Power generation’s impact on data centres – practical options and the case for gas

Market growth and demand dynamics

The global diesel generator market is projected to reach $37.03 billion by 2032, expanding at a Compound Annual Growth Rate of 7.45%. This growth reflects increasing demands for reliable backup power solutions across multiple sectors. This significant requirement underscores the growing importance of reliable backup power solutions across various industries.

Ireland currently has the highest electricity demand growth rate in Europe, with consumption expected to rise by almost 7% per year and as the UK electrifies its heating and transport sectors demand on the grid is forecast to rise significantly. Surging demand, and the value of flexibility in a power system with greener but less reliable power sources, means the need for reliable backup power solutions is likely to grow in the coming years.

Infrastructure challenges

The UK’s transition to net zero is reshaping the power generation landscape. The British Energy Security Strategy’s push for wind, solar, and nuclear power creates new challenges in grid stability and reliability. The gap between peak demand and available supply is particularly concerning during winter months, making robust backup power solutions increasingly critical for essential services and industries.

In Ireland and Northern Ireland, approximately 2150 MW of conventional generation capacity will retire in the next five years – roughly equivalent to the power needed for a city the size of Dublin. This reduction in baseload power generation capacity, combined with increasing demand, creates a critical need for reliable backup power solutions that can support grid stability while meeting environmental obligations.

Market adaptation

The UK’s commitment to phase out unabated fossil fuel electricity generation by 2035 is driving innovation in the backup power sector. The deployment of smart grid technologies and demand-side response mechanisms is creating new opportunities for flexible power generation solutions. Major infrastructure projects across the UK, including HS2 and the expansion of data centre capacity in key locations such as London, Manchester and Cardiff are driving demand for reliable backup power solutions.

Data centre impact

In Ireland alone, there are currently 82 data centres in operation, with 14 more under construction and plans approved for an additional 40. This trend is mirrored in the UK, reflecting the insatiable appetite for digital services. In Ireland, data centres consumed approximately 5.3TWh of electricity in 2022, accounting for around 17% of the country's electricity demand – nearly equivalent to the consumption of all urban dwellings. 

In this sector, some very big companies have made very big promises to reduce net carbon emissions, but for the foreseeable future, the reliable, quick response of diesel backup gensets is essential to the data centre operating model.

Microgrid momentum

As data centres work to manage reliability and sustainability in tandem, microgrids have emerged as a solution. These localised power systems can integrate multiple power sources – from traditional generators to renewable energy – while operating either connected to or independent from the main grid. Some solutions can enhance system efficiency by optimising between different power sources. Some can also provide comprehensive real-time insights into microgrid performance. For data centre operators, this translates into enhanced control over power quality and costs while supporting sustainability initiatives. The ability to integrate components like solar power, gensets and energy storage provides the reliability that data centres demand while potentially reducing operational costs and carbon emissions.

The practical sustainable option

If there is one trend the industry can expect to continue in 2025, it is the increased use of Hydrotreated Vegetable Oil (HVO). This fuel has emerged as a significant breakthrough in sustainable power generation and can be used in many diesel engines with no modifications. With approximately 70% lower lifecycle carbon emissions compared to conventional diesel, HVO offers an immediate pathway to sustainability without compromising performance. Its stability and storage advantages over biodiesel make it particularly attractive for backup power applications across various sectors. Expect data centre operators in particular to drive demand for certified HVO. 

The case for gas

The natural gas generator market remains steady in the capacity market where they augment the grid demand with some data centres also adopting on-site gas generation where emission restrictions are tight. This will continue in 2025, as the industry moves toward cleaner fuel alternatives. Gas generators burn cleaner with lower NOx outputs without the need for expensive after treatment equipment, so we should see more of them in applications where the supply of gas is assured.

Where is the hydrogen?

Green hydrogen fuel remains on the horizon and there is scope for generators that burn a blend of hydrogen and natural gas, but with hydrogen infrastructure under development – and the cost to create green hydrogen well above the return for electricity generation process – this technology is possibly years away from the mainstream. There are processes that create hydrogen as a bi-product and the use of this for power generation is under great consideration. There are already reciprocating gas engines operating on 100% hydrogen so the technology is proven and ready.

Power generation using hydrogen fuel cells, which use pure hydrogen in a controlled, flameless chemical reaction, is gaining traction as a potential solution for sustainable backup power. This technology has been demonstrated to work very effectively but is still expensive and requires a lot of space. Again, widespread adoption remains several years away.

Smart power management

Advanced monitoring and control systems are revolutionising power generation management. These technologies enable real-time performance optimisation, selecting what generation source is most cost-effective, enhancing fuel efficiency, enabling predictive maintenance, and remote operation capabilities. Such solutions help organisations maximise efficiency whilst minimising environmental impact. These technologies are bound to become more commonplace in 2025.

Strategic considerations

Organisations must develop comprehensive approaches to power generation that balance immediate reliability needs with long-term sustainability goals. This includes investing in fuel-flexible generator systems, developing relationships with sustainable fuel suppliers, and implementing advanced monitoring and management systems.

Power solution providers are expanding their portfolios to include more sustainable options while maintaining the reliability that critical operations demand. This includes developing hybrid solutions that can integrate with renewable energy sources and implementing smart technologies for optimal performance.

A measured approach to success

The power generation sector’s evolution through 2025 and beyond will be defined by its ability to balance reliability with sustainability. Success will require a measured approach that embraces new technologies and fuels while maintaining the robust backup power capabilities that modern operations demand. 

This approach will require collaboration between power solution providers, end users, and regulatory bodies to develop practical, sustainable solutions. Those who can navigate this complex landscape while maintaining operational excellence will be best positioned to thrive in the years ahead. As the UK and Ireland continue to grapple with increasing power demands and ambitious environmental targets, the power generation sector must remain agile, innovative, and committed to sustainable solutions to meet the challenges of the future.