The race
to green
The data centre sector’s energy consumption is large and growing. The world’s data centres consumed 460 terawatt-hours (TWh) in 2022 – equivalent to powering over 8 million homes – according to the International Energy Agency (IEA). This figure could more than double to 1,000 TWh by 2026, the IEA predicts, roughly equivalent to the annual energy consumption of Japan.
This has led to growing scrutiny of the sector’s carbon emissions and energy efficiency, through regulations such as the European Energy Performance of Buildings Directive (EPBD) and the EU Code of Conduct for Data Centres. Recent updates to the European Energy Efficiency Directive (EED) also include provisions that specifically target data centres.
Some EU member states have their own, stricter requirements. In Germany, for example, all data centre construction projects that will begin operations in 2026 onwards must achieve a power usage efficiency (PUE) of 1.2 or less.
The carbon embodied in data centres – in other words, emissions from the manufacturing and construction phase – has also attracted the attention of regulators.
In countries including France, the Netherlands and Denmark, new buildings must conform to emissions restrictions throughout their entire lifecycle, including materials and construction.
The EU’s Carbon Border Adjustment Mechanism (CBAM), meanwhile, imposes a tariff on imports of carbon-intensive materials, such as steel and concrete, based on their embedded emissions. CBAM is currently being phased in and will be in full effect from 2026.
These measures are expected to drive demand for low-carbon versions of construction materials, such as 'green steel' and 'green concrete', and will require companies commissioning and building properties to have a close eye on the carbon footprint of their supply chains.
Beyond the environmental impact of data centre construction, businesses are increasingly being held to account for labour practices in their supply chains. The European Corporate Sustainability Due Diligence Directive (CSDDD), if passed as expected, will require qualifying companies to monitor their supply base for evidence of exploitation and take action if they find it.
It is not just regulators who are forcing data centre operators to improve their sustainability credentials. Consumers are increasingly concerned with the environmental footprint of the digital services they use, while businesses of all kinds are under pressure to improve their scope three emissions. Some data centre operators have responded by publishing data about their facilities’ energy and water consumption, and this may soon become a standard customer expectation.
Furthermore, with space, power and construction components in short supply, data centre operators will need to accelerate their efficiency improvements just to keep up with demand. They will need to find ways to enable more compute capacity with fewer resources, an objective that aligns with the fight against climate change.
These regulatory restrictions will stoke demand for greener materials and more energy-efficient infrastructure components.
Climate risk to the supply chain
As we have seen, our survey respondents believe that the oncoming wave of sustainability regulation is the single biggest risk to the data centre construction supply chain, with 61% ranking it among the top five most likely disruptions.
These regulatory restrictions will stoke demand for greener materials and more energy-efficient infrastructure components, such as cooling systems, potentially triggering shortages and backlogs.
But climate change itself also places the supply of construction materials and infrastructure components at risk: 56% of respondents rank physical climate risks, such as flooding and forest fires, among the most likely supply chain disruptions. As global temperatures increase, and extreme weather events grow more frequent, the data centre construction supply chain will also become more volatile.
For these reasons, data centre operators and contractors cannot manage construction supply chain risk without also considering its impact on sustainability.
When planning their data centre projects, they must consider not only today’s supply chain risks and constraints but also how environmental regulation will shape their future demand and how physical climate risk might threaten tomorrow’s supply.
Slow action on sustainability
Sustainability is certainly high on the data centre agenda. For example, 63% of operators surveyed say efficiency of power consumption is in their top five priorities for data centre design, more than any other option. And 56% rank ‘reducing carbon emissions and increasing energy efficiency during the use phase’ as a top priority (see figure 6).
Minimising ‘whole life carbon’, including embodied carbon during construction, is less of a priority, but is still ranked in the top five by 50% of operators.
And respondents are planning to take action on sustainability. Over 90% have plans to adopt all of the sustainability measures that we proposed in our survey (see figure 7).
However, in each case, fewer than half have put these plans into effect. Only four in 10 respondents have adopted on-site renewable generation, for example. Fewer still scrutinise the environmental performance of suppliers (37%), measure and reduce the embodied carbon of material (31%) or select materials that boost energy efficiency (25%).
