Dublin in distress: Power supply issues threaten growth of Europe’s second-biggest datacentre hub

Ireland a popular destination

Marketing aside, there are other reasons why Ireland has proved to be such a popular destination for the US tech giants to build out their European headquarters and datacentre regions, says Wallage.

“It’s the first place they [the US tech firms] hit on the way to Europe, there is no language barrier, it has a strong and educated workforce, and there have also been tax breaks introduced to encourage them to move in as well,” he says.

Also, the Irish government revamped the country’s planning system several years ago, so that datacentres that meet certain size thresholds were reclassified as “strategic infrastructure developments”, so the processing of their planning permits would be fast-tracked.

Ed Galvin, CEO and founder of datacentre-focused analyst firm DC Byte, describes the explosive growth of Ireland’s datacentre market as a “great Irish success story” based on how much economic benefit and investment the sector has pulled into the country as a whole.

“We are tracking over 621MW of live IT capacity, equivalent to around €4.7bn of investment, and there is more than 900MW, or €6.8bn of investment, either under construction or planned to be built in the next three to five years,” he says.

“With those figures in mind, total investment in the datacentre sector, not including the IT hardware and associated networking and facilities management services, averages out at around €1.5bn a year of inward investment. If we did account for the full stack of equipment and services, that figure is likely double, or even triple.”

Unsustainable datacentre market growth

From an investment and economic perspective, Dublin’s development into a major datacentre hub is a huge feather in the country’s cap, but it has brought into sharp focus shortcomings in Ireland’s electricity infrastructure, which is heavily reliant on non-renewable natural gas.

“The Irish national grid wasn’t built to sustain such high, intensive use of it,” says CBRE’s Madsen-Jones. “It’s not that there isn’t enough power – the issue is with transmission and getting the power to where it needs to be.”

Indeed, a report by the Irish Academy of Engineering in August 2019 said Ireland’s power networks and infrastructure would require €9bn of investment by 2027 to cope with the datacentre community’s growing demand for power.

At the same time, the Irish government has set itself a target of having at least 70% of the country’s energy derived from renewable sources by 2030, yet many of the datacentres that are in operation, planned or in the process of being built will be powered by non-renewable natural gas.

“Most of the providers that are building out today are doing it with gas generation because it’s something Ireland does have, but that is non-renewable,” says Madsen-Jones. “So that is not going to work long-term [for the datacentre sector] because of the pretty aggressive renewable energy agenda the government has.”

Environmental engineer Allan Daly, whose fervent objecting to Apple’s plans to build a datacentre in Athenry, County Galway, led to the tech giant pulling the plug on the project in 2019, says the problems Dublin is facing now have been “foreseeable since at least 2015”.

“The only possible way to power all of Ireland’s proposed datacentres would be to build one or two new baseload natural gas-fired power plants,” Daly tells Computer Weekly.

Meanwhile, the country’s efforts to bolster its green power generation capabilities are already struggling, says Daly, citing the fact that Ireland had to pay €50m to Denmark and Estonia in November 2020 for a “statistical transfer” of renewable energy after failing to generate enough green power itself.

“Ireland failed to make its overall target [for the year] by 3% and was forced to pay [that money] at the 11th hour to avoid infringement penalties from the European Commission,” he says. “That’s money that could have been spent on grid upgrades, renewable energy supports or even grid connections for datacentres.”

Power pressure building in other datacentre hubs

Dublin is far from being the only major datacentre hub that has come up against power supply constraints when trying to meet the server farm capacity demands of the hyperscale and colocation community.

Amsterdam has run into well-documented issues of its own, resulting in the government pushing through a year-long ban on all new datacentre builds in 2019, and the growth of the Frankfurt market has been dampened somewhat by the high cost of acquiring sites and power in that region.

This has led to calls for datacentre developers to  broaden their horizons when searching for suitable server farm sites, and to consider building datacentres in towns and cities where power and space constraints are not such a concern.

A similar suggestion was also put forward in March 2021 by Ireland’s national grid operator, EirGrid, during the launch of its Shaping our electricity future consultation. The initiative set out several prospective approaches to ensuring the country reaches its renewable energy goals.

