Remember the days when research involved going to the library to thumb through heavy tomes? Or you put photographs in an album instead of on Facebook – or didn’t stream a movie? 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. Add to this the fact AI means companies want even more data to crunch to provide the business insights of the future, and our digital footprint grows 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 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.
The data centre ecosystem comprises different players spanning on-premises data centres that house companies own IT systems and hyperscalers, the giant cloud providers like Amazon Web Services (AWS) and Microsoft. Others include colocation facilities (colos) owned and operated by independent providers offering equipment, space and bandwidth for rent and off which cloud storage service providers can piggyback. Efforts are underway to shift the industry onto a sustainable footing, but critics warn many people don’t realise it’s a sector which uses so much energy.
“People are not aware of the detail,” says Prof. Gordon Blair, Head of Environmental Digital Strategy at UKCEH and Distinguished Professor of Distributed Systems at Lancaster University. “From members of the public to captains of industry, they don’t realise. When a plane takes off, we hear the roar and know it involves carbon emissions, but technology is ephemeral, and the metaphor of the cloud enhances that.”
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 the 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.”
He says the cost of power is a pass through to customers and the benefits of economy of scale are instantly visible in lower bills. “People are thinking about their sustainability footprint,” he continues. “Sustainability saves money and being more sustainable can help your bottom line.”
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 observers more data centre operators are developing inhouse 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.
But as data centres become increasingly significant buyers of renewable energy, they are also attracting criticism for reducing the availability of renewable energy for others. Facebook is one of the largest corporate buyers of renewable energy, with contracts in place for more than six gigawatts (GW) of wind and solar energy located on the same electrical grids as the data centres they support.
Moreover, accounting and reporting emissions is challenging. Positively, 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.
Identifying where the energy is coming from is a complex business for companies like Wasabi that don’t own or operate their own premises. “We don’t have visibility on the level of renewables in their energy mix because sourcing power is the remit of the co-lo. We can get some visibility, but it’s hard to measure, and changes through the course of the day.”
It reflects wider challenges for treasury teams that have outsourced their IT systems and data strategy, trying to get a handle on their Scope 3 cloud operations. Although regions like the EU are tightening reporting on Scope 3, it is complex and characterised by poor levels of reporting and transparency.
“One of the biggest challenges to reducing emissions from the cloud is the lack of transparency. Few companies properly count Scope 3, and the lack of transparency allows companies to make it up,” says Blair who calls for speeding up the introduction of legislation that will standardise rules on the accounting and methodologies to assess carbon footprints as part of a company’s accounts. “Every single large company has pledged net zero but are they confident they will achieve it or is it just a marketing slogan? We don’t know because we don’t have the numbers.”
Sustainable investors
Wasabi’s lender cohort are increasingly pushing sustainability. In 2022, the company completed its fourth round of capital raising, expanding its funding base from primarily family offices to more institutional finance and regulated lenders that are hiring consultants to ask deeper questions on sustainability, and Wasabi’s carbon footprint.
Like requests for a breakdown in the energy bills the company is charged by the co-lo’s it uses to get more visibility on emissions. Or investor 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,” says Bayer.
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.
Dealing with waste
No conversation about a sustainable data industry can ignore the issue of waste. Data is the new gold and companies are afraid to throw it away. AI has made data more valuable on the premise it will feed the models that will drive innovation in the future. It means companies are holding onto data they were previously dropping on the floor, even if they have to pay to store it.
Executives say their job is to provide the efficient resources to drive our digital lives in the most sustainable way possible, not get behind the veil of what their customers choose to store. Like a car salesman asking a customer if they really want to buy a car, they say it’s not their job to question how much data a client wants to store.
But it’s possible we are storing far more data than we need, and this will increase in the future, warns Blair. “A lot of it may never be utilised,” he says, citing the reams of satellite data that is being captured by the scientific and defence community that might never be used. “Most data that is accumulated will never be looked at. It’s the same as keeping all this stuff in our cupboards that we don’t need,” he says.
Still, one area data centres are addressing the waste question is via recycling equipment when it is replaced at points in the cycle. This process also benefits from economies of scale, says Bayer who says Wasabi’s hundreds and thousands of servers with a five-to-seven-year life can be recycled easier than a company with say, five servers. “It is much easier to work with vendors to retire that volume of equipment. We can do it more thoughtfully than just put it in landfill.”
Innovations
Innovation in the industry is also set to improve sustainability. For example, King notes that 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.
STT GDC is also using AI in its data centre operations to optimise cooling infrastructure and manage the heat generated from the servers. The smart processes include automatically adjusting the cooling infrastructure based on environmental factors to further improve PUE. “We have established an R&D team in Singapore exclusively dedicated to initiatives like this, ensuring that every precious kilowatt drawn from the grid is utilised with utmost efficiency.”
Industry protagonists 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.
They argue that the growth curve will flatten, driven particularly by ever more efficient equipment. The industry releases a new generation of products on average every three years that is steadily improving the work delivered per unit of energy consumed. “When these companies buy a new server, they can hopefully consolidate two to 12 existing servers into one new one. Best case, that means taking 11 machines off the floor and dropping the energy use by half or more to do the same amount of work,” says Dietrich.
He also believes the gap between facilities groups that buy the power and pay for it, and the IT groups that plugs in and run, is closing. This disconnect, where IT groups have historically focused on reliability, resilience and availability rather than energy use is changing as operators realise they need to be more efficient with their equipment, and save on capital investment if they have to buy fewer servers, in an environmental and business win.
“The case for running systems at optimal levels and streamlining the amount of equipment needed has become a central sustainability. It’s carbon emissions you don’t have to account for,” he says.
Still efficiency drives are also proving challenging. Like the fact servers have a power management capability whereby it’s possible to idle parts or turn it off to reduce power. Dietrich notes a trade off with this approach because when operators begin turning off functions, it takes longer for the system to communicate at the speed it’s meant to, impacting a variety of workloads.
And for all the efficiencies, Blair remains concerned about the ‘Rebound Effect’ where history tells us that continued efficiencies just continue to drive growth. “As soon as we save, we do more. We save, we invest, and the industry gets bigger. If you look at the statistics, carbon emissions from technology are not dropping. The world needs to slash carbon emissions over the next couple of decades and a gradual decrease won’t halt the climate emergency,” he concludes.
