Power Struggle

At the heart of the ‘issue’ is that national power infrastructures are not keeping pace with the growth in new data centre power requirements. The current situation in Slough - the world’s second largest data centre market – provides good example. Slough has effectively run out of substantive high voltage electrical power meaning the UK National Grid has needed to commit to building a new 400kv substation (the largest size substations in the UK).

Whilst this is a positive development, the capacity increase it has promised already looks insufficient. The new substation will provide for around 900Mva of new supply, similar to the total London data centre market currently. Within 6-months of National Grid drawing up this solution however, all the newly available power has been allocated albeit clearly, a phased rollout will stretch into many years ahead. Which leads us to the next issue. Time and speed to market.

Developing a new 400KV substation is no mean feat. The UK Grid has needed to secure the required land (either co-operatively or through Compulsory Purchase Order), secure planning consent, and contract for large 240MVa transformers.  The implementation will be staggered to ensure limited downtime and of course, timed to avoid poor weather. Therefore, whilst the UK National Grid are proactively offering a solution, the time to implement means that the earliest date for connection is at least four years away.

With many operator’s ‘chasing Cloud’ customers who will only commit to space and power (execute Agreements for Lease) where the operator can demonstrate a ‘go live’ date within 36-months, this mismatch of demand and availability creates a problem. Operators will need to secure a green light from funding partners to move forward unconditionally, but hope that delay doesn’t affect the cost of capital ‘too’ harshly.

These challenges are not unique to the UK. There is a common misconception that greater capacity is available in Tier 2 markets where there are currently fewer data centres. The data centre development team at Knight Frank are actively acquiring development sites in at least five tier 2 markets in Europe where the power network provider has made formal power offers. These however, are ‘subject to modification applications’. In other words, a commitment to deliver the required power is possible, but only once grid have built a new substation. This of course means, a means a similar extensive time lag to Slough.

So, what is the solution?

1. An end to ‘Power Banking’. The market is guilty of ‘power banking’ but who can blame them? Securing a substantial share of power capacity present and future, effectively reduces the risk of competition. A solution could be for energy providers to commit to a minimum day one load with subsequent increases subject to meeting the required sales projections. 
2. Grow relationships, create partnerships.  Knight Frank retains extensive relationships with all power providers. Power is fundamental to data centre development. Knowing the power network, its shortfalls and its opportunities yields market advantage through creating efficiency and reducing potentially wasteful design and pre-planning costs.
3. Increase Rent on ‘Option’ space & power. All operators struggle with the quandary around ‘Right of First Refusal’ (ROFR) or Option Space. Where a customer commits to an initial MW load at day one whilst enjoying immediate access to Option space at a moment’s notice, there is clearly substantial pressure placed on the operator upstream, resulting in increased ‘power banking’, effectively reserving more power than will ever likely be used.  The only way to mitigate would be for all operators to come together and increase rents on option space – ‘If you really want it, then you can really pay for it’.
4. Explore alternative options. Different approaches to the challenges are emerging such as the use of hydrogen gas generators. This might not be the answer for all and is not as ‘green’ as other alternative solutions; it does provide a reliable and easily implementable answer to a pressing problem.  Further, this method may offer a short-term fix. Users in theory could revert to electrical power once the grid upgrades are live. 

The most important topic to address will be to action measures in support of achieving global sustainability. The data centre industry currently consumes 3% of the world’s total power consumption. Although optimisation will temper the pace of future rises, undoubtedly usage will only get greater. 

Access to renewable power offers clear advantage, but most European countries are still heavily reliant on fossil fuels. In the future, could cross border distribution of power derived from renewables enable wider achievement of carbon reduction targets? Possibly. Efficiencies in process though will be the main tool in achieving successes meaning innovation in technologies have the biggest role to play moving forward.

As digitisation becomes ever more ingrained into our everyday lives, so the reliance and therefore power requirements of data centres will grow. In a world essential to the evolution of everything SMART, smart thinking is required.

Read our report in partnership with DC Byte here.