The growing data centre market
The global data centre market is growing at an unprecedented pace, driven by the rapid deployment of cloud computing, AI applications and transformation to the digital economy. Hyperscale data centres continue to grow and dominate the market, constructing and operating their own new build facilities. At the same time, colocation facilities are being developed at a rapid pace whereby the landlord leases space and provides services to corporate tenants who house their IT infrastructure in such facilities. However, such rapid growth of both hyperscale and colocation projects create substantial challenges for data centres in procuring green, cheap and continuous electricity.
The energy dilemma
It is estimated that data centres currently account for around 3-4% of the UK's total electricity usage, with that figure expected to grow exponentially. Some commentators, including the CEO of National Grid, predict that this figure could increase six-fold by 2025.
To further add to this challenge, the transition to net zero, including the increased deployment of renewables, electrification of heating and the rise of electric vehicles, are causing considerable strain on many countries’ grid networks, creating rising costs as well as significant delays to connect data centre projects to the grid.
As a result of this, we are seeing an increasing trend of data centre developers seeking to build their own gas fired power plants due to frustration at long delays in accessing the electricity grid which could put Britain’s AI ambitions on a collision course with its decarbonisation goals.
What are the power solutions?
In order to mitigate these power issues, we see the below solutions being used in the market:
- On-site generation. Installing renewable generation such as onshore wind or solar PV can reduce the amount of electricity required to be imported from the grid and reduce electricity costs. However, for large data centres, they would always require a connection to the grid and it is unlikely that they would solely rely on on-site generation for their electricity needs.
- Co-location with battery storage. Batteries could be utilised on-site and integrated with renewable generation to ‘shape’ the consumption profile and to mitigate intermittency issues associated with renewables, for example, to discharge from the battery when the sun is not shining or the wind is not blowing.
- Corporate Power Purchase Agreements (CPPAs). CPPAs are being increasingly used by data centre operators as a means to provide long-term power price certainty by contracting directly with a renewables generator to provide power to their data centre. CPPAs have the benefit of providing a contracted amount of green power to the data centre at a price that is below the market price. However, such arrangements are complex as they involve a tripartite arrangement whereby a licensed supplier, offtaker (data centre operator) and renewables generator enter into an arrangement under which the licensed supplier ‘sleeves’ the power from the generating site over the grid to the chosen data centre. In addition, careful consideration will be given to the creditworthiness of the generator counterparty for these long-term arrangements.
- ‘Private wire’ PPAs. Where a data centre is located near to a power generation facility, the generator and data centre operator can enter into a direct agreement for the sale and purchase of power. The advantage of this ‘private wire’ arrangement is that the electricity is conveyed over non-regulated ‘private wires’ and does not attract the charges associated with the regulated network, resulting in a price benefit for the offtaker (data centre operator).
- Small modular nuclear reactors (SMRs). There is a growing trend in utilising SMRs to power data centres. SMRs do not have the same high capital costs associated with large-scale nuclear plants and at the same time offer a low carbon alternative to grid electricity.
- Cooling systems. Data centres are adopting cutting-edge cooling technologies to counter the increasing heat loads created by data centre use. New cutting-edge technology, such as chip-level liquid cooling utilised by Microsoft to optimise AI workloads while eliminating water consumption for cooling, is an example of this. Other novel cooling technology includes advanced waterless cooling technologies to enhance efficiency and sustainability in response to growing environmental concerns.
The future?
It is clear that the growth of data centre development is not relenting and with such growth comes substantial energy challenges. This will require innovative new solutions and structures to be developed to source clean, cheap and reliable electricity to serve power-hungry data centres.
If you have any data centre queries, please contact Jonathan Cohen.
