The energy industry is in the midst of one of its largest paradigm shifts as data centres begin to overshadow every conversation about energy production and consumption. As one of the three emerging overarching themes that are turning the global energy landscape on its head, their growing thirst for power is breaking all records. There’s a catch. Data centres can be constructed quickly – typically within three years. This quick build time poses novel challenges for legacy energy systems that have historically taken several times longer to build.
As data centres rapidly grow in unnecessary, unsustainable and irresponsible ways, they disproportionately impact global power systems. These mammoth facilities are open 24/7. They strive for a stunning downtime of under five minutes a year, signaling almost zero tolerance for any outage. Their energy-intensive nature along with the public demand to reduce their footprint, they’re forcing the sector to rethink how power is generated, distributed and consumed.
The future demand for processing power is increasing exponentially. Consequently, data centres find themselves at the focal point of energy debates, affecting supply chains and influencing investment decisions. Their increasing footprint necessitates a robust response from energy providers and regulators alike to ensure sustainability and reliability in power supply.
The Impact of Data Centres on Power Systems
As such, data centres have emerged as a lightning rod in the debate over energy infrastructure and resource allocation. Experts estimate that data centers will soon use more energy than all other energy-intensive industries in the US put together. This major policy shift further exposes the tech sector’s insatiable appetite for energy. First, the sheer demand for energy is alarming. All the while it’s getting harder to meet these energy needs and still maintain grid reliability.
That’s at least 25 gigawatts (GW) of small modular reactor (SMR) capacity tie to data centers that have been announced. This exemplifies a greater trend across the country towards less volatile energy sources, especially toward nuclear power. Analysts expect big things for nuclear power and data centers from 2031 to 2035. If they do, it will be key to ensuring their energy supply mix is robust. The bad news is that, like any major transition, this one will not be free from thorny challenges.
“Despite the burden they are putting on power systems now, over time, if policies and grid planning catch up, data centres are more likely to reshape the energy transition – towards more firm, low-carbon capacity and demand flexibility – than to derail it.”
The urgency to decarbonize and adapt power systems has never been more critical. This includes the incorporation of new technologies like battery storage. Singh notes that “these investments will be critical to integrating new power capacity and ensuring the stability of increasingly complex grids.” Battery storage has transformed into a key asset in today’s power systems. It’s not even a secondary fix—today it’s required.
The Role of Renewable Energy and Nuclear Power
In the short term, nuclear energy is expected to be the primary source of energy for data centers. Writing on The Conversation 2030 in Australia will see a greater emphasis on renewables and gas. According to GlobalData, by October 2023, renewables will provide the majority of data centers’ power. This change marks a major step forward in the industry’s increasing dependence on green energy. This change represents a significant, industry-wide effort to promote sustainability, even as data centres continue to combat the heavy energy requirements of their operations.
Yet, the road to this renewable future is fraught with challenges. Singh highlights that “the tariffs and new anti-dumping and countervailing duties on South East Asian cells and modules are likely to create genuine supply bottlenecks and unprecedented challenges for renewable energy deployment.” These issues can take years to bring about any significant movement towards achieving a timely transition to renewable, clean energy sources.
The shift to a mostly renewable energy future will require major breakthroughs in operating the grid. As Vyakaranam points out, “Battery storage is no longer a supporting actor but a necessity to modern power systems.” Battery applications have started becoming established in a wide range including energy shifting, black start capabilities, and providing ancillary services. For stabilizing and supporting smooth grid operations, this underscores how critical these technologies are.
Future Challenges and Opportunities
In the face of their increasing demand, data centres pose significant opportunities for energy production innovation. Hyperscalers, massive data centre operators like Amazon, Google and Microsoft, have become some of the biggest buyers of renewable energy, analysts say. At the same time, they’re increasing their support for initiatives focused on energy storage and advanced grid technologies. They’re doubling down on early-stage clean energy options such as fusion and next-generation nuclear.
While the industry takes stock on these changes, it’s important to remember that the need for compute use is booming. According to Vyakaranam, “Compute use demand is strong, so a total bust is unlikely. If companies do overbuild, they can fall back on slowing new capital expenditure, leasing excess space, repurposing sites for other energy-intensive industries, or selling assets to infrastructure investors.”
Data centres should not stand in the way of energy transition. Experts agree that if policies and smart planning continue to stay ahead of their explosive growth, these facilities can help ensure a cleaner, more sustainable energy future. To address this demand, the energy sector will need to respond rapidly so that future demands don’t hinder the stability of our grid.