These include a policy that would allow the Irish government to dictate where large energy users, including datacentres, should locate their businesses, which could potentially see datacentres sited away from areas where power supplies are known to be scarce.

The outcome of the consultation is set to be made public in autumn 2021, so it remains to be seen if that proposal will come to pass.

In the meantime, a separate month-long consultation by the Irish Commission for Regulation of Utilities (CRU) was launched in June 2021. It set out a series of suggestions about how to safeguard the country’s energy supplies to guard against rolling blackouts in years to come, while also continuing to meet the power demands  of consumers and datacentre operators. 

The accompanying 29-page consultation CRU report reinforces the reasons why intervention is needed now, highlighting figures that show a single datacentre requiring an electricity load of 60MVA is the equivalent of a “large town/small city” being connected to the grid.

“Over the last four years, EirGrid has seen annual increases in demand usage of around 600GWh from datacentres alone – equivalent to the addition of 140,000 households to the power system each year,” says the consultation document.

“In the absence of datacentres, Ireland would be experiencing much more modest electricity demand growth, consistent with population growth, general economic development and the general development of industrial demand.”

To address the situation, the consultation document says the CRU could introduce a moratorium that would ban datacentre operators from adding further facilities to the grid for an unspecified number of years.

If that were to happen, the Dublin market might be cushioned from its effects for a period of time because there are lots of datacentre developments in the pipeline that have already acquired planning permission and grid connections, says Danseb Consulting’s Wallage.

“What you often find, though, is that the developers only have planning permission in place for phase one of a project,” he says. “If they’re planning on building out a datacentre campus, but phase two has not been approved yet, a ban could put projects like that at risk of delays, for example,” he says.

“What you have to remember, though, is that if they did put a ban on new builds, the scarcity of supply will drive up pricing and demand for existing facilities, which will be great news for colocation providers.”

A moratorium is not the CRU’s preferred course of action, the document confirms, because, in its view, there are alternative “mechanisms” that datacentres can employ to reduce their reliance on the grid, particularly during peak times. These include making increased use of their on-site backup power, and running their more energy-intensive workloads during off-peak hours.

“There are a range of technologies and behaviours that can be adopted by datacentres and datacentre developers in Ireland which can mitigate some of the challenges this sector brings,” says the report.

“The CRU recognises these measures may not work for all datacentres, but the CRU must act now to protect the electricity system.”

“If they did put a ban on new builds, the scarcity of supply will drive up pricing and demand for existing facilities, which will be great news for colocation providers”

Another proposed course of action by the CRU would involve prioritising the processing of applications for electricity grid access for datacentre operators that commit to building power generation units at their sites that meet the total energy needs of their facilities.

Applications will also be prioritised for operators that opt to build datacentres in areas where power supplies are not so constrained – presumably to encourage more datacentre development to occur outside the Dublin area.

The CRU consultation closed on 7 July 2021,  and the results are not expected to be made public for some time yet. If the outcome does see operators pushed to build more datacentres outside of Dublin, Wallage is unsure how receptive the industry will be to that.

For instance, although power and space might be more abundant in other parts of Ireland, Dublin has proven network connectivity and has construction firms that are well-versed in building datacentres. But the same cannot necessarily be said for other parts of Ireland.

“People are going to have to look beyond Dublin for datacentre locations, but it could be a tough sell,” says Wallage.

“You’ve got the whole ecosystem already set up in Dublin, because that’s where all the big construction firms are, but there’s an opportunity to build that ecosystem in other parts of the country, too.”

That is, of course, if the hyperscalers can be convinced to look beyond Dublin as their preferred location. For the US cloud giants that have sought to base their datacentre availability zones in Dublin, there is also no real appetite currently for expanding their operations in other parts of the country, says CBRE’s Madsen-Jones.

“In Ireland, they will have every single application they offer in that availability zone, and they will also have test and development environments,” she says. “And it’s really hard once you get to a point where you have rolled out that many applications in a location to replicate it somewhere else.”

