Overcoming Obstacles: Addressing the Four Major Challenges Facing the Data Center Industry

As the appetite for data continues to surge, investments in data centres are experiencing unprecedented growth. According to real estate services firm Savills, the capacity of data centres across Europe is anticipated to expand by a remarkable 21% by 2027. During this same timeframe, overall internet bandwidth usage is projected to nearly triple. This remarkable increase is fueled by increasingly stringent data retention regulations and the rapid development of sophisticated artificial intelligence tools. However, this expansion does not come without its challenges, particularly the imperative to deliver data at scale while simultaneously reducing the industry’s substantial environmental footprint.

Here are four critical issues that the data centre industry will confront in the years ahead:

1. Power and Cooling
   Power and cooling remain at the forefront of concerns for the data centre sector. The International Energy Agency (IEA) estimates that data centres account for approximately 1-1.5% of global electricity consumption. To counteract this staggering figure, data centres must prioritise the optimisation of power usage and the enhancement of cooling efficiency. The implementation of advanced cooling technologies can drastically lower energy consumption compared to conventional air-based cooling systems. Moreover, adopting energy-efficient hardware, such as servers with low-power processors, can lead to substantial energy savings.
2. FLAP-D Dominance
   The cities of Frankfurt, London, Amsterdam, Paris, and Dublin (collectively known as FLAP-D) are home to the highest concentration of data centres in Western Europe. However, this density, coupled with the massive energy demands of data centres, is placing an escalating strain on local grid infrastructures. In response to pressing energy constraints, governments in Dublin and Amsterdam have enacted moratoriums on the construction of new data centres. Simultaneously, locations once deemed suitable for tier 2 or tier 3 data centres are now being classified as tier 1 spots due to inadequate power supplies, land shortages, and limited grid connections. As competition for capacity intensifies, customers are looking beyond traditional locations for new development sites. Cities like Milan and Oslo are emerging as attractive investment destinations, while in the UK, development is shifting away from the once-popular Slough ‘Availability Zone’ (AZ) in West London, which hosted over 30 data centres as of May 2024. New preferred locations include development sites in East London and rural areas in the Midlands and Northern England, where developers can take advantage of the opportunity to build on a larger scale without the constraints of urban centres.
3. Cybersecurity Concerns
   The stakes for cybersecurity have never been higher. As cyber threats escalate and the risk of data breaches looms large, data centre operators are compelled to bolster their security protocols. Robust cybersecurity measures are imperative; this includes advanced encryption technologies, real-time threat monitoring systems, and comprehensive employee training programs aimed at mitigating risks of unauthorized access. Additionally, employing artificial intelligence (AI) and machine learning algorithms can significantly enhance a data centre’s capacity to detect and respond to evolving threats, ensuring data integrity and security.
4. Transitioning to Renewable Energy
   In recent years, the cost of renewable energy sources has plummeted, making them an increasingly viable option for data centres seeking to avert the challenges of power supply and minimize expenses. The pressing question, however, is how to implement a sustainable energy strategy effectively. Solar and wind power, although intermittent, provide a reliable and environmentally friendly way to generate energy. Another option is nuclear power, which boasts an impressive capacity factor exceeding 90%, rendering it one of the most reliable energy sources available. In the UK, governmental initiatives are underway to roll out innovative Small Modular Reactors (SMRs) by the early 2030s. These advanced nuclear reactors are designed to have about one-third of the generating capacity of traditional nuclear reactors, allowing for on-site shipping and installation at locations deemed unsuitable for larger plants. Additionally, hydrogen is beginning to emerge as an energy storage solution across various industries, from transportation to chemical production. However, harnessing hydrogen for energy generation in data centres is unlikely to prove cost-effective in the foreseeable future.

In summary, the data centre industry is on the cusp of significant transformation, driven by technological advancements, regulatory pressures, and a newfound focus on sustainability. Adapting to these evolving challenges will be crucial for future success.