Authored by: Paul Churchill, Vice President and General Manager, South East Asia, Vertiv
Businesses are moving to the cloud, making data centres a critical segment of every organisation, industry, and sector. As data centres get larger, energy consumption has become increasingly important to their operators and owners. Disruptions in their operation can bring businesses and organisations to their knees.
A data centre’s need for always-on power and its relatively high power requirements present challenges in the direct use of renewables. While solar technology has made significant strides in efficiency, and both solar and wind energy have become more cost-competitive compared to traditional energy sources, these technologies are still maturing and viewed as risky—and impractical—by many data centre operators. Reducing the industry’s carbon footprint is a high priority, but it can’t come at the expense of reliable power availability.
Data professionals across the globe seem to agree with this perspective. According to Vertiv’s Data Center 2025: Closer to the Edge global survey, participants projected that a meagre 13% of data centre power could come from solar and 8% from wind.
In Asia Pacific, the combined average projections for solar, wind and hydro from the participants stood only at 31%. Compared to responses to the same question in 2014, the new projection seems timid. Back then, solar power alone was projected to meet more than close to one third (34%) of data centre power requirements by 2025 with an additional 12% coming from wind.
Will we continue to scale back expectations as we move closer to 2025?
Based on the trends and developments occurring today, there are reasons to remain optimistic. The target identified by the survey respondents, which is one in every five kW/hour of electricity consumed by data centres coming from solar and wind by 2025 - is realistic and achievable.
What is Holding Us Back?
The large majority of data centres including those in Malaysia will continue to rely on utility power and while the availability of renewable energy on the grid is growing, it seems unlikely that the industry can depend totally on the grid to reach the 20% mark by 2025. Malaysia's high potential to increase renewable energy adoption is hindered by a number of challenges - with financing standing as a major barrier. The country needs RM33 billion worth of investments in order to achieve its renewable energy mix targets.
How We Are Moving Forward
In 2018, Malaysia set a target to increase its renewable energy in electricity generation from 6 per cent to 20 per cent by 2025. A majority of this would be driven by solar. The country is working on achieving this goal by implementing large scale solar programmes. Similarly, the Green Investment Tax Allowance and Green Income Tax Exemption have also been extended until the year 2023. Given these programmes and incentives, data centre developers in Malaysia, have made strong commitments to powering their data centres with renewable energy. They are pioneering approaches and leveraging their scale to forge a path that has the potential to raise the overall use of renewable energy by data centres globally.
How PPA Serves As an Alternative
Power Purchase Agreements (PPA) have emerged as a key vehicle for increasing a data centre’s consumption of renewables. This can be considered indirect, rather than direct, consumption as the Agreement makes the renewable energy resources integrated into the grid accessible to data centres. Today, PPAs often represent the best alternative for increasing renewable energy consumption and can serve to drive new development of grid-scale renewable energy sources, particularly when employed by large developers.
Unlike renewable energy credits (RECs), which represent the clean energy attributes of renewables but are not a direct energy purchase, PPAs allow operators, where possible, to purchase the dispatched clean electricity along with the bundled REC.
This is simplest to accomplish in competitive retail energy markets. It is more complex in areas where the retail market is regulated but is still possible through a fixed-floating swap agreement, as described in the Google white paper, “Achieving Our 100% Renewable Energy Purchasing Goal and Going Beyond.”
PPAs and RECs are being used today by several major developers, including Google, Equinix, and Digital Realty, to accelerate the timeline for achieving ambitious clean energy goals as other strategies are pursued. However, they are more than a short-term strategy. They will become less necessary as the percentage of renewables on the grid increases, but for organisations that commit to 100% renewable power, they will continue to be used in the long term to compensate for the inevitable gaps in the availability of sufficient renewable resources.
With these large players accounting for an increasing percentage of total data centre capacity, and thus data centre power, their commitment to renewable energy and the use of PPAs will drive up the overall percent of data centre power from renewables while also incentivising utilities to add more renewable power to the grid.
What are the possible solutions? Microgrids can also play a role in directly supplementing the renewable energy available on the grid. These grid-connected on-site energy generation or storage plants are being promoted to enable data centres to gain greater control of energy costs by reducing peak demand. Solar panels are ideally suited to support microgrids, providing operators both lower-cost power and the ability to directly support some percent of their data centre power requirements through renewables.
Overcoming the Obstacles
The solution to increasing the use of renewables to power data centres lies in increasing the percentage of grid-connected renewable energy sources. In 2018, about three percent of the power generated globally came from solar, but only about 60 percent of that is utility-scale.
This would seem to put the issue outside the data centre industry’s control—and put the projection of one in five kW/hours by 2025 out of reach. However, that’s not necessarily the case.
PPAs and microgrids are significant steps in finding solutions to the renewable energy puzzle. And they may very well be enough to achieve the projection of Data Center 2025 participants,as long as data centre operators remain committed to clean energy and work with their utility partners to drive increased development of utility-scale renewable energy projects. Yes, the industry is a significant consumer of electricity, but it has also become a force for change in this area.