Matthew Harris, CFO of UK high-performance data centre operator Kao Data, explores the wider implications for data centre sustainability in light of the energy crisis, and why it should be a catalyst for radical change.
At the time of its announcement, former UK prime minister Liz Truss’s intervention to freeze energy prices for households for two years was expected to cost the government as much as £140 billion (€156 billion). In the worst-case scenario, it was estimated that a separate six-month initiative to cap costs for companies, charities and public sector organisations could cost a further £48 billion.
Chancellor Jeremy Hunt has scaled back the schemes, and the recent falls in energy costs have greatly reduced the UK government’s exposure from those worst-case scenarios. However, the fact that the government even countenanced a short-term fix that brought with it financial exposure greater than the entire annual health and social care budget raises an important question: what could truly be achieved if that level of funding were available for sustainable solutions?
Many of the green and sustainable technologies set to deliver the next leaps in energy security and decarbonisation are here today, but often they must overcome the inertia that makes reversion to fossil fuels seem the easy option. However, if almost £200 billion is now a conceivable sum to spend on energy solutions, radical changes become possible.
Incentivising net zero
Arguably the most radical change would be to foster reductions in demand. While the recent cold snap in the UK saw coal power stations fired up, it also saw National Grid announce a further test of its demand flexibility service, which pays customers to use less energy during periods of peak use.
In reporting the growing impacts of the energy crisis, some media outlets have implied that Britain could face rolling blackouts. The truth, however, is very different – not least because there are few periods throughout the year when demand is very high. In fact, the greatest 2GW of electricity demand occurs just 0.6% of the time. To put that into context, Hinkley Point C, the new nuclear power station being built at an estimated cost of £25 billion, will provide 3.2GW of energy.
Incentivising customers may therefore offer the benefit of reducing demand at key times, and could effectively pay for itself through lower input costs and avoided infrastructure investment. No doubt that is why more than 200,000 Octopus Energy customers happily participated in a test of demand reduction, which the company said replaced energy demands from a gas power station over the course of an hour.
But to achieve the full potential of demand flexibility requires investment in a smarter grid capable of replacing crude ‘turning off’ (or down) with more sophisticated prioritisation of, say, a peak in energy for heating as people return home versus a short pause in charging of local electric vehicles.
Fossil-fuel transition
While some demand reduction can be delivered very quickly, the move away from fossil fuels will not be immediate. This is something echoed by Myles Allen, a professor of geosystem science at the University of Oxford and director of the Oxford Net Zero initiative.
Allen believes that keeping things simple is the key to solving the energy and climate crisis, highlighting in a recent article published online that there’s a lot that can be done in terms of renewable energy and reducing emissions, but that the UK will not achieve its climate goals by 2050 if it focuses solely on the switchover to renewables and nuclear power.
Allen argues that carbon capture and storage is an affordable way of stopping fossil fuels from causing further global warming. He calculates that the additional cost of production from fossil fuel companies to remove the carbon from their products, when phased in gradually over three decades, would be less than their average increase in wholesale profits since the beginning of 2022.
Ultimately, the sun doesn’t always shine and the wind doesn’t always blow, so when it comes to investment in renewables, this will also require investment in energy storage. The most obvious storage technology comprises grid-scale batteries, which are now being deployed at pace – with more than 400MW of such capabilities installed in 2021 and the pipeline of future projects growing to over 20GW.
Green hydrogen also helps solve the renewable energy storage dilemma by being created and stored when renewable-energy generation is high, thereby raising the question of whether hydrogen will fuel the data centre of the future.
Data centres and decarbonisation
For over a year now, the data centre sector has absorbed energy shocks that have put prices to levels that were previously unthinkable. Although the industry has undoubtedly made great progress to lead the way in decarbonisation, becoming both more efficient and sustainable in the last decade, research has shown that data centres still consume between 1 and 3% of the world’s electricity. The industry should therefore use the current opportunity to ask, “what other ‘unthinkable’ things must the sector consider as we move towards net zero?”
At Kao Data, we’ve long held the belief that data centres can be a catalyst on the road to net-zero emissions – and since our company’s inception, we have ensured that sustainability has remained at the heart of our decision-making.
As the world becomes more digitised, the need for zero-carbon digital infrastructure has become more important. In line with this, the only path to a sustainable future is one via which data centres and other critical infrastructures become interwoven with a resilient, renewable energy system.
Amid the turmoil of a volatile energy market, it is critical that our industry does not regress by re-encouraging the use of fossil fuels or start to pursue the production of non-renewable sources such as waste-to-energy. We must ensure that both the health and security of our planet remain the priority at all times, encouraging our customers to adhere to the same sustainable ethos.
Sustainable priorities
We believe that the data centre industry must also remain committed to powering customers’ workloads with green, electrical energy, and as such, operators should proactively invest in the technology to drive both the production and provision of owned renewable-generation capabilities.
This could mean identifying alternative means for direct connection to renewable energy production within local ecosystems. For operators based in parts of the UK where access to geothermal power might be impossible, this could include the buying of land for solar farms with private wire connections or by finding a way to partner with onshore wind farms.
For example, at Kao Data we have worked with our energy provider and the Little Cheyne Court wind farm in Kent to ensure that every electron of energy we consume is matched by an equivalent capacity generated at a specific local UK asset. This, we believe, is key to going beyond the Renewable Energy Guarantees of Origin (REGO) system, ensuring our energy provision is as green as possible while pushing the boundaries of what’s possible in terms of UK energy procurement.
While strategies to build owned energy-production capabilities such as wind and solar may take time to become a reality, we believe it is essential that all operators take steps to bring this capability into their portfolios. Doing so would provide the industry with the ability to secure long-term, low-cost, fixed-price renewable power directly for the benefit of the planet and our customers.
Looking forward, our industry must remain committed to sustainability, despite the surrounding macroeconomic challenges. At Kao Data, it is our belief that sustainable innovation holds the answer, and that now is the time for industry to collaborate and push boundaries in the race to net zero.
Matthew Harris is CFO of high-performance data centre operator Kao Data
