EU Industry Body Wants Data Centers to Become Part of the Energy Grid

Data center operators have been lobbying European Union officials to make them part of the electricity grid, offering a plan they say can help reach the block's renewable-energy goals.

The plan, expected to be put to European energy ministers in April, could help the data center industry answer growing public alarm over the amount of energy it takes the run the internet, even as government officials say more digitalization is one of the best ways for all industries to cut carbon emissions. Saying they want more internet -- and a greener internet -- EU officials have threatened to add more regulations to a growing pile of rules and fines to force the industry to go green.

Authors of the proposal, a draft of which has been obtained by DCK, hope it can help data center operators cope with regulations such as the recent rules that can nail them for using diesel generators for backup power.

The proposal in essence is for data center operators to help balance energy supply and demand on the electrical grid, which is facing more and more fluctiations as more intermittent renewable energy generation sources come online. Data center operators would replace diesel generators with batteries and top them up with grid energy when it was abundant and cheap and sell the energy back when the grid was running short.

The European Data Centre Association (EUDCA) took this plan to Brussels on January 30, when it lobbied cabinet officials for Frans Timmermans, the energy commissioner whose European Green Deal plan threatens tougher measures on dirty computer power. The idea is to make data centers part of the solution, not a scapegoat for the problem.

A Costly Proposition

The plan has one potentially fatal flaw: the data center industry cannot afford it. So it's pleading with regulators to get government to pitch in.

"We've gone into Timmermans' cabinet and said, 'If you are smart, and you help us, we can become part of a green grid solution," Michael Winterson, who led industry lobbying in Brussels as chair of the EUDCA policy committee, told DCK in an interview.

"Data centers have a very flat, stable demand," he said. "What if we over-invest in energy storage, and when loads were high and demand was low, we would consume and store energy? And we use that when energy on the grid is expensive."

The technology to do this already exists, but it's "not yet financially viable for us," said Winterson, who is VP of business development and EMEA managing director of services for Equinix, the world's largest data center provider by revenue.

He described a potential AI-based system that could "arbitrage the market" to make a profit buying and selling electricity. Since the energy storage systems currently on the market are too expensive to make such a set-up profitable, government could step in with incentives to make it work financially for the operators, Winterson suggested.

"I don't know what that incentive could be, he said. "Offsets on loans for green investment? Some form of credit for green investments? An energy tax incentive? It doesn't have to be huge, and it can be tapered off."

Reserve Energy Market Already Busy

The proposal coincides with an EU effort to find stable energy reserves as it switches from fossils fuels to renewables. Regulators have relaxed rules to make it possible for anyone to connect power reserves to the grid. But this liberalization has already made prices fall on the Frequency Containment Reserve (FCR) market, the market data center operators would join if they could afford to.

"There's lots of competition in the FCR market, so watch out data centers," Philippa Hardy, principal reserve market analyst at energy consultancy Delta-EE, said. "You are not the only ones trying to create value from [energy] storage. The value in FCR is actually decreasing, because there's a lot of people going after it."

Neither is the data center industry the only one under pressure. New emissions rules on diesel generators would hit others, such as hospitals, just as hard, she said.

"Are you going to have parallel industries saying, 'Well if data centers are getting a tax break or some special fast-track to FCR... then that's not fair.' The capex of a battery system is a hurdle for every industry as we work towards decarbonization. Batteries are way more expensive than diesel gensets."

Those concerned with ensuring the grid runs smoothly, however, would welcome more players to the FCR market. The more reserve suppliers the better, said a spokeswoman for TenneT, a transmission system operator in the Netherlands and Germany responsible for guaranteeing enough reserves to keep the electricity grid stable.

"In sectors where new electricity demand is likely, this warrants consideration of what uses can be made flexible cost-effectively," she said. "Data centers are one of those sectors."

Load-balancing the grid, however, is only one, modest way to make it flexible, the TenneT representative said. Data centers should also manage their electricity use with smart metering and smart contracting arrangements with energy suppliers.

Winterson said Equinix and other operators were indeed using smart energy systems and had been trialling a system where they balance their own load dynamically with renewables. The reason the grid could not flex enough to meet demand fluctuations, though, was that it had lacked investment, said the draft plan he has been touting in Brussels.

Data Centers as Energy Suppliers

When energy ministers meet in Croatia on April 27, he plans to tell them that data centers should take a central role in the EU energy system. The draft EUDCA plan, called "Future Energy Vision," positions data center operators as energy suppliers to compute systems.

The pitch is that operators have invested hundreds of millions of dollars in energy efficiency, and most of them run on between 50 and 100 percent renewables. Yet getting the whole industry to 100 percent renewables would need capital expenditure on expensive, experimental technologies. They would have to invest in storage technology. The EU, whose Green Deal was demanding industries do more to go green, should put up innovation funds to help industry make the leap. And they need to act fast, because the data center investments operators made today, which could amount to $200 million for a single facility, were commitments for which they could not expect to recoup for 20-30 years.

Meanwhile, operators face other problems, Winterson said, being "very concerned" that the edge computing trend might hit them "heavily." As 5G-enabled low-latency applications proliferate, more computing power may go into small edge data centers to support those applications, and less of it into the big centralized data centers the world's technical infrastructure so far has relied on.

"It may fundamentally change the shape of what is a data center, which is a scary thing for us," he said. "Because once you put a couple hundred million dollars in the ground, that asset has to be sweated for about 25 years."