For Data Centers, Sustainability Isn’t A Perk — It’s A Competitive Advantage
Energy efficiency isn’t just good for the climate. For data center firms, it’s also good business.
Data centers consumed 205 terawatt-hours of electricity consumption in 2018, or about 1% of total consumption worldwide. But thanks to efforts by some of the largest hyperscalers and colocation providers, total electricity consumption has remained consistent over the past decade despite a surge in demand for computing power, according to research published in the journal Science.
“It really led off with the big hyperscalers,” said Travis Wright, vice president of energy and sustainability at QTS Realty Trust. “Facebook, Microsoft, Google, Apple, customers like that have been all about sustainability for a while now.”
Google, for instance, has managed to steadily reduce its power usage effectiveness, a measure of energy efficiency in data centers, through a combination of custom servers and innovative cooling techniques. Likewise, Facebook touts its industry-leading data center efficiency and says that its global data center operations will be powered by 100% renewable energy by the end of this year.
With hyperscalers setting the bar, data center sustainability isn’t just a perk: It’s “table stakes” for data center deals, Wright said. QTS, among other major colocation players, are pioneering their own sustainability models, both in terms of technology and financing.
QTS, which operates 26 data centers spanning more than 7M SF across the U.S. and Europe, began negotiating directly with investment banks to finance its renewable energy deals. Seeing a secular trend toward renewables, QTS found that investment banks were ready and willing to cut long-term financial agreements for its renewable energy projects. The result is a win-win for both QTS and its customers, Wright said, and the financing model has since been adopted by other colocation providers.
“A lot of it is driven by Wall Street,” he added. “It’s important to investors, customers, and it’s going to be really important for us.”
Data center sustainability is increasingly a primary selling point for customers leasing space.
For one, many modern enterprises are keeping a close eye on their own carbon footprints, tracking their sustainability metrics and reporting progress to customers and shareholders. Secondly, when it comes to energy-hungry data centers, greater efficiency combined with plentiful capital also translates into more competitive pricing.
“Everything we do is based on renewables, and the savings we make, we pass on,” said Phill Lawson-Shanks, chief innovation officer at Aligned Energy, which operates six large data center campuses comprising more than 2.3M SF.
In data centers, the primary source of energy demand is cooling: servers generate heat, and traditional data center cooling systems rely on cold air circulation, water cooling or a combination of both.
Aligned, for its part, patented a technology called Delta Cube, which traps and removes heat generated by servers, instead of circulating cold air, and automatically adjusts to heat that fluctuates. The current iteration can lower temperatures by 45 degrees while using much less energy, said Lawson-Shanks, and also makes for a more flexible and easy-to-scale system.
The benefits have been especially pronounced during COVID-19, which sent millions of office workers — and their kids — home for an indefinite period. For Aligned’s gaming customers, the hours of highest use, and thus highest heat, were after school.
“Now with COVID, it’s all the time,” Lawson-Shanks added. “As the heat increases, the system detects that.”
Investors are taking notice, and piling more capital into efficient technology, infrastructure and energy supply. Rising sustainability demands are generating creative deals in the data center industry; Honeywell recently announced a partnership with Vertiv, a data center supplier, to build a new microgrid system designed to better integrate alternative energy sources.
In September, Aligned secured $1B in sustainability-related debt financing arranged by leading investment banks, including TD Securities, Goldman Sachs, Deutsche Bank and others. The unprecedented deal, which represents the first of its kind in the data center industry, sets interest rates based on sustainability commitments. If Aligned meets certain targets, which renewables use, worker safety and other sustainability metrics, it will pay back the borrowed money at a lower interest rate. Aligned plans to use the capital to fund its expansion.
Given high customer demand, steady innovation and patient capital, data center firms have the right ingredients to make progress in sustainability and to stand out in the marketplace as well.
“It’s about the environment, and it’s also about having good business practices,” Wright added. “We can create value and benefit society at the same time.”