The role of data centers in the energy transition

The growth in demand for digital services, including the increasing use of artificial intelligence solutions, requires the processing and hosting of huge amounts of data. These operations take place in data centers relying on uninterrupted access to energy, the demand for which is constantly increasing.

According to the European Commission’s report ‘Energy Consumption in Data Centres and Broadband Communication Networks in the EU,’ data centers accounted for 1.8-2.6% of electricity consumption in the European Union in 2022. According to forecasts by analyst firm PMR, ‘Data center market in Poland. Market analysis and development forecasts for 2022-2027′, the volume of power in Polish data centers will grow over the next few years, reaching 215 MW in 2027. Poland is one of the most dynamically developing ’emerging markets’ in the entire data center sector, which should prompt the entire ICT industry in the country to adopt a long-term strategy of action in the context of energy transformation.

Smart decisions are needed to improve energy efficiency in data storage and computing at both national and global levels. This is a task that requires the collective efforts of policymakers, regulators, and centralized business representatives. By working together, they can define criteria and guidelines that will help to reduce the environmental impact of the evolution of ICT, as already reflected in the EU Energy Efficiency Directive (EED). On the other hand, the broader business and social environment and data center clients should focus on working with data center providers to ensure the best possible efficiency regarding energy consumption and environmental impact.

Increased demand for data is driving energy efficiency

Artificial intelligence is a megatrend that is significantly shaping the data center industry. Maintaining AI environments requires a specific data center infrastructure. Some key considerations are  the utilization of liquid cooling solutions, powering the facilities with renewable energy, high energy and water efficiency of the facility expressed in terms of PUE (Power Usage Effectiveness) and WUE (Water Usage Effectiveness), as well as the collection and utilization of waste heat generated by data centers. The issue of improving energy efficiency is also reflected in EU regulations. The EED (Energy Efficiency Directive), which came into force on 10 October 2023, contains a number of recommendations for many market sectors, including the ICT sector. For the data center sector, the recommendations include, for example, reporting on installed power capacity, data volumes, energy consumption, PUE, waste heat utilization, water consumption, and the use of renewable energy. The directive’s provisions are very much needed, as they force operators to take specific actions and introduce the necessary transparency into our industry. On the other hand, they benefit clients. Knowing the energy parameters of data centers, they will choose operators that consume less power and incur lower costs for the provision of colocation services.

The reporting obligation will be extended to all data centers with more than 500 kW of power. Small (edge) data centers typically have power capacities of around 1 MW, while traditional facilities have capacities in the tens of megawatts. EU member states have two years to adapt their national laws to the new requirements, and data center operators should use this period to prepare accordingly. Non-financial reporting can be a challenge for operators, but especially for owners of smaller, on premise, data centers, especially if they have not analyzed their environmental indicators.

Sustainable data centers

Many business representatives, either individually or with the aim to meet regulatory guidelines such as Europe’s ‘Fit for 55‘, have set targets to reduce greenhouse gas emissions and minimize the environmental impact of their operations. Businesses already have to pay more attention to energy efficiency, not only with regards to their organization but also by looking at their suppliers. Sustainable data centers play a crucial role in helping companies achieve these goals. As presented by market data, low-emitting data center providers are growing in the market.

Research firm IMARC Group’s “Green Data Center Market” report states that the size of the global sustainable data center market reached US$88 billion in 2023. IMARC expects the market to reach USD 423.7 billion by 2032, demonstrating a growth rate (CAGR) of 18.5% between 2024 and 2032. The market is experiencing rapid growth, driven by a focus on energy-efficient data center solutions to reduce operating costs, serve the growing volumes data volumes and increasing needs for cloud computing, and ensuring compliance with environmental regulations and the UN Sustainable Development Goals.

The Polish government’s work to align national regulations with the EED should be carried out so that technology owners do not look for data center facilities outside of EU countries where similar regulations do not apply. In other words, the aim is to encourage the location of IT infrastructure within the EU for reasons including regulatory consistency, transparency, and data security.