Typically, hyperscale availability zones comprise several datacentres that are in relatively close proximity to each other for failover and latency reasons. This is why the public cloud providers prefer to expand in areas where they already have an established presence.

That said, the hyperscale internet service provider companies, which include the likes of social media giant Facebook, have shown themselves to be a little more open-minded to having datacentres beyond the “borders and boundaries” of Dublin, says Madsen-Jones.

As previously mentioned, tech giant Apple made a memorable (albeit abortive) attempt to build a datacentre 120 miles away from Dublin at Derrydonnell Forest in Athenry, County Galway, several years ago.

“We’re seeing some activity on the periphery of the [Dublin] market, but we haven’t seen anything anywhere else in Ireland,” adds Madsen-Jones.

Another reason for this is that, despite their competitive differences, the hyperscale cloud giants tend to favour proven datacentre sites where others of their ilk have already built out a presence, says Wallage.

Where one hyperscaler goes, others are likely to follow, which means there is potential for a secondary datacentre hub to spring up elsewhere in Ireland if the connectivity and infrastructure challenges Wallage mentioned previously can be overcome.

“It’s one of the things we’ve seen in other countries, like Japan,” he says. “Tokyo absolutely dominated the Japanese datacentre market, and now Osaka has become a very strong second hub.

“There’s not that many good examples in Europe, but Paris is the main hub in France and now they also have Marseille, and Munich is emerging as a secondary hub [to Frankfurt] in Germany.

“But creating a second hub has tended to work well because the hyperscalers are a bit herd-like, so if one of them was to move into Cork, for example, it is likely that interest from the others will follow.”  

Hyperscalers flock together

For evidence of that trend, you only need to look to the burgeoning hyperscale datacentre hub of Sweden. Like Dublin, its growth has been fuelled by the government-backed marketing efforts of organisations such as Business Sweden, which have promoted the country as a prime location for datacentre development.

Another organisation that has been instrumental in these efforts is the Node Pole, an entity focused on getting energy-intensive industries, including battery manufacturers and datacentre operators, to invest in Sweden.

The brand started life back in 2010 as an umbrella organisation for a group of municipalities that were working together to encourage Facebook to consider setting up a datacentre (to support its European operations) in the country’s industrial north. 

The idea was that securing the investment of a household name like Facebook might encourage other companies of its size and stature to consider building a server farm in the region.

Facebook opened the first of three Swedish datacentres it now operates in Luleå back in 2013. Since then, Microsoft and Amazon Web Services (AWS) have built hyperscale facilities in the country, and Google has recently secured environmental permits to follow suit as well. In 2016, the Node Pole brand was acquired by local energy providers Vattenfall and Skellefteå Kraft.

As is the case for other Nordic countries, one of Sweden’s major selling points is the fact that the country’s energy mix is predominantly green, which is a huge lure for the increasingly environmentally conscious public cloud giants.

The country is also sparsely populated, with plenty of space for the “land and expand” datacentre growth strategies favoured by the hyperscale community, Node Pole CEO Christoffer Svanberg tells Computer Weekly.

“Sweden is a very good combination of low energy prices, low carbon emissions, a highly qualified workforce, very good fibre connections, and a good business climate in general,” he says.

“Sweden is a very good combination of low energy prices, low carbon emissions, a highly qualified workforce, very good fibre connections, and a good business climate”

To curry favour with the datacentre community even further, Sweden has previously rolled out tax breaks to help the hyperscale cloud firms drive down their energy costs, and the country is also a member of the European Union, says Svanberg.

Referring to the power supply and space constraints encountered by Dublin, Amsterdam and Frankfurt, Svanberg says many of the traditionally popular datacentre hubs are reaching their limits.

“For the past 20 years, we’ve seen the major hubs in Europe get bigger and bigger, but that is not going to be able to continue, because no regional politician or local politician will want to end up in a situation where you have issues with electricity supplies because they’ve built a bunch of datacentres,” he says.

“This is not to bash Dublin or Frankfurt, but the fact of the matter is you will not be able to continue to put hundreds of megawatts in these locations any more.”

