PG&E Begins Energy Infrastructure Upgrades to Bring San Jose's Net Zero Community to Life

Rhea-AI Summary

PG&E and Westbank have announced significant progress in developing Silicon Valley's innovative net-zero community in San Jose. The project will combine three data centers with up to 4,000 residential units, utilizing excess heat from the data centers through a district energy system to heat and cool surrounding buildings.

Key developments include:

• PG&E has begun infrastructure upgrades to deliver 200 megawatts of power to the data centers
• San Jose City Council unanimously approved the first two data centers, with the first expected online in late 2027
• The project includes rehabilitating the 100-year-old Bank of Italy building, adding 114 residential homes
• Eastdil Secured will lead the search for data center partners

The initiative aims to address growing demands for AI-driven data centers and housing while advancing San Jose's sustainability goals, promising reduced energy bills and building decarbonization through the district energy system.

Positive

• Infrastructure upgrade to deliver 200MW of power capacity
• Unanimous city council approval for first two data centers
• Project combines revenue-generating data centers with residential development
• Cost reduction potential through energy recycling system
• Strategic positioning in high-demand AI data center market

Negative

• Extended timeline with first data center operational only by late 2027
• Significant capital investment required for infrastructure upgrades
• Complex integration of multiple systems may increase operational risks

Insights

Energy Infrastructure Analyst

PG&E's 200-megawatt infrastructure upgrade for San Jose's data centers represents strategic positioning in the high-growth AI computing market while advancing California's sustainability goals. This isn't merely a power delivery project—it's a sophisticated integration of energy systems that creates multiple revenue opportunities.

The district energy approach, where waste heat from data centers is repurposed for surrounding buildings, demonstrates rare technical innovation from a traditional utility. By capturing and reusing thermal energy that would otherwise be wasted, PG&E is enabling significantly improved energy efficiency across the development while positioning itself as an essential partner in next-generation urban infrastructure.

With data center demand described as "off the charts" by San Jose's mayor, PG&E is securing substantial long-term power delivery contracts in one of America's most expensive electricity markets. The substation rebuilding and transmission enhancements deliver additional value by enabling broader electrification initiatives beyond just the data centers.

This project addresses several strategic challenges simultaneously: meeting the enormous power demands of AI infrastructure, advancing decarbonization goals, supporting housing development, and modernizing aging grid infrastructure. The unanimous city council approval significantly reduces regulatory risk, while the phased approach (first center online in 2027) allows for managed capital deployment.

Urban Development Strategist

Westbank and PG&E's San Jose project represents a breakthrough in integrating critical digital infrastructure with urban housing development. By pairing three data centers with up to 4,000 residential units, this initiative creates a synergistic solution to Silicon Valley's twin crises of housing affordability and AI computing capacity.

The heating and cooling approach alone delivers three substantial economic advantages: reduced energy costs for residents and businesses, improved power utilization efficiency for the data centers, and reduced carbon emissions. These efficiency gains create a sustainable economic advantage beyond typical developments.

The rehabilitation of the century-old Bank of Italy building, which will include 114 residential units and all-electric systems, demonstrates how historical preservation can be incorporated into forward-looking infrastructure. This balanced approach tends to receive stronger community support and faster approvals than purely commercial developments.

Notably, the global call for data center partners through Eastdil Secured suggests the developers are seeking specialized operators rather than building generic facilities. This approach typically attracts higher-quality tenants and stronger long-term economics. For PG&E, serving as the enabling infrastructure partner positions them upstream in the value chain of Silicon Valley's continuing digital transformation while advancing climate objectives—a powerful combination for future growth.

Westbank Issues Global Call for Data Centers

SAN JOSE, Calif., April 9, 2025 /PRNewswire/ -- Today, Pacific Gas and Electric Company (PG&E) and real estate developer Westbank announced two major milestones in the development of Silicon Valley's innovative net-zero community. PG&E infrastructure upgrades have begun, and Westbank has launched a global call for data center partners to join the initiative.

Eastdil Secured, a global real estate investment bank, will lead the process of identifying partners who support using data centers to enhance communities.

