Data Centers in South Dakota

South Dakota – Cost-Effective & Resilient Infrastructure

Executive Summary

South Dakota is a strategic market for companies prioritizing operational resilience and cost control. It is an excellent location for disaster recovery sites and workloads that are not hyper-sensitive to latency, offering significant savings through robust tax incentives and a stable, low-risk environment. These financial advantages directly improve profitability for large-scale deployments.

South Dakota: At A Glance

Network & Connectivity Ecosystem

Carrier Density & Carrier Neutrality There are 4 main network providers active in South Dakota, as of September 2025. While the local market is modest, these carriers provide redundant connectivity to primary national hubs in Minneapolis and Denver, ensuring reliable data transit for regional and disaster recovery workloads.

Direct Cloud On-Ramps South Dakota has no direct public cloud on-ramps, enabling access to 0 cloud regions locally as of September 2025. Businesses connect to hyperscale clouds via private network links, such as dedicated wavelength or Ethernet services, to major interconnection points in nearby cities like Minneapolis.

Internet Exchange Points (IXPs) The state does not host any major public internet exchanges. Most network peering is handled privately between carriers or occurs through regional IXPs in larger hubs like Minneapolis, which is essential for optimizing traffic flow to and from the region.

Bare Metal Bare metal server capacity is available in South Dakota, primarily through national providers that can deploy hardware into local facilities. Providers like Hivelocity offer on-demand compute solutions that can serve customers in the region.

Power Analysis

Average Cost Of Power Industrial electricity costs average $0.23/kWh, as of September 2025. While this rate is higher than in some other US markets, the state's power grid is dominated by renewable sources, particularly wind and hydroelectric power, which offers price stability and helps meet corporate sustainability goals.

Power Grid Reliability The power grid is well-engineered and reliable, especially in commercial centers like Sioux Falls. The significant investment in wind and hydroelectric generation contributes to a stable and resilient power infrastructure capable of supporting critical data center operations.

Market Access, Business & Tax Climate

Proximity To Key Business Districts Data centers in South Dakota are positioned to serve the state's key industries, including finance, healthcare, and government operations centered in Sioux Falls and Pierre. The location is also ideal as a secondary disaster recovery site for businesses in Minneapolis, Omaha, and Denver.

Regional Market Reach From South Dakota, organizations can effectively serve the Upper Midwest, including North Dakota, Nebraska, Iowa, and Minnesota. It is a logical choice for content delivery, application hosting, and backup services where millisecond latency is not the primary driver.

Tax Advantage For Data Centers South Dakota offers some of the most aggressive and long-lasting tax incentives for data centers in the country. Qualified projects can receive exemptions on sales, use, and property taxes for up to 35 years, which dramatically reduces both initial capital investment and ongoing operational costs.

Natural Disaster Risk

South Dakota has a very low natural disaster risk profile, with a FEMA National Risk Index score of 14.92 out of 100, as of September 2025. The geography protects it from major catastrophic events like hurricanes and earthquakes.

The primary environmental risks to consider are seasonal and include:

• Winter Weather & Ice Storms
• Strong Wind
• Hail
• Riverine Flooding
• Drought