In September 2024, the UK government presented itself as an attractive and stable home for such facilities, and the developing technologies that depend on them by announcing that data centers will be designated as critical national infrastructure.
Data centers require huge amounts of energy, provided at a constant and reliable rate, to operate. As a result, data centers are huge players in the energy market, entering into power purchase agreements (PPAs) and trading on the spot power market, to satisfy both long-term and short-term power demands. The International Energy Agency predicts that global data center electricity consumption could double to the equivalent of Japan’s annual electricity use by 2026. In 2024, the chief executive officer of the National Grid, John Pettigrew, predicted that power used by data centers will increase six-fold by 2035.
Challenges
The National Grid and grid operators are facing enormous pressure in keeping up with energy use by data centers. Pettigrew stated last year that the grid was becoming “constrained” and “bold action” would be needed to cope with the surge in demand. In recognition of this pressure, the grid recently started work on a new substation site at Uxbridge Moor in Buckinghamshire to assist in powering new data centers. This will be just one of many crucial actions that must be taken to adequately meet the growing power demands.
Another key consequence of the rising demand from data centers is the threat to sustainability efforts. Fossil fuels have been the go-to energy source for the facilities – the increasing demand described above is hindering and, in some instances, reversing decarbonization efforts. This poses both general and regulatory challenges as regions strive to meet their respective mandates and appease public concern. The UK government’s net zero strategy aims to reduce all UK emissions to zero by 2050 – data centers will be instrumental in either meeting or failing to meet this goal.
Opportunities
A number of opportunities arise from the surge in energy use by data centers and the resulting consequences. There are opportunities for innovation in energy management, renewable energy technologies and grid modernization. We will look at each of these in turn.
Innovation in energy management
Energy should be managed in such a way so as to further the clean energy agenda while minimizing grid disruption. For example, significant energy savings can be made through measures such as power management and power capping in servers, as well as software-defined power, which enables the dynamic allocation of battery or mains power across racks. Importantly, these approaches have limited impact on performance. Additionally, microgrids designed for on-site optimization and sharing of power sources can employ policy-driven software to assist in lowering costs and reducing carbon.
Furthermore, demand response programs provide strong incentives for facilities to reduce their energy usage, particularly during peak hours. As part of this, data centers adjust their power consumption in response to grid connections or price signals from customers. Facilities can engage with such programs to help balance supply and demand, by entering into demand-side response arrangements with the grid.
Renewable energy technologies
Data centers should continue looking to harness renewable energy to reduce their reliance on fossil fuels and pressure imposed by them on the grid. A number of major tech companies have already committed to operating their data centers solely on renewable energy – an ambitious but necessary pledge. PPAs will be invaluable here and data centers should look to collaborate with providers and developers of renewable energy to secure long-term renewable commitments (for example, electricity supply accompanied by renewable certificates) without jeopardizing the stability of the grid.
Data centers also may look to generate renewable energy on-site. By combining on-site generation with effective energy storage methods, including battery energy storage systems, data centers could ultimately become self-sufficient. However, the regulatory implications of co-locating a generation asset alongside an asset that is trading power would need to be considered.
Grid modernization
Although data centers should continue looking to reduce pressure placed on the grid, there is also an opportunity for the grid itself to modernize. In March 2024, the UK’s National Energy System Operator published its “Beyond 2030” plan: a £58 billion investment plan essentially looking to progress and advance the grid to meet growing pressure, known as the “Great Grid Upgrade.” Plans include the expansion of the offshore grid and a new electrical spine running from north to south. In addition, Pettigrew has suggested the development of a “super-supergrid”: an ultra-high-voltage onshore transmission network superimposed onto the existing grid. As part of this, the UK should also ensure that the grid is renewable-ready, particularly following the EU Agency for the Cooperation of Energy Regulators’ recent critique of European grid operators’ preparedness for the influx of renewable energy.
Despite these promising commitments, data centers are also facing challenges through regulator-imposed reform. Earlier this year, Ofgem published its Decision on the Connections Reform Package. The package looks to prioritize connection projects that are immediately ready in order to reduce delays and lower costs. The decision explicitly mentions that data centers may be disadvantaged by such proposals because they often do not immediately meet the readiness criteria (land rights acquisition tends to be later than with other projects).
Conclusion
The future of the UK’s digital infrastructure will depend on the ability of the UK’s grid to meet the challenges placed on it by increased demand. Data center operators will also have to consider electricity supply arrangements that meet their needs and should explore options with different suppliers and trading strategies.
