Data centers across the UK have found themselves caught in the eye of a reputational storm over the last year, due to the constant ratcheting of climate-related financial directives that are currently being enforced and fortified on a governmental level.
Most notable is the Financial Conduct Authority (FCA) listing rules, which mandate that a range of entities including asset owners and managers (investment portfolio managers, fund managers) must report on their climate-related risks.
As of April 2022, this has been extended to also include other listed companies and the largest private businesses, such as data centers. The Streamlined Energy and Carbon Reporting (SECR) framework is adding further anxieties, enshrining in law that large businesses must publicly report and lay bare their energy consumption, and output of greenhouse gas emissions.
The mandates are a coordinated action by the government and financial sector regulators to crack down on businesses’ carbon usage, and accelerate the overall sustainable transformation in time to achieve the UKs 2050 net zero target.
Publicly displaying business’ carbon footprint to the market is going to create a league of who is leading the way in reducing their footprint – and who is dragging their heels. This is particularly key to financial reports in the data center world, where financial houses will be held accountable for the companies they are investing in and their sustainability goals.
The data center industry is particularly energy-intensive, accounting for up to four percent of global electricity consumption and one percent of global greenhouse gas emissions. There is therefore a huge pressure for data centers to not only reduce the energy that they are using, but also that they are bringing into their facilities.
To complicate matters further, our society’s systemic shift towards a cleaner, greener future also intercepts our digital revolution; the data center market is expected to rise by 5.5 percent between 2023 and 2028, with Amazon Web Service promising to invest €1.8 billion ($2.36bn) in the UK to construct and run data centers.
With capacity demand on a continuous upward trajectory, there is an increasing focus on carbon reduction as a major driver for these businesses. Those looking to boost their green credentials better act fast, however, as there is a limited and rapidly diminishing capacity available on the UK power grid. Heightened demand for the adoption of renewable and clean energy has led to an unprecedented soar in applications for wind and solar grid connections, which have only been further intensified by the UK's fortified sustainability regulations.
This is putting significant pressure on the already stretched Dependent Network Operators, leading to bottlenecks and critical delays.
The National Grid has warned that those looking to secure their connection in England and Wales must wait in line behind 600 other projects compromising of 176GW, in a backlog extending more than a decade into the future – all fighting for 64GW of connected capacity. Data centers wanting to connect to the grid and tie in onsite generation will be particularly impacted, given their extensive capacity demands.
Getting ahead of the curve
While the UK government is researching wider plans to improve capacity and lessen delays, this will take time – and given the growing scrutiny and publicity of larger companies' sustainable efforts, time is not a luxury that most can afford.
Developers looking to get connected now can do so by partnering with Independent Network Operators (IDNO) – Ofgem-regulated energy professionals that offers an alternative route to connect to the grid. IDNOs can reserve grid capacity for free on behalf of their clients; as well as offering an upfront ‘Asset Value’ payment that is entirely unique to their services to significantly reduce the cost of a new or upgraded grid connection.
IDNOs have an in-depth understanding of distribution utilities and the energy landscape, making them ideally suited to support data centers that naturally require the most efficient, reliable, and sustainable energy sources to power their facilities. Vattenfall IDNO is currently supplying 100 percent renewable energy to Microsoft’s data center in Sweden, and is experiencing an increased demand for our services here in the UK too. The IDNO market is set to become an increasingly important player in the UK's transition to net zero.