How electricity providers are adapting to the global data centre build out

Companies are racing to deploy emerging technologies like AI by standing up new data centres. AI technologies are expected to drive the future of economic competitiveness, national defense and many forms of innovation, making the race to build energy infrastructure to supply these data centres critical to these enablers of national success.

The scale of data centre investment is large enough to reshape energy markets, with McKinsey projecting nearly $7 trillion in capital outlays for data centres by 2030, including $1.3 trillion in power generation, cooling and electrical equipment. The pace of deployment is equally impressive, with electricity demand for data centres growing at four times the rate of all other sectors. In Ireland, data centres already represent 20 percent of electricity consumption. This rapid increase in demand for electricity is producing a business supercycle around the infrastructure needed to produce new power.

Whether energy infrastructure can be built fast enough to meet demand is an open question. Demand for power-producing infrastructure has escalated to the point where many corporate customers pay not just for new equipment, but to reserve the right to place future orders. Critical components like transformers used to see order backlogs of one to two months, but now see backlogs exceeding three years. Power producers that can rapidly deploy infrastructure for data centres stand to collect premiums from these power-hungry customers – if they can meet the necessary performance requirements.

Data centres need continuous electricity supply. This requirement is so fundamental that it will drive design choices and siting for data centres developers. Finding economical ways to deliver the necessary reliability, scale and pace of growth will be a key area for competition in the energy sector.

Data centre reliability targets reach as high as 99.999% availability – equivalent to all but eight minutes of a calendar year. Electricity providers that can approach this level of reliability may be able to negotiate incentives. Conversely, regions where power is unreliable will struggle to attract data centre investment.

Already, these requirements are reshaping the electricity business. Data centres that produce their own power often choose to use many smaller-scale gas turbines, rather than one or two large-scale turbines. This approach helps ensure that the facility can still operate when a single turbine goes offline. Many grid-connected data centres build uninterruptible power supplies or backup generators on site, or combine backup systems with contractual incentives for their power suppliers.

Power suppliers and developers competing for data centre contracts will need to carefully evaluate their approach to reliability when deciding whether to pursue high-stakes incentive-or-penalty contract structures. Power producers that successfully meet or exceed their contractual performance targets can benefit by building digital trust with their customers.

Energy companies and data centre developers will need strong cybersecurity. Power plants increasingly use digital controls for optimization and automation. Similar digital controls are intrinsic parts of the technology stacks that enable renewable energy, battery storage, and peaker plants. Without cybersecurity these digitized systems will be unable to withstand the cyber threats that target operational technologies. Even on-site backup generation and battery systems will need cyber controls to guarantee reliability for the handful of days per year they are called upon to operate.

For cybersecurity providers, this moment will require speed and agility. Speed will be needed to ensure security can be included during the design phase while still aligning with the rapid pace of data centre deployment. Agility innovations may be required to ensure that cybersecurity can adapt to attacker innovations over the lifetime of the infrastructure – without disrupting production for more than the eight allowable minutes per year.

The outcome of the race to build data centres and their supporting infrastructure will have far-reaching implications. AI capabilities – and future innovations like quantum computing – will be fundamental for economic and defense infrastructure.