CONTACT US
Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}
Strategies for Addressing Data Center Power Challenges Strategies for Addressing Data Center Power Challenges

Strategies for Addressing Data Center Power Challenges

Michael Borron • 12/15/2022

Data center electricity demand in the United States and other developed markets continues to grow, and consumption in developing markets like Africa and Asia will grow rapidly to provide services and infrastructure to growing customer bases. Data centers account for 1-2% of the total electricity consumption globally, according to the IEA. Proportionally 1% may seem like a tiny fragment of overall consumption, though note that the entirety of solar power makes up 2% of world’s mix of electricity generation according to the IEA.

Data centers support and facilitate many of the services we consume online. Whether you're binge-watching a series, making a query on google, using social media, or working remotely. Global data center traffic increased to over 20 zettabytes (or one sextillion bytes) by the end of last year, a compound annual growth rate of nearly 25%. Anything you do on the internet is possible because of data centers and related infrastructure.

The Power Challenge for Data Centers

While power has always been an essential part of data center site selection, how data center developers approach this problem has fundamentally changed in the past two years. Developers have always faced difficulty getting large amounts of power to a site, but today that task is more challenging than ever. This challenge is coupled with additional scrutiny on generation sources within markets, as this will impact both the potential cost and source of electricity over the lifespan of a data center.

While power has always been an essential part of data center site selection, how data center developers approach this problem has fundamentally changed in the past two years. Developers have always faced difficulty getting large amounts of power to a site, but today that task is more challenging than ever. This challenge is coupled with additional scrutiny on generation sources within markets, as this will impact both the potential cost and source of electricity over the lifespan of a data center.

Recently, the UK's energy price hike played a prominent role in Sungard UK's insolvency. The UK division of Sungard faced difficulties stabilizing after the pandemic; their service contracts left little room to pass on increased costs to customers. The Ukraine-Russia War re-affirms the importance of a thorough analysis of a market's energy makeup.

The Push for Green Power and Creativity

The data center industry and many tech employers have pledged to reduce carbon emissions and strive for carbon neutrality in the coming years. Google, Amazon, and other hyper-scale data centers are investing in solar or wind energy to run their data centers. The world is behind this push as fossil fuels continue to harm the environment. At the close of 2020, 28 of global electricity generation was sourced from renewable energy according to the IEA. (Source: https://www.iea.org/reports/global-energy-review-2020/renewables)

Overall, we have observed more price stability in markets where power is renewable. The province of Quebec in Canada is a prime example of a 100% renewable grid's benefits. Quebec has abundant cost-effective green power that can provide long-term price stability. This has been a significant driver for economic growth in the province and has attracted billions of dollars for data center investment.

As data centers push to become more environmentally friendly, we are seeing increasingly creative designs that seek to reduce data centers' environmental impact. many are seeking to use its waste heat from data center operations to warm homes or even greenhouses.

The Problem

The data center industry continues to grow, along with the industry's power consumption. The industry is facing multiple power-related challenges discussed above:

  • Aging existing infrastructure and expensive capital improvement costs.
  • Increased competition from other heavy power users.
  • Delays in power delivery from distributors.
  • Energy price volatility and increasing costs.
  • Reducing carbon emissions and the industry's push to go green.

Strategies for Providers

In the Short-term

  1. Data center service providers should begin conversations with utility companies; the earlier, the better. With longer delivery timelines, many power distributors operate on a first-come, first-serve basis. Operators need to shift strategies and look farther ahead to secure power.
  2. One of the most common problems operators have today is running out of space. Data centers must shift from single-site acquisitions to larger campus-style developments. There are also significant cost savings in this approach for infrastructure, staffing, and site selection.
  3. Data centers must form strategic partnerships with local communities. Data centers worldwide seek creative partnerships, including district energy providers and greenhouses looking to reuse waste heat to heat homes, grow to produce, or co-invest in green energy generating projects. Taking a longer-term outlook on properties allows for more potential to create strategic partnerships within communities.
  4. Data center operators must structure leases to protect against future cost increases. With inflation and energy prices increasing, structuring leases and services contracts to pass on cost increases is vital to safeguarding long-term profitability.

In the Long-term

  1. Get creative: There are lots of innovative new and existing technologies that have the potential to increase power efficiency and reduce a facility's carbon footprint. These innovations are more sustainable and should reduce operational expenditure in the long term. Take cues from companies like Nautilus and Q-scale.
  2. Strategic Partnerships: Looking for opportunities to partner within local communities can produce incentives and locations that would otherwise be unavailable. Data centers are excellent anchor tenants for new district energy networks; Meta is heating 6,900 homes in Odense, Denmark, with one of its facilities. Strategic joint ventures or merger and acquisition activity is also recommended. Joint ventures can effectively expand into new markets by gaining local market expertise or access to sites that would otherwise be unavailable. Merger and acquisition activity will also continue; QTS and switch were acquired by Blackstone and American Tower respectively, will open up capital and land portfolios to assist in their continued expansion.
  3. Plan Years Ahead. With longer timelines to construct and service data centers, providers need to find ways to plan and de-risk longer-term investments. With this comes the need to dig deeper into local energy, real estate, and regulatory markets; and not just the current state of these markets but attempting to project out over the life of the data center asset.

 

Are you ready to get in line?

Let's help you make a future-proof plan for green power and strategic partnerships to reduce your overall expenditure and manage risk for years to come.

The Cushman & Wakefield’s Global Data Center Advisory Group has worked with hyperscalers, cloud service providers, and enterprise customers to assist them with finding new data center sites and facilities and/or disposing surplus facilities. For more information on how Cushman & Wakefield's can assist you with your data center needs, please contact us.

 

Want more information on Data Centers?

Get updates on what's next for the data center sector of commercial real estate.

Learn More

Learn more about Cushman & Wakefield's GTA Data Center Advisors

Interested in learning more?

Get in touch and we can assist with any additional information you need.
With your permission we and our partners would like to use cookies in order to access and record information and process personal data, such as unique identifiers and standard information sent by a device to ensure our website performs as expected, to develop and improve our products, and for advertising and insight purposes.

Alternatively click on More Options and select your preferences before providing or refusing consent. Some processing of your personal data may not require your consent, but you have a right to object to such processing.

You can change your preferences at any time by returning to this site or clicking on Privacy & Cookies.
MORE OPTIONS
AGREE AND CLOSE
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
Agree All
Reject All
SAVE SETTINGS