Also, the savvier datacentre developers are starting to realise that continuing to plough money into these increasingly crowded European hubs might not be a good long-term investment, given the EU’s sustainability pledges and anti-climate change commitments, says Svanberg.

“The Union has been pretty clear on what it wants to achieve, and they’ve put down some broad numbers for 2030 and 2050, but what we haven’t really seen yet are details about the taxes and penalties there will be,” he says. “But the fact the datacentre industry uses so much power makes it certain that it will be one of the industries the European Union will target.”

For that reason, any hyperscale cloud or internet firm intent on expanding its presence in one of the other major European hubs could be storing up trouble for itself in the years to come, he adds.

“Investing in a large-scale datacentre establishment today in Germany or wherever, I would argue is a move that comes with a bunch of risks. You don’t know how sustainable and green it will be or if it will be possible to continue to grow in that location, or if the European Union will come up with all kinds of taxes, fees and penalties to support their climate ambitions,” says Svanberg.

“If you believe in what the environmental activists are saying – that 10 years from now we are going to be in a mess [from a climate change perspective] – what is your datacentre investment in a coal-fuelled region going to be worth?

“Also, are you going to end up in a situation where customers eventually say they’re not interested in having data in your datacentre any more because it messes with their brand and their sustainability goals.”

Looking beyond the traditional hubs

There are certain non-negotiable, data protection and latency-related reasons why enterprises and hyperscalers have historically shown a preference for having a datacentre presence in Frankfurt, Dublin, Amsterdam, London or Paris.

This means that a wholesale lift and shift of their datacentre operations to the Nordics might not be possible for some enterprises, but there could be scope for companies to migrate their less business-critical workloads to the region, says Svanberg. This, in turn, could provide a workaround for companies whose cloud and colocation partners are coming up against power and space issues in other European datacentre hubs.

“Let’s say you could move 30 megawatts of data to another location, like northern Sweden, and make that location a library where you put your old and cold data to release capacity in Dublin or Amsterdam, rather than just try and grow more in that location,” he says.

“It would improve the financial performance of your company, because instead of building a new datacentre in an expensive location, you are building one in a cheaper location.”

As well as workload flexibility, operators may also need to become more open-minded about how they manage their power usage, says Dirk Idstein, managing director of renewable energy utility provider Enel X.

And that means being prepared to work in a more collaborative way with national grid operators, like EirGrid, than they are typically used to.

“Datacentres in general are increasingly conscious that they need to become what we call ‘good citizens of the grid’ and they need to become a solution to the challenge and not a problem,” Idstein tells Computer Weekly.

“And having partnerships with grid operators is increasingly important to [datacentre operators’] business plans, whereas before there may have been a little bit of more of a service provider mentality, where they are like, ‘I’m the big datacentre guy. You are the grid connection provider - serve me.’ Now it’s more of a true partnership.”

Enel X works with datacentre firms all over the world on programmes that encourage them to develop closer working relationships with national grid operators so they can alter their energy usage patterns according to peaks and troughs in demand.

One way it does this is by enabling datacentre operators to create virtual power plants (VPPs) using their on-site uninterruptible power supply (UPS) battery systems and backup generators, so the energy they contain can be fed into the grid during peak demand times, for example.

Alternatively, operators can lean on their VPP setups to run their facilities for extended periods to minimise the amount of energy they draw from the grid during peak periods.

Incidentally, one of Enel X’s reference customers is the Cork Internet Exchange (CIX), which operates a 33,000 ft² colocation facility that boasts 4MVA of generative capacity.

The flexibility and collaboration that Enel X’s technology affords datacentres and grid operators echoes the aspirations of the CRU consultation, which floats the idea of prioritising access to the grid for server farms that are able curtail their power consumption during peak times.

This is a concept that datacentre operators have been urged to get on board with repeatedly in recent years, as analysts have warned about the pressure the rapid growth of datacentre hubs across the world are having on regional power supplies.

As previously detailed by Computer Weekly, it is an idea that datacentre operators have been somewhat slow to come round to – because the industry is renowned for being risk averse and conservative when it comes to embracing new ways of working.

