Eva Talmacsi, co-head of TMT Practice in CEE, CMS
In today’s digital age, data infrastructure, including data centers and cloud solutions, plays a pivotal role in supporting efficient service delivery.
Demands for more data, and therefore ever more powerful data center capacity, are growing exponentially around the world.
According to the International Energy Agency (IEA), for every bit of data that travels the network from a data center to end users, another five bits of data are transmitted within and among data centers. Data centers have, therefore, a vital role in facilitating the current and forecasted data usage and generation as data centers are used to host networked computer servers that store, process, and distribute large amounts of data1. Mobile data traffic is projected to continue growing quickly, quadrupling by 2028 hence data center demand is huge.
Data center workloads have already increased 340% between 2015 and 20222, and data center energy demand is forecasted to increase by about 15x by 2030 to reach 8% of total projected electricity demand. The rapid growth of artificial intelligence, along with other modern technologies, such as streaming, gaming and self-driving cars, are some of the reasons behind this continued growth.
We have already seen the number of data centers grow globally. For example, Brazil’s data center inventory has grown by 127% from 2020 to 2022, meanwhile Sydney’s has jumped 30% year on year3. In Europe, it is estimated that by 2025, the number of data centers needs to increase nearly 2.5 times to more than 3,000 data centres (approximately 20,750 Mw). However, this assumption does not take into account future technological developments that will likely increase the efficiency of data centers and increase their power capacity4.
Datacenters, however are energy- intensive, consume valuable resources and contribute to greenhouse gas emissions. Sustainable digital transformation requires efforts to migrate to green digital infrastructure and reduce environmental footprints.
Estimated global data center electricity consumption in 2022 was 240-340 TWh, or around 1-1.3% of global final electricity demand, of which about 90 TWh are directly attributable to the three largest hyperscalers: Amazon, Microsoft, and Google. This excludes energy used for cryptocurrency mining, which was estimated to be around 110 TWh in 20225, accounting for 0.4% of annual global electricity demand. Data centers and data transmission networks are responsible for 1% of energy-related GHG emissions. Despite strong gains in efficiency, the rapid growth in workloads handled by large data centers has resulted in a substantial increase in energy use in this segment over the past several years, growing by 20-40% annually.
Overall data center energy use (excluding crypto) appears likely to continue growing moderately over the next few years, but longer-term trends are highly uncertain.
However, Apple, Google, Meta and Microsoft purchased or generated enough renewable electricity to match 100% of their operational electricity consumption in recent years (primarily in data centers). To reach carbon-free energy goals, data center owners are signing power purchase agreements (PPAs) with suppliers of renewable energy. Meanwhile, hyperscalers are starting to fund the building of renewable-energy plants in the face of soaring prices caused by supply shortages.6 In the United Kingdom, for example, Amazon has supported Scottish Power’s wind farm and is purchasing its entire 50-megawatt (MW) output.
On the other hand, matching 100% of annual demand with renewable energy purchases or certificates does not mean that data centers and data transmission networks are powered exclusively by renewable sources. The variability of wind and solar sources may not match a data center’s demand profile, and the renewable energy may be purchased from projects in a different grid or region from where demand is located.
Making digital transformation more sustainable
The International Telecommunication Union and the World Bank6 have identified six critical pillars towards sustainable digital transformation. These pillars not only promote climate mitigation but also contribute to environmental sustainability. The first pillar addresses climate risks associated with data centers, while the other five pillars aim to mitigate the climate and environmental footprint from data centers.
Climate-resilient data center location
The single most effective — not to mention least costly — way to make data centers resilient against climate change is simply to place them in locations where they are less prone to the negative impacts of a changing climate. The ideal data center location in the age of climate change is one that:
- enables sourcing of clean energy under any climate conditions. Data centers that can rely on a combination of solar and wind power are well-positioned in this regard;
- is not prone to flooding, even with higher sea levels; and is not in a region where insurers are likely to charge higher rates or refuse coverage altogether.
Sustainable design and buildings
With the ultimate target to reach net zero, an energy efficient design must deploy renewable and circular solutions (e.g. using recycled materials in servers and using treated wastewater for cooling). The re-use of treated wastewater or rainwater harvesting features, such as blue roofs to collect and store rainwater are also increasingly common examples of ways to cut water consumption in data centers.
Sustainable ICT
ICT equipment in data centers requires power and cooling. Purchasing energy-efficient equipment, implementing virtualization technology to ensure efficient server management, ensuring timely upgrades and refreshes, and leveraging real- time monitoring of equipment performance are strategies for sustainable ICT use in data centers.
Sustainable energy
The use of renewable energy sources such as hydropower and wind is a critical element of green datacenters. One notable example of datacentres run by renewable energy is the Scala Data Centers (a sustainable hyperscale data center operator in Latin America) that was the first to use 100 percent certified renewable energy. They have also received Carbon Neutral certification and demonstrate that it is viable to effectively use renewable energy to run a data center effectively.
