Insight & Analysis

How data centres are trying to improve sustainability

Published: Mar 2024

Data centre industry executives say economies of scale, plugging into renewable energy sources and equipment efficiencies will increasingly drive down ballooning energy consumption in the sector where exponential growth, a lack of awareness of the industry’s carbon footprint, plus poor emissions reporting, is hindering sustainability.

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In a digital world, content is at our – and treasury’s – fingertips, increasingly stored in outsourced data centres since the explosive growth of cloud computing. Now AI means companies want even more data to crunch to provide the business insights of the future and companies’ digital footprint is growing by the day.

Data centres have transformed productivity. But these giant buildings, densely packed with humming computers on racks, also have a high energy and water use. The International Energy Agency (IEA) estimates that around 1-1.5% of global electricity production supplies data centres and data transmission networks. Other estimates are more worrying. Like energy consultants Baringa’s prediction that Ireland’s data centres, 75 and counting, could soak up 27% of the national electricity output by 2029.

For companies incorporating sustainability into their business strategy, energy efficiency in their data storage and visibility of emissions from the sector are a growing concern. To find out more, please contribute to our 2024 Global Sustainability Study.

Sustainability in scale

Treasury Today interviewees argue that large data centres create an economy of scale that is making the industry more sustainable. Data centres use the metric Power Usage Effectiveness (PUE) to calculate the percentage of energy used to cool buildings and run the machines. It shows that most of the energy going into the buildings goes on running IT. That means opportunities to save energy come from optimising IT infrastructure and the performance of servers, storage and network equipment.

“The best energy performance gains are achieved by consolidation of workload and operating the equipment at higher utilisation levels more of the time,” explains Jay Dietrich, Research Director, Sustainability at Uptime Institute in Wisconsin, US. He says much of the growth in data centres is coming from companies moving their IT operations to the cloud and colocation facilities. These companies have typically run their own data centres and are migrating to cloud or colocation facilities because they can’t reduce their PUE or they want to minimise capital expenditures.

One beneficiary of that trend is Boston-headquartered Wasabi Technologies, a leading provider of outsourced cloud storage to businesses and governments as well as distributors or channel partners, in turn with thousands of customers of their own. Because cloud systems pool resources, they can use every inch of slack in the system. Data centres pack in the storage and network equipment in efficiently designed cages that stops duplication and increases sustainability, explains Wasabi CFO Michael Bayer.

“It’s better to share resources,” he says. “Companies are increasingly aware of the costs around IT and systems infrastructure. It’s not easy pushing IT out to the cloud, but it is easier than buying new boxes and keeping up investment in-house.”

Green energy

Singapore-headquartered ST Telemedia Global Data Centres, one of the world’s fastest growing data centre providers, currently draws over 50% of its energy use from renewable sources, targeting 100% by 2030. Strategies include investing directly in renewable energy projects. For example, the company has invested in renewable projects in India, benefiting from a regulatory framework that allows it to draw cheap electricity from projects it has invested in. In another project in Berlin, the operator is located directly adjacent to a significant renewable energy project. “As data centres continue to expand, closer integration with green power generation and collaboration with other industries will undoubtedly gain momentum,” predicts Jonathan King, Group Chief Strategy and Investment Officer at STT GDC.

Dietrich observes more data centre operators are developing in-house energy buying teams who have the skills to evaluate energy contracts and are also working with consultants. “There has been an expansion of interest around this,” he says. Strategies include operators buying renewable energy in one market and using the guarantee of origin to offset power from fossil fuels in another.

King observes an increasing awareness amongst STT GDC’s customers regarding what they are drawing from the grid versus actual utilisation, driven both by cost efficiency and the need to account for carbon emissions. However, he says the carbon accounting industry is still developing, and further, industry-wide progress will be an important step forward to effectively managing emissions in the data centre industry.

Bayer notices requests for a breakdown in the energy bills the company is charged by the colocations it uses to get more visibility on emissions. And requests to separate power bills, space bills and networking bills. “We’ve definitely started to get more questions. Carbon emissions are now part of the dialogue; it wasn’t five years ago,” he says.

STT GDC has committed to be carbon neutral by 2030 and has developed a Sustainability-Linked Financing Framework allowing it to access green financing linked to KPIs like renewable energy usage, carbon intensity reduction and increasing the number of Green Data Centres. To date, the company has raised US$500m through this facility, but King flags room for further growth in the green financing market. “While the industry is progressively embracing green finance, it has yet to reach its full potential. The market’s evolution is ongoing; it entails more than just meeting key performance indicators to attract green funds at a lower cost,” he says.

Innovation in the industry is also set to improve sustainability. For example, King notes the design of buildings can help limit water use, for example a closed loop system means it doesn’t constantly draw water but uses a fixed volume that recirculates. “It is essential to recognise the water scarcity, which may be even more pronounced,” he says. “We’re also implementing liquid cooling strategies, including immersion cooling, to allow our data centres to support the increasing power density (and heat emissions) from AI/High Performance Computing workloads. These strategies are critical to deliver responsible digital infrastructure in a highly sustainable manner,” explains King.

Industry protagonists also argue that data centres will get more efficient with every year of progress. Older generations of data centre assets operate at a PUE of around 2 -2.5. “For every 1 MW of power required to power IT servers in a data centre, approximately 2.5 MW needs to be sourced from the grid for these older, less efficient assets,” explains King. In a sign of increasing efficiencies, STT GDC has been continuing to lower its PUE even in more challenging climate markets like Singapore, achieving PUE factors in the 1.2-1.3 range.

Our 2024 Global Sustainability Study is now open! We’re reaching out to our corporate community to learn how you’re incorporating sustainability into your business strategy. Please share your views and journey with us.

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