Instead, the majority plan to adopt these measures either in the next one to two years, or the next three to five. This might prove to be too slow, given the long lead times of data centre construction projects. As a result, projects built today might soon fall short of the required standards. This, combined with the sector's growing energy consumption, may attract even greater scrutiny from regulators.
Anticipating and mitigating supply chain risk should therefore be an urgent priority for the data centre sector.
Figure 6. Sustainability and the data centre design agenda
Which of the following are your top priorities for data centre design in 2024?
Figure 7. Slow uptake of data centre sustainability measures
Which of the following has your organisation adopted – or plans to adopt – specifically in response to environmental regulation and/or to meet sustainability commitments?
Organisations interviewed for this report have made more progress. “We’ve been greening our supply chain for the last few years, as new operational tolerances have come into place across Europe, in countries such as Germany,” says Stephen at Mercury Engineering.
Sustainability should be considered at the very earliest stages of data centre construction projects. For example, modelling carbon during the data centre design process allows operators and their contractors to make accommodations for sustainable practices.
“You can buy steel that is low carbon, but there’s a cost to that,” explains Jon McElroy, Managing Director at Mace Technology and Manufacturing.
“There is a pinch point somewhere in terms of what we can and can’t do. You need to pick that up early in the design or there’s a cost that makes it prohibitive.” The data centre sector is uniquely placed to take substantive action on sustainability, and our survey shows that its intentions are good. But operators and contractors must put those intentions into practice sooner rather than later.
Given the long lead times for in-demand materials and equipment, and the continued risks to the supply chain, those who fail to take action today could find themselves at the back of the queue when their needs become urgent.
You can buy steel that is low carbon, but there’s a cost to that.
Moving beyond FLAP-D
Data centre operators have historically focused their attention on the FLAP-D (Frankfurt, London, Amsterdam, Paris and Dublin) tier-one metro markets, but they are now increasingly looking further afield.
“From a data centre perspective, tier-one countries are beginning to be less favoured, and secondary markets such as Spain are beginning to gear up,” notes Barry at Ada Infrastructure.
This is partly due to growing demand outside the FLAP-D regions. “We have seen a huge growth in demand in the likes of Madrid, Warsaw and Milan,” explains Stephen. “In the next two to three years these secondary markets will, I believe, become primary markets.”
Despite the industry’s move to greater energy efficiency, power constraints are another reason to look beyond the tier-one markets. “Ultimately, the hyperscale industry may have to move away from the main FLAP-D metros, because there just isn’t enough power for demand,” says Dave at Equinix.
And environmental regulations are also having an impact. “Amsterdam is traditionally a strong region for us,” says Jon. “However, we’ve had projects on hold there as a reaction to the new [stricter] regulations.”
Supply chain constraints have had some influence in this move: 42% of survey respondents say these constraints have made them or their customers more likely to consider new or alternative locations, with Italy, Germany and France the most likely destinations (see figure 8).
But supply chain constraints are more likely to put a break on the geographic diversification of data centres – in particular, the supply of suitably qualified construction labour.
Contractors increasingly prefer to use some local labour for their construction projects. “We always operate with a blend of local and imported workforce,” says Stephen at Mercury Engineering. “With groundworks, you want that local experience and know-how.”
So do operators such as Equinix. “As the industry has grown, we have been trying to build with more local contractors for the shell and core of our buildings,” says Dave. “From a green perspective it’s a lot better, and with people with local market knowledge you can come out of the ground a lot sooner.”
“But it’s not always possible to gauge the strength of a local labour market from a distance,” warns Jon. “No matter how much due diligence you do when you go into a region, you don’t really understand it until you’re working there.”
Furthermore, some specialised skills, such as installing electrical equipment or cladding, might not be available in tier-two markets. A hybrid approach, combining local labour with imported specialist skills depending on the needs of the project, is therefore advisable, as is a comprehensive feasibility assessment of any new data centre location.
Figure 8. Most likely alternative data centre destinations
In which locations in the UK and Europe is your organisation/are your customers more likely to build data centres as a result of construction supply chain constraints?
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