But with regulators like CRU potentially pushing through changes that would give datacentre operators a competitive advantage for participating in such schemes, it is likely that take-up will increase across the board, says Idstein.

“If you can only expand [your datacentre] by becoming part of the solution, that will drive it,” he adds. “It happened in Amsterdam – in that the municipality restricted permits for new datacentres, as part of their push to get rid of diesel backup generators.

“If you have a diesel-based solution, you will never get a permit. Permitting to allow expansion is the key driver making operators swap diesel for battery-based backup setups.”

“How a colocation provider can help their client achieve sustainability goals is increasingly a decision criterion for retail tenants when choosing a colocation provider”

But even without that, says Idstein, enterprises are increasingly making sustainability pledges that extend to improving the environmental friendliness of their supply chains. This is resulting in colocation providers feeling the pressure to participate in schemes that demonstrate their commitment to cleaning up their energy consumption habits.

“How a colocation provider can help their client achieve sustainability goals is increasingly a decision criterion for retail tenants when choosing a colocation provider,” he says.

And there are other signs in the market that attitudes are softening among datacentre operators towards taking part in schemes that will see them work more collaboratively with grid operators.

Proof of this can be seen in the blueprints for some new builds that feature UPS battery setups that will have “grid interactivity” built in, says Idstein. Some operators are also opting to “oversize” their backup power generator capacity so they have capacity to run their sites off those during peak times.

“It’s going beyond the stage of experimental and innovation projects and becoming a more solidified, almost standard operating model, for a lot of providers,” he adds.

CBRE’s Madsen-Jones is of the view that getting datacentres to “prop up the grid” in this way will be essential as Ireland’s transition to renewable power gather pace. After all, it can be notoriously difficult to predict with any degree of certainty how much solar or wind power, for example, Ireland will receive each day because of the unpredictability of weather patterns.

As the Irish electricity grid transitions from gas to renewables, the datacentre community and their on-site power generation resources may be called upon regularly to plug any gaps in supply, she says.

What the future holds for the Irish market

Looking ahead, Madsen-Jones says she anticipates that, irrespective of how the CRU and EirGrid consultations conclude, the expansion plans of Ireland’s datacentre operators will inevitably come under closer scrutiny than ever before.

“I know EirGrid is concerned with wanting to make sure that energy is not just being procured for possible projects, but it’s being procured for things that are actually going to go ahead,” she says.

“And there may be a point down the line when the government has to look at what these datacentres are being used for as well and see where the benefits lie in letting these projects proceed.”

Despite the challenges facing the Dublin market, CBRE’s data suggests the looming threat of building bans and changes to the way access to the grid is procured are – as yet – proving to be little deterrent to the hyperscale players’ development plans.

“There is still a high amount of activity across the market,” says Madsen-Jones. “And I don’t think it has deterred customers because the hyperscalers are still showing a propensity for building out datacentres.”

However, questions remain about how many of the planned builds that have been announced to date will come to fruition, she adds. “If we look at everything that’s been announced, the market could have close to 800MW of supply by the end of 2024, and just under 1,200MW of supply by the end of 2026,” she says.

“That’s a huge amount of development, but we think just under 600MW of that 2026 figure is highly speculative, because it includes sites that don’t have planning or power [grid connections] yet.”

With Europe’s other datacentre hubs facing similar power and planning challenges, it is fair to assume that governments and policy-makers around the world will be watching how the situation resolves itself in Dublin with keen interest, says Madsen-Jones. “There will be many governments starting to take note of the challenges Dublin is facing.”

But it will also be interesting to note how the hyperscalers respond to any changes that curtail their ability to grow through the introduction of energy permitting and planning reforms in Dublin, she points out.

“Something else these governments are going to have to keep in mind as well is what the impact will be if they deny Microsoft or AWS the chance to expand,” she says. “Will it affect the cost of the services they offer, because they have to be delivered from another market? Or will it slow down the move by enterprises to the cloud or to become more efficient? There is going to be a bit of push and pull.”