Adapt and innovate: Navigating challenges and embracing opportunities for sustainable growth in data centres

Data centre operators face multi-faceted challenges in securing access to the resources they need to operate their data centres efficiently. This, coupled with increased scrutiny from legislators and activists, means that they are under significant pressure to adapt and innovate. 

However, challenges bring opportunities and there are potentially enormous financial and social rewards available to governments and private enterprises that can offer incentives and solutions to mitigate these challenges and achieve more sustainable outcomes. 

Challenges for data centre operators 

Data centres have quickly become the cornerstone of our digital infrastructure, serving as critical hubs that store, process and disseminate the vast quantities of data by which our societies function. 

However, our increasing dependence on data centres brings with it significant implications for the environment, including in relation to energy consumption, greenhouse gas emissions, water use, and electronic waste generation. The advent of generative AI technologies and the vast quantities of data these technologies process threatens to exponentially magnify the environmental impacts of data centres. 

1. Access to a reliable power supply

Access to a dependable power source is vital for the efficient functioning of data centre operations. A general lack of grid capacity is a key issue for operators, and there have been numerous examples in recent years where a lack of grid capacity, or problems connecting to the grid, has led to delays for data centre construction projects. Even a grid connection is not a guarantee of reliable power; as is currently the case in California, where the state struggles to maintain consistent power to high-demand facilities in Silicon Valley.  

Power disruptions can be detrimental todata centres in a number of ways, including: 

• Operational impacts – data centres are responsible for storing and processing large amounts of critical data for businesses and other organisations, so any interruption in the supply of power leading to system downtime can result in significant financial losses and damage to the reputation of the data centre operator. 
• Damage to equipment – data centres house expensive and sensitive equipment such as servers, storage devices, and networking equipment. These devices require a stable and consistent power supply to function properly. Power fluctuations or outages can damage the equipment and result in data loss, which can be catastrophic for both the data centre operator and its customers.
• Security risks – Data centres are responsible for storing and processing confidential and sensitive data of their customers. A power outage or fluctuation can compromise the security of this data, making it vulnerable to cyber-attacks or data breaches.

2. Access to an adequate water supply

Data centres require a significant amount of water for their cooling systems, which in turn are essential for maintaining the optimal temperatures required for the proper functioning of data centre equipment. Water access limitations can reduce feasible options for data centre locations, and can restrict opportunities for expansion into new markets or high-demand areas. 

By way of example, a data centre in Quebec, Canada, faced significant opposition in 2021 from local residents and environmental groups, who viewed the data centre operator’s plans to use an estimated 20 million litres of water per day for its cooling systems as a threat to the local environment and water resources. 

Data centre operators must carefully consider water access issues and plan for efficient water usage to ensure smooth operations and comply with regulations. 

3. Regulatory compliance

Governments across the globe are scrambling to work out how to best legislate to minimise data centre impacts, without stifling digital transformation and progression. In particular, data centres and their operators are subject to a growing number of environmental regulations and reporting obligations, which aim to reduce their carbon footprint and promote sustainable practices. 

The increased focus from regulators means data centre operators must navigate lengthy and complex compliance hurdles, which in turn can cause delays in construction and increase their operating costs. Here are some examples of regulatory requirements affecting data centres:

4. Supply Chain Constraints 

The data centre industry is not immune to the global supply chain disruptions and skilled labour shortages that are currently beleaguering the construction industry. Building a data centre requires a highly skilled workforce and a wide range of specialised equipment. 

Delays in the delivery of components and onboarding of technical expertise can significantly impact the construction project timeline for new data centres. 

5. Pressure from customers

The challenges described above are exacerbated by the demands of the large-scale operators of cloud and internet services who, in striving to meet their own environmental, social, and governance targets, impose onerous performance standards and additional reporting commitments on data centre operators. 

As a result, the pressure is on data centre operators to find innovative ways to reduce energy consumption and other environmental impacts of their operations, particularly as power efficiency improvement using traditional methods begins to plateau. 

Opportunities for sustainable growth

1. Renewables

Despite the considerable challenges it faces, the data centre industry is currently poised for a transformative shift towards sustainability. The opportunity to leverage the growing availability of renewable energy, particularly wind and solar in providing viable, cleaner alternatives to conventional coal-based power represents step change for operators. 

2. Private wire systems

Data centre operators are also leveraging new strategies such as private wire systems to help overcome resource issues. Private wire systems are connections that link power sources directly with energy consumers such as data centres. 

This direct transfer bypasses the public grid, mitigating the risks associated with grid connection and volatility to ensure a more stable and continuous power supply of power.

Where private wires are integrated with renewable energy sources, such as solar or wind farms, they can significantly reduce the carbon footprint of a data centre and give operators more autonomy over the procurement and pricing of their electricity.

3. Strategic location planning

Planning the location of edge data centres, to bring processing resources and storage capabilities closer to the devices and networks that they support, can be hugely beneficial in increasing response times for latency-sensitive applications, improving security, optimising bandwidth usage, improving security and generally reducing data centre costs. 

Edge data centres are particularly effective in supporting real-time AI applications which in turn can be powerful tools to boost energy efficiency in data centres.

4. Leveraging AI

Integrating AI into data centre activities can help automate and enhance operational processes, such as resource allocation, security, server maintenance, and monitoring and reporting. 

For example, AI can optimise energy usage (which is one of the largest operational expenses for a data centre) by dynamically adjusting cooling systems and power distribution based on real-time demand and environmental conditions.

5. Funding initiatives

Financial initiatives also play a role in the push towards sustainability. The European Union has pledged to invest €2 billion via the European Data Strategy in a European High Impact Project, which aims to provide energy-efficient cloud infrastructure, including data centres. 

Additional funding initiatives are focused on improving the energy efficiency and sustainability monitoring of data centres, adopting “total cost of ownership” models over traditional “return on capital expenditure” metrics.  

Looking ahead 

Data centres have become essential to the infrastructure of the digital economy, yet they bring with them a plethora of environmental challenges, including intensive energy consumption, depletion of natural resources and e-waste generation. 

Governments across the globe are responding to these issues by introducing specific regulations aimed at reducing the environmental impacts of data centres, and promoting sustainable practices. 

The increased regulatory burden is an ongoing challenge for data centre operators, who will have to continually manage, monitor and report their environmental performance to stay compliant. 

Getting this right will be crucial to securing funding and investment from lenders, funds and financial sponsors who are looking to play a part in this critical industry as it expands to meet the growing needs of global consumers.