Sustainable cooling
Climate conscious cooling – data driven approach to understanding local hydrology, geography, energy and emissions factors – is playing a big role in the future of data center designs. Using water responsibly, using alternatives to freshwater (e.g. wastewater, industrial water or seawater) or using liquid-cooling technologies are becoming an integral part of future strategies and a valuable alternative to air-cooling for existing and new data centers.
E-waste management
A data center can decrease e-waste by selecting components that have long lifespans and are easy to process at their natural end-of-life cycle. Using recycled materials and making equipment easy to repair can also decrease the environmental toll. These actions reduce the frequency a data center needs to discard hazardous electrical or electronic goods.
How policy-making is reshaping the data center landscape
These dimensions of green data centers should also be considered as part of public procurement strategies and requirements, and in wider policies and regulations to encourage investment in green data centers and increased resilience and efficiency of existing data center infrastructure.
Europe has long been at the forefront of efforts to reduce energy use and emissions. To accomplish this, the European Union (‘EU’) passed an updated Energy Efficiency Directive (EED) in the summer of 2023.
The European Commission is also exploring measures to improve the energy efficiency and circular economy performance in data centers. Data centers need to become more energy efficient, reuse waste energy such as heat and use more renewable energy sources, with a view to becoming carbon- neutral by 2030. To meet this goal, the Commission will rely on a mix of existing instruments such as the Ecodesign Regulation on Servers and Data Storage Products, reviews of existing legislation and new initiatives such as the Proposal for a Directive on energy efficiency (recast) introducing new elements to improve the energy efficiency and sustainability monitoring of data centers.7 Under the recast directive, data centers in the EU with installed IT power of more than 100 kilowatts will need to publicly report energy performance. Once baseline data is collected, the EU will then incentivize further reductions through subsidies or penalties.
The Corporate Social Responsibility Directive (CSRD) is also important legislation which will require companies to report on the environment-related risks they face. According to the directive, this will include ‘reporting on social and environmental factors with a view to identifying sustainability risks and increasing investor and consumer trust.’ The directive also prompts companies to report on diversity, and ‘social and employee-related matters, respect for human rights, anti- corruption, and bribery matters,’ among others.
Other regions still have a long way to go in regulatory changes in this space. Following droughts in some countries in Latin- America such as Uruguay and Chile, local communities have become frustrated at the likes of Google hub data centres that they blame for consuming large amounts of the local water supply. Google’s plans to build a second data centre in Chile has been stalled since 2020 due to local communities filing environmental complaints. Despite this, few regulatory changes have been made in these countries to impose certain regulations on these new data centers.8
The US has also taken initial steps to address the impact of data centers. Several US states are also implementing stricter regulations. In Virginia, pending laws focus on carbon reduction and sustainability through more stringent requirements. Similarly, Oregon has proposed reducing carbon emissions 60% by 2027 for data centers and cryptocurrency mining, imposing fines for noncompliance.
Business opportunities for sustainable and resilient data centers
The shift to renewable energy sources enables data centers to tap into a constant supply of clean energy which provides an attractive market for investors in sustainable power-supply and other relevant projects. Green data centres will play a wider role in the global energy transition. The data center industry can contribute to a more stable and cost-efficient energy system and cost reductions. For example, batteries can capture surplus energy during periods of low demand and release it during peak hours or grid outages to ensure uninterrupted operations.
Data centers also need to connect to a fiber-transport network, so proximity to infrastructure and subsea landing points as well as to renewable energy plants or having access to industrial land are of critical importance.
Governments, investors and other stakeholders are all incentivised to collaborate in the interest of decarbonisation of energy systems and to implement alternative solutions such as updated power grids and infrastructure networks as well as energy-storage solutions.
- https://www.savills.co.uk/research_articles/229130/335882-0 ↩︎
- https://www.iea.org /energy-system/buildings/data-centres-and-
data-transmission-networks
↩︎ - https://mediaassets.cbre.com/-/media/project/cbre/shared-site/ insights/reports/2023-report-media-folder/global-data-center-trends-2023-media- folder/global-data-center-trends.pdf?rev=3d3310b22390450fa449d0950215494d p.5 ↩︎
- https://www.savills.co.uk/research_articles/229130/335882-0 ↩︎
- https://ccaf.io/cbnsi/cbeci ↩︎
- Green Data Centers: towards a sustainable digital transformation: A Practitioners Guide’ Report by The World Bank Group by Rosie McDonald and Sara Ballan. Dated 29 November 2023. – The ‘Original Report’ ↩︎
- https://digital-strategy.ec.europa.eu/en/policies/green-cloud (European Commission Official Website)
↩︎ - https://telecom.economictimes.indiatimes.com/news/internet/in- latin-america-data-center-plans-fuel-water-worries/103974724 ↩︎
Eva Talmacsi is an English and US (NY)-qualified Corporate/ M&A partner of CMS based in London. She advises clients on a broad range of complex cross- border transactions across EMEA and beyond with a particular focus on the TMC sector. She co-heads the firm’s TMT Practice in CEE and is a member of the Global Digital Infrastructure and M&A Transactional Steering Committees of CMS TMC.
