Data centre pathways to decarbonisation

Data centre pathways to decarbonisation

Despite a huge increase in traffic and workloads, data centre energy demand has increased only relatively modestly over the past 10 years. Building highly efficient hyperscale data centres has certainly helped to limit overall energy demand. These facilities are functional and efficient, equipped with servers that are stripped to the bare essentials; there’s no need for video connectors and blinking lights when nobody sees them. Smaller data centres have also played their part by investing in a range of energy efficiency measures such as more efficient power supplies, cooling technologies and low-power computing infrastructure.

While the data centre sector has invested heavily to minimise its energy use, globally it still accounts for 1% of the world’s energy demand. As major power users – and especially where data centres are located in clusters – data centre growth must align with grid capacity. On their part, electricity grid operators are constantly challenged to maintain a stable supply as well as ensuring that there is sufficient supply to meet peak demands. 

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

Today, more than ever, grid operators need partnership from their largest energy users. This requires businesses to embrace a degree of innovation in their energy use that can be used to support network security, stability, and sustainability without having a negative impact on their business. 

Decarbonisation strategies

There are many pathways to low-carbon energy, and data centre operators have to 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.

Growth in renewable energy is set to continue as many 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 is due to be commissioned in 2020 without subsidies and should produce cheaper electricity than any coal, oil or natural gas option.

One of the easiest low-carbon options for data centre operators to take is to buy their energy from a green supplier. Energy suppliers can use Renewable Energy Guarantee of Origin (REGO) certificates to calculate their Fuel Mix Disclosure and substantiate their green tariffs.

One concern with this approach is that suppliers can trade REGOs separately from the unit of electricity that came from the renewable asset and attach them to fossil-fuel generators in order to pass them off as green. Critics of REGOs also argue that they fail to incentivise the building of new renewable sources of power.

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. Heavy energy use is driving hyperscale operators closer to grid operators – often by working with partners to develop strategies that enhance their corporate reputations. 

Data centres are increasingly 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; 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 supports resilience

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 data centre operators should participate in such schemes. 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 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, DSR 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 DSR, PPAs, 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 tremendous impact on grid innovation. Given the data and power industries’ growing 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. 

Multiple strategies are available to meet different data centre business models, enabling them to meet decarbonisation goals while bolstering profitability and resilience. All the while supporting the security, stability, and sustainability of the grid system that powers their business. 

Written by Andrew Toher, Head of Customer Insights, Enel X UK

Andrew Toher, Head of Customer Insights, Enel X UK

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