as earthquakes or landslides, are minor or not material for this inland geography as of September 2025.