Despite an exponential growth in data and workloads, data centres have done an exceptionally good job of managing energy demand, which has increased only modestly over the past 10 years. Better energy efficiency measures in smaller data centres and highly efficient hyperscale data centres have gone a long way to limit energy demand.

While data centres account for 1% of the world’s energy usage, the sector is responsible for only 0.25% of emissions. On the supply side, electricity grid operators have maintained grid stability and generated sufficient power to meet growing data centre needs in a rapidly changing energy landscape. 

However, with a desire to build new data centre capacity, and a continued trend for locating new data centres within established geographical clusters, sustainable growth now requires closer strategic partnerships between data centres, energy companies and the grid.

Pathways to low-carbon energy

There are many pathways to low-carbon energy, and data centre operators must decide what strategy is right for them. The range of options vary from simple contractual agreements (such as Guarantees of Origin) with green energy suppliers to more active involvement in the operation of the energy grid.

At the passive end of the decarbonisation spectrum, energy suppliers use Renewable Energy Guarantee of Origin (REGO) certificates to calculate their Fuel Mix Disclosure and demonstrate how green their tariffs are. However, suppliers can trade REGOs separately from the unit of electricity that came from the renewable asset and attach them to fossil-fuel generators. Critics of REGOs argue that they fail to incentivise the building of new renewable sources of power.

Growth in renewable energy is set to continue as countries pursue net zero carbon targets. According to the International Renewable Energy Agency (IRENA), over 75% of onshore wind and 80% of solar PV project capacity was due to be commissioned in 2020 without subsidies and should produce cheaper electricity than any coal, oil or natural gas option.

With renewables growing as a proportion of the overall energy mix, grid operators are finding it more difficult to modulate supply to meet demand. Instead, they are looking to increase the flexibility of the grid on the demand side through a number of strategies – either storing, shifting or transporting electricity.

Today, more than ever, grid operators need active participation from their largest energy users. This requires businesses to embrace a degree of flexibility in their energy usage that supports network operations but does not negatively impact on business operations. 

Renewable energy leadership

The industry is showing strong leadership on corporate renewable procurement; the top four corporate off-takers of renewables in 2019 were all ICT companies. At the hyperscale end, heavy energy use is driving them closer to grid operators – often by working with partners to develop strategies that enhance their corporate reputations. 

Data centres operating across all business models are looking to Power Purchase Agreements (PPAs) as a route to good grid citizenship. PPAs enable off-takers to procure long-term contracts with operators of renewable assets. However, negotiating PPAs can be technically complex. Some key PPA parameters include the term of the agreement; whether the PPA is a corporate arrangement, includes a private wire and/or storage; and how risk is allocated between procurer and generator, including the volume risk. Optimising these parameters to deliver a bespoke agreement that suits both generator and off-taker requires depth of knowledge and experience.

Demand Response as a resilience strategy

Using time or price triggers to shift demand away from peaks, by implementing demand side response mechanisms, has proved to be a successful flexibility strategy for grid operators for several years. 

Demand Response (DR) is a good fit for data centres but there are still questions around how participation works with some business models. For example, co-location data centres operate within strict customer service level agreements, and operators are understandably cautious about adopting measures that are perceived as a threat to uptime.

On the other side of the debate, some co-location data centre operators have actively embraced DR. They see participating in DR as part of their resilience strategy as they receive advanced notice of grid problems and can prepare for trigger events or pre-emptively move to back-up power for the duration of the grid instability. On-load testing that more accurately replicates the utility’s fail risk is another benefit of working with a partner to participate in flexibility schemes. 

As well as being a means to more robust resiliency measures, DR provides data centres with capacity payments simply for being on standby; valuable income to help offset energy costs. 

Broader energy initiatives

Energy management initiatives extend beyond the matter of supplying power to the data centre itself. Increasingly, businesses are seeking holistic approaches to manage their energy needs. For example, as the use of electric vehicles grows, workplaces are integrating charging infrastructure for employee and visitor use. Smart EV charging can play a role in grid balancing by integrating these more flexible, non-critical loads into an overall energy efficiency plan.

A holistic approach to managing energy typically incorporates efficiency measures, alongside other initiatives such as PPAs, DR, EV infrastructure and even utility bill management, which provides detailed insights into energy spend that can inform planning.

While major energy users see the benefits of planning a broad approach to energy strategy, finding capital to fund the measures can be a barrier to moving forward. A potential solution to address the funding barrier is to work with a specialist partner on an ‘as-a-service’ model. 

Energy-as-a-Service, or EaaS, helps to overcome the issue of having to find capital to fund improvements and forges a long-term relationship with a partner who can advise and deliver on PPAs, flexibility solutions, energy efficiency measures, utility bill management and so on. As well as monetising the flexibility of energy assets and reducing costs, EaaS enables profitability, improved resiliency, sustainability and better risk management – especially with respect to compliance and market exposure. 

Driving grid innovation

As large energy consumers and one of the fastest growing users of power, data centres have the potential to make a positive impact on grid innovation. Given the data and power industries’ interdependence, many now advocate that it’s time for data centres to contribute to the overall stability of electricity systems by becoming better grid citizens. 

Data centre operators have a choice of energy strategies to meet their individual business models and energy demand profiles. Following the right path is key to meeting decarbonisation goals while maintaining industry growth, profitability and resilience.