FUTURE OF DATACENTRES - MARYLAND RULING ON DIESEL GENERATORS - WHAT COULD IT MEAN FOR THE DATA CENTRE INDUSTRY?

The ruling

On 2nd August 2023, the State of Maryland denied Aligned Data Centres’ proposal for 168 diesel generators at the Quantum Loophole campus in Adamstown to be granted an exemption from environmental requirements. While short of a total rejection, it will require the application to be approved for a Certificate of Public Convenience and Necessity (CPCN), which is a formal process requiring Judicial approval and evidence to be presented on both sides.

Technicalities of the ruling aside, the language used by the Commissioner (“I don't understand, in 2023 why you're proposing a 504-megawatt diesel generator”) appears to be demonstrative of a hardening in stance toward data centres in Planning considerations and the increasing role that environmental considerations will play in developments gaining approval.

The question we must therefore ask – is this a sign of a hardening in stance towards data centres in planning regionally or globally, or is this an anomaly?

Data Centre Social Contract

At a fundamental level, the Authority decision making process is about balancing a range of parameters and how these support a regions wider development strategy. Data centres have sometimes been viewed unfavourably as they don’t provide employment comparable to mixed use or commercial developments so after the initial investment, the return for the local area is more limited and this has less tendency to flow outwards. This is often not aided by the clandestine nature of data centre operations.

When pressures on resource availability are low, data centres are a good investment for a region as they are long term, high value investments for the land use and can grant an Authority a capital injection. However, when resource competition increases, data centres are less attractive as they often must be selected instead of another development, not alongside.

This is especially true of power as across the globe we are seeing power availability become a driving factor in data centre development, coupled with pressures on water. Last year a data centre in Holland made the news for using over 4x the amount of water it was forecast to do so, at 84 million litres. This put the data centre directly competing with residents for drinking water.

While these news stories around data centres aren’t new, they are drawing greater attention to the industry and so the sector needs to look at what can be done to improve usage and allow data centres to exist more harmoniously.

Impact of this ruling:

It is unlikely that this ruling in isolation is going to cause a seismic shift in the way data centre developments are viewed at any significant scale (regional, national or international). It is more likely that this is an indicator that the initial hyperscale data centre “boom” is reaching maturity and that the coming three to five years are going to be increasingly tumultuous. We are already forecasting this will be the case as the current “boom” is augmented by a coming AI boom; speed to market is increasingly a driving factor in development selection and Authorities are increasingly aware of the value of the land they have.

A desire to better utilise land in constrained regions, lack of power and water availability and generator emissions/ diesel consumption are going to drive the discussion and be the initial metrics that data centres are assessed on. Authorities are now in a good position to negotiate on “value adds” or set more stringent requirements, knowing that developers are desperate to bring capacity to market and that with demand high and supply low, this increase in cost can be passed to the customers.

The Future

This ruling will likely result in data centre developers being increasingly driven away from diesel generators as even those running on HVO will still produce emissions. With redundant electrical feeds not an option and solar/ wind not viable for baseline power without significant storage, it will require creative solutions or value adds to demonstrate value for local authorities in the longer term. For example, in March 2023, a development in Devon hit the news with a small data centre being used to heat a municipal swimming pool and this has reignited the well needed discussion in the sector around waste heat and district heating networks.

Economies of scale are more challenging in Europe than the USA due to land availability and while campus nuclear microgeneration or hydroelectric may be viable on 400MW + campus’ the challenge remains more prevalent in Europe. This leaves less options on the table in the face of stricter legislation and planning requirements.

Fundamentally, data centre design has changed little in the last ten years. Facilities are more efficient, but wholescale innovations are few and far between and the industry has been conservative in innovating. This is understandable, given the need for stability and resilience as a fundamental of the service offering, but clients will increasingly have to demonstrate novel solutions to problems to pass planning.

Complex problems with multiple solutions:

We are working with clients to look at new solutions to these problems and see the solution as three-fold:

1. Reduce demand for backup capacity in the event of main supply failure. This

focuses on technologies which increase the operating temperatures or acceptable variances for rack temperatures, as well as business models which may allow clients to select less “backed up” rack space for a reduction in rates. This could include tiered spaces within a data centre for less critical storage, including archiving.

2. Replace diesel generators with alternative technologies. This goes beyond looking at HVO or alternative fuels to the hard question of alternatives. Microsoft plans on eliminating diesel generators at its data centres by 2030. How will they and others achieve this?

3. Better standardisation, monitoring and comparability across data centres with a more tailored green standard to demonstrate benefits to clients. With data centre regulation and standards still in their infancy and a drive from clients for greater information and comparability, especially where sustainability is concerned, there is a need for greater energy and supplier audits, coupled with Scope 1,2 and 3 emissions challenges.

Conclusion

The Maryland ruling is a clear indication that authorities and governments are reconsidering the status quo and environmental impact of data centres and the role that they can play in driving data centre developers to do better for their regions environmentally. This is being driven across all levels from local approval authority up to national legislature and as an industry we need to read these signs and be more aware of our social contracts.