Westbank's project will pair three data centers with up to 4,000 residential units to create a sustainable downtown San Jose. Excess heat from the data centers will be harnessed and repurposed through a district energy system to heat and cool surrounding buildings. The plan addresses the growing demand for artificial intelligence (AI)-driven data centers and housing while advancing San Jose's net-zero goals.

"The Silicon Valley Initiative is about the evolution of energy, housing and AI infrastructure – it will create a more inspiring and sustainable community that demonstrates leadership globally. In PG&E and the City of San Jose, we have found collaborators who share our vision and commitment. We're looking forward to working together to bring this initiative to life," said Westbank CEO Ian Gillespie.

On April 8, the San Jose City Council unanimously approved the advancement of the first two data centers, marking a significant step toward their development, with the first data center expected to come online in late 2027.

"Demand for new data centers is off the charts and will enable a more efficient and convenient future for everyone, but convenience doesn't matter if we destroy the planet in the process," said San Jose Mayor Matt Mahan. "This innovative partnership will allow us to harness data center demand to build much needed workforce housing and ensure it is powered by excess heat from the data centers. I can't think of a more creative or important breakthrough for our future than this."

PG&E has started infrastructure upgrades for delivering approximately 200 megawatts of power to the three data centers. The improvements include rebuilding a key substation and making several transmission interconnection and capacity enhancements that will position San Jose for continued growth and innovation.

"PG&E's infrastructure projects will have a far-reaching impact beyond the net zero community. They will support San Jose's new rail service, incoming developments and the electrification of homes and vehicles," said Michael Medeiros, vice president of South Bay Delivery for PG&E. "These upgrades will help ensure San Jose continues to lead and stay ahead in sustainability."

The Net Zero community groundbreaking is anticipated for later this Spring, beginning with rehabilitating the ~100-year-old Bank of Italy. The building will include all-electric mechanical, electrical and plumbing systems, as well as new energy-efficient windows. The building will also include 114 residential homes and will integrate into the district energy system.

"This initiative represents a bold new approach to energy, housing and economic transformation. As a key infrastructure partner for California, PG&E is proud to play a pivotal role in this effort—integrating advances in data centers and AI with district energy to build more resilient, low-carbon communities of the future," said Teresa Alvarado, vice president for PG&E's South Bay and Central Coast Region.

Additional benefits of the Net Zero Community include:

• Reduced energy bills for businesses and residents by utilizing recycled heat from data centers.
• More efficient use of electricity powering the data centers.
• Decarbonization of buildings connected to the district energy system.

About PG&E

Pacific Gas and Electric Company, a subsidiary of PG&E Corporation (NYSE: PCG), is a combined natural gas and electric utility serving more than 16 million people across 70,000 square miles in Northern and Central California. For more information, visit pge.com and pge.com/news 

About Westbank

Westbank is a practice dedicated to the creation of inspiring environments, with a body of work that includes residential, hotels, retail, workspace, district energy, affordable housing, exhibitions and public art. The net zero community in San Jose is being developed in partnership by Westbank, Peterson and OPTrust.

View original content to download multimedia:https://www.prnewswire.com/news-releases/pge-begins-energy-infrastructure-upgrades-to-bring-san-joses-net-zero-community-to-life-302424740.html

SOURCE Pacific Gas and Electric Company

FAQ

When will PG&E's first data center in the San Jose net-zero community project become operational?

The first data center is expected to come online in late 2027.

How much power will PG&E deliver to the new San Jose data centers?

PG&E will deliver approximately 200 megawatts of power to the three data centers.

How many residential units will be included in PG&E's San Jose net-zero community project?

The project will include up to 4,000 residential units, with 114 homes in the renovated Bank of Italy building.

What are the main benefits of PG&E's net-zero community project in San Jose?

Benefits include reduced energy bills through recycled heat from data centers, more efficient electricity use, and building decarbonization through the district energy system.

How will PG&E's data centers contribute to the net-zero community in San Jose?

The data centers will provide excess heat that will be repurposed through a district energy system to heat and cool surrounding buildings.