Data Centers

Ireland’s power grid supplies the world’s largest cluster of hyperscale data centers, which have powered the global digital revolution through the Pandemic. Its national grid operator has now identified data center growth as a “significant” systemic risk. 
Silicon Valley says it wants to champion renewables power but remains extremely sensitive to resiliency issues. The likes of Amazon, Google, Facebook and Netflix continue to be reliant on diesel-fired generators as a resiliency solution. 
The Global Energy Transition faces yet another stern test.

Cambridge, Massachusetts (January 11, 2022):  The Global Energy Transition has seen significant challenges to power grids through 2021, including those in Texas, Britain and Germany. Island nations have been near-laboratory test cases for working out such challenges. Their standalone power grids amplify the effects of the shift from steady baseloads of coal-, gas- and fuel oil- fired power to intermittent renewable sources such as wind and solar — for good and for bad.

At Acelerex, we have been active participants in addressing these challenges, working closely with the governments of both the Maldives and Barbados in planning their shifts to renewable energy sources. However, it is not only small island nations such as Barbados and the Maldives who are at the leading edge of the Energy Transition. The energy crisis that has roiled Britain in recent months demonstrates that even a G7-sized island grid requires a meaningfully higher degree of centralized resource planning in managing the shift to renewable energy sources.

One of the most instructional island grids in the world right now is Ireland. In addition to its status as an island grid, Ireland also has the distinction of being a major IT hub for both the United States and the European Union. Attracted by a favorable tax regime, technology companies have turned Ireland into the world’s largest cluster of hyperscale data centers — the bedrock of the global digital revolution of the past two decades. Countless millions of people around the world rely on the island nation’s data centers in order to work remotely, stream movies, surf the internet and share photos and videos with loved ones. Ireland is now home to 70 such data centers, consuming over a tenth of the entire energy supply of the island nation. As the world’s digital revolution continues to accelerate into this decade, Eirgrid, Ireland’s national grid operator, expects data centers to consume 30% of total energy supply by 2029.

On November 23, 2021, in response to the challenges faced by Ireland’s power grid, the nation’s Commission for Regulation of Utilities (CRU) published a decision paper on data center grid connection processing. CRU framed its decision paper in the context of data center construction as “an evolving, significant risk to electricity security of supply in Ireland,” one that it had been studying in detail even before Britain’s energy crisis flared up in August. The upshot of the decision paper is that Ireland now requires new data centers grid connections to be “within the system stability and reliability needs of the electricity network.” The decision will complicate the development of future data centers in Ireland at precisely a time when the COVID-19 pandemic has greatly stoked demand for additional data centers.

For operators, data centers not only represent a major source of energy consumption, but they are also uniquely vulnerable to supply disruptions, making them especially focused on the resiliency issues which upended power grids in Britain and Texas in 2021. The industry’s standard practice to guard against such disruptions has been to utilize backup generators fired by diesel fuel. This practice is especially problematic for the operators of hyperscale data centers — Silicon Valley giants such as Google, Amazon, Facebook and Netflix. These same companies have touted themselves as being at the forefront on the global shift to renewable energy, creating tension between their day-to-day business needs and their lofty clean energy ambitions.

Google has taken the lead in addressing this gap. In December 2020, it announced plans to build the first ever co-located data center and energy storage facility, selecting a site in Belgium. In the same announcement, Google estimates that the data center industry has approximately 20GW of diesel generators worldwide, representing an enormous opportunity for it and other data center operators to replicate its facility globally. The company declared its intention to work alongside ELIA, the local transmission system operator in Belgium, to “strive to make our project a model for how data centers can become anchors for carbon-free electric grids.”

If the project proves to be successful, Google expects that such renewables-driven data centers will not only help reduce the stress on national power grids and be an effective resiliency solution, but that they could also eventually lower operating costs. Google expects such centers to be able to integrate bilaterally into the grid, charging during demand troughs and selling excess power back into the grid when needed. Since Google’s announcement, other major operators of data centers — including Amazon, Facebook and Netflix — have announced similar plans.

This gives the data center segment — one of the most difficult and pressing challenges facing the world’s power grids over the next decade — an unusually deep pool of motivated, well-capitalized early adopters of renewables-plus-storage technologies. Most importantly, the operators of data centers represent a class of extremely sophisticated and demanding customers who can not afford to allow empty ESG narratives to interfere with their most critical business infrastructure.

All of the above makes the data center segment (particularly on the island grid of Ireland) an especially important test case for ensuring that the promise of renewables, storage and a multi-lateral power grid become a reality without sacrificing resiliency, reliability and cost-effectiveness.

Given the sheer size and complexity of data center requirements, operators will need to quickly integrate digital grid, smart control and resiliency assets in the near future.