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European Data Centers To Adopt Flexibility Or Face Barriers

image credit: BloombergNEF
Michael Kenefick's picture
Senior Associate BloombergNEF

Analyst at BloombergNEF, a research house focused on the transition to a net-zero future. My focus is the changing power system and the impact of new resources and technologies such as batteries...

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  • Feb 18, 2022
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European data centers are finding it harder to connect to the grid. Their large energy demand strains local supply and threatens national environmental goals, breeding local opposition. At the same time, economies need to build more data centers to support the growing demand for digital services. Data centers can avoid some of the issues by adapting the way they use energy and responding to the grid’s needs. This flexibility would ease the challenges of integrating more renewables and help serve the rising demand from electric vehicles.

By 2030, power demand from large data centers will almost double in five key European markets: Germany, Ireland, Netherlands, Norway and the U.K. These facilities will draw 5.4 gigawatts from grid, using 48 terawatt-hours a year, according to a new report by BloombergNEF Data Centers and Decarbonizsation: Unlocking Flexibility in Europe’s Data Centrers. This power demand represents 3.7% of those countries’ total electricity use in 2030, up from 2.3% in 2021.

While small in percentage terms, the impact of data centers varies by country. Ireland and Germany have similar data-center capacities, but in the much smaller Irish power system, they represent 24% of total power use, compared to 1.5% in Germany. But where data centers have the greatest demand, they also offer the greatest flexibility and benefits.

Data-center flexibility comes from shifting computational load to different times of the day, such as away from winter evening peaks, or using on-site back-up power to avoid grid usage during times of grid congestion. Most back-up generation is diesel and so environmentally not suitable for supporting the grid. Companies like Microsoft are exploring the use of hydrogen for back-up power, which would be a cleaner alternative. Additionally, present in all data centers are uninterruptible power systems (UPS), which is often large power equipment that ensure the continuous operation of the site in the event of a power outage, before backup generators come online. UPS have a large power output but can only do so for a few minutes. This means they are well suited to providing flexibility like frequency response, which will be needed more and more as wind and solar farms replace coal plants.

Data center capacity highlighted in the report hosts 16.9GW of flexibility in 2030, which equates to a quarter of the U.K.’s peak demand today. Due to operational, legal and regulatory barriers, however, that flexible capacity plummets to 3.8GW. While technology is currently available to enable much more capacity, data-center operators are cautious due to the high standard of service that customers demand. Several pilots and trials show that data centers can technically provide flexibility to the grid with little impact on operations. Already in Scandinavia, data centers operated by Digiplex and Basefarm are using their UPS to support the grid. Companies such as Google and Microsoft already shift their computational loads to make best use of their servers, but more can be done.

Greater incentives are needed to encourage this flexible behavior. Power markets should value flexibility and open that value to all grid users. The environmental benefits of flexibility need to be properly assessed and assigned to participants. Businesses are ever more aware of their carbon impact and environmental benefits such as this may be the strongest lever to boost data-center flexibility.

Pushback on data center development in Germany, Netherlands and Ireland are signals that something needs to change. While developers move to other markets such as Norway, adopting more flexible operation would mean data centers would find it easier to connect to the grid.

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Matt Chester's picture
Matt Chester on Feb 18, 2022

Greater incentives are needed to encourage this flexible behavior. Power markets should value flexibility and open that value to all grid users. 

Are there any concerns on if this would end up raising the prices on lower income residential ratepayers who can least afford to shift their load? 

Michael Kenefick's picture
Michael Kenefick on Feb 18, 2022

I agree that time-of-use tariffs that charge people more to cook their dinner in the evening feels regressive. An alternative is to to reward those who can shift their load, instead of punshing those who cannot shift their demand. Local flexibility markets, such as Piclo in the U.K.,are an example of how this works.

Jim Stack's picture
Jim Stack on Feb 18, 2022

I have read that many data centers locate in cold climates since a huge part of their power is for cooling. A cold location can cool the equipment by just using outside air through a heat exchanger. Large MegaWatt advanced lithium Battery Storage can also help a lot and have a zero pollution rating. Those solutions didn't seem to get mentioned. Is that not a big factor?

 

QUOTE=Data-center flexibility comes from shifting computational load to different times of the day, such as away from winter evening peaks, or using on-site back-up power to avoid grid usage during times of grid congestion 

Michael Kenefick's picture
Michael Kenefick on Mar 4, 2022

Hi Jim, you raise some good points. Yes, data centers are looking to colder regions such as the Nordics, which also have from extremely low-carbon grid supply thanks to abundant hydro power. Data centers also want to be as close to the end user as possible in order to reduce lag time and improve performance. So while we will see a lot of growth in Nordic countries, most data center capacity will be in densely populated regions.

Our report covered large-scale batteries in data centers but these are still at pilot stage. Scaling is a challenge due to the size of the battery needed for backup. A data centers needs at least eight hours of backup power, while today most batteries are sized at one hour, two hours or at most four hours duration. Hydrogen as backup is another option but again is only at pilot stages. We are looking at a minimum five years before either these options are viable or widespread. Shifting loads or using the UPS for flexibility is something that can happen sooner, but needs a change in thinking.

Paul Korzeniowski's picture
Paul Korzeniowski on Mar 17, 2022

No doubt that our reliance on computer grows and with it so does demand for energy to run these systems. The technology companies are idealogically aligned with clean energy initiatives and trying some novel approaches to make their data centers more environmentally friendly.  However, the problem is complex and not prone to a quick and easy fix. 

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