CIM Group: Charting a course to greener data centres

This article is sponsored by CIM Group

What changes have you seen in terms of demand for data centres and what are the primary drivers?

We continue to see growth in the volume of data traffic, as well as heightened sensitivity to transfer speeds. Those are the two factors that are driving the current demand for more and bigger data centres. This also translates into a need to limit the distances that data is travelling by having data centres situated more locally, or at the edge.

In terms of the underlying drivers, I would point to the exponential growth in mobile devices. It used to be that every household had one; now, every person in every household has both a phone and a tablet. This trend was exacerbated by the pandemic, of course.

As we have moved from 3G to 4G and now 5G, the applications being developed for mobile technologies are also becoming more data intensive, and there is much more traffic with devices. Just think how much data has to be transferred so that each person on a conference call – sitting in their own distinct location in various places around the globe – can hear one another as if they were in the same room.

We are also increasingly seeing data connections between machines that are in distinct physical locations and that don’t have a person intermediating. In other words, data is being collected at one site, which is coming from some sort of production at another site, and then being transmitted to a network. That is also increasing demand for data centres.

In fact, data is now integrated into every aspect of how we live and work: the transportation of people and goods and an ever-expanding array of devices from video doorbells to systems managing an office building’s energy efficiency.

What are some of the environmental challenges associated with this proliferation of data centres?

It is well known that data centres have massive power requirements and redundancy in order to ensure reliable networks. They are very significant consumers of electricity and most of that power, at least in the US, is coming from a variety of independent grids. Each of those grids has its own mandate as to how quickly, if at all, it is moving away from fossil fuels.

And so, to the extent that data centres are located in grid systems where fossil fuels still dominate, there is obviously a massive greenhouse gas effect. That environmental impact is less pronounced in those grid systems that have a commitment to decarbonisation and that are moving rapidly towards the adoption of renewables.

In addition to the raw electricity required to power the servers and data processing, electricity is also used in the data centres to cool the environment in order to prevent outages. That is also primarily driven by power generated by the grid.

There are environmental considerations associated with water usage in the context of cooling systems. The availability of water varies dramatically by geography. For those US states located close to the Great Lakes, water is abundantly available and there is no issue. But for locations in the Western US, for example, which are exceptionally prone to recurrent droughts, the availability of water is a massive problem. There is no way you can run a data centre without keeping a stable ambient environment – water, as a resource, must therefore be carefully regulated.

The third way in which data centres face environmental challenges is that in order to ensure consistent uptime, which is exceptionally important for tenants and customers, backup power is required onsite – typically in the form of diesel generators – in addition to grid power. That is a problem both in terms of carbon emissions as well as the degradation of air quality.

At the same time, do data centres not also have a positive role to play in helping provide energy solutions?

Absolutely, which goes back to my previous point about machine-to-machine connections. Today, data can be collected at a grid and end-user level in a way that has never been possible before, in order to identify inefficiencies. The use of data is critical to developing solutions to a whole range of environmental issues, from water and waste management to energy efficiency and even the production and distribution of green electricity.

How are stakeholders in data centres responding to these environmental pressures?

The stakeholders that have had the most dramatic impact have been the cloud service providers, which are making massive decarbonisation commitments. They started out with global targets but are now evolving into more nuanced and localised decarbonisation strategies. What I mean by that is they are matching the local resources with the local load they are using.

In other words, historically, if the cheapest green power was in the state of Oklahoma, but most of the cloud service provider’s data centre processing was in Silicon Valley, they would have simply added those pluses and minuses to their carbon balance sheet and decided they were just fine. Now, however, they recognise the need to measure the energy they are using against the grid systems in the locations where they have most data centre capacity. Because of their scale, those stakeholders have a very significant impact and, following their lead, the colocation companies are now making similar commitments.

What about the regulators as stakeholders? How have they responded to these issues?

The regulators responsible for air emissions, water consumption and electricity set the operating terms for each environment in which someone is looking to build a new data centre. In other words, if a certain location is particularly sensitive to air quality, they will ban diesel generators and, as a result, developers of these data centres have had to innovate to come up with alternatives.

What new technologies and systems are being developed that can help moderate power usage?

There are all sorts of ways in which the operation of servers is being made more energy efficient – ways of ensuring there is less leakage into the environment. In addition, there are a number of new alternatives to evaporative cooling that are being used to maintain the ambient environment within the data centre. On the backup generator side, operators are starting to look at using battery systems as an alternative and, of course, they are increasingly looking at clean energy fuels to run those generators, including hydrogen.

What about innovation when it comes to water preservation?

We are seeing the application of waterless cooling systems as an alternative to traditional air conditioning. This involves fan walls that keep the data centres at the appropriate ambient temperature. This preserves water that would otherwise simply evaporate.

Against the backdrop of these environmental challenges, as well, of course, as your commercial rationale, what types of data centre deals are most appealing to you?

CIM Group looks at all types of data centres, with an emphasis on the opportunity to invest where there is unmet demand. In particular, we like to invest in purpose-built data centres, as opposed to those that have been repurposed. Ground-up construction enables data centre owners and operators to be full-service providers and serve a client base that seeks a high level of service and a lower cost. For instance, while there is a clear need for edge data centres, these are also more costly and not all businesses need to be located in high-population areas.

In terms of geography, meanwhile, we particularly favour the coastal urban areas in the Western states, as well as the Mountain West. Both of these locations involve grid systems that are increasingly moving away from fossil fuels in their generation. We are also heavily focused on incorporating energy efficiency into the design of our data centres in order to lower carbon intensity, reduce costs for our customers and generate a better value proposition for our investors. Finally, we work hard to develop solutions that promote water preservation, which is absolutely a moral and regulatory requirement in these areas.

What are some of the ways in which investors can make sure they are on the right side of these environmental changes?

Investors are coming at this with their own sets of reporting requirements. They are demanding that managers account for the use of all limited resources and set goals to continue moving in a direction that uses less fossil fuels, less non-recyclable water and generally less waste. Investors are setting the parameters for the use of their capital. This is not unique to data centres, of course, but it certainly applies.

Indeed, investors, as well as businesses and consumers, are driving an increased level of environmental and social responsibility across all industries, and data centres are not exempt. Data centre owners and operators cannot simply deliver a standard property and expect a never-ending stream of potential customers. Those that are actively investing in new systems and technologies to reduce power and water consumption will generally be in a better competitive position to secure tenants and long-term contracts.