Verne Global

7 May 2018

Dutch data centers concerned about future electricity availability

Written by Peter Kelly-Detwiler (Guest)

Peter is co-founder of NorthBridge Energy Partners and has more than 25 years experience in the international energy industry. You can follow Peter at: @PKayDee

The Dutch data center industry is crucial to the economy of the Netherlands, but its growth may be hindered by challenges to the local power supply infrastructure. In a recent letter to the Netherlands Minister of Economic Affairs and Climate, the Dutch Data Center Association (DDA) warned about limitations to the Dutch energy infrastructure, especially in Schiphol Rijk, Amsterdam Zuidoost and the Amsterdam Science Park.

The DDA has been actively tweeting about the problem and working to get the word out to numerous media outlets that the Dutch energy grid is facing the greatest challenge in the urbanised areas around Amsterdam, where building out new infrastructure is challenging owing to dense populations. As a consequence, the DDA stated, the future growth of the domestic industry is at risk.

Explosive data center growth in Amsterdam may not continue unfettered

Data is really big business in the Netherlands. The Amsterdam Internet Exchange is the world’s foremost data traffic exchange, when measured by members or total traffic. In its most recent report, the DDA observed that the data center industry has enjoyed double-digit growth for the past decade. It grew by 15% in 2016, and Amsterdam became the first market ever to exceed 50 megawatts (MW) of take up in a single year. Indeed, Amsterdam is the center of growth, hosting 68% of the country’s data centers (now at 1,200MW and 283,000 square meters) in the greater city area, and boasting 17.5% annual average growth for the past six years. In fact, approximately a third of all European data centers sit in the Amsterdam area, in part because of its solid network connections, proximity to the rest of the European market, and power prices that are generally lower than that of its neighbours, especially in Germany, and across the English Channel in the UK.

The growth in Dutch data centers has until now been supported by the historic reliability of its energy supply and the ability to buy renewable electricity. Holland has outperformed its neighbours with the fewest minutes of annual energy interruptions and at the same time, over 90% of the energy purchased and then consumed comes from renewable resources.

Unfortunately, that growth may now be severely hampered by a limitation on the power supply and subsequent reliability concerns. The lifeblood of data centers is electricity (it’s no coincidence that data center growth is measured in MW) and that electron flow may soon be compromised. It’s not that the Dutch system doesn’t have enough generating capacity - it currently has more than enough. And it’s not that the country doesn’t have access to green power. In fact, approximately 25% of the country’s generating capacity is renewable, and the Netherlands has an ambitious roadmap to increase its offshore wind from today’s 1,000 MW to over four times that by 2023. The problem is that the existing grid infrastructure will not be capable of delivering this green energy in the future and continuing to support such rapid rates of growth. Thus the DDA warns that timely upgrades to that infrastructure are critically important.

Grid infrastructure upgrades are time-consuming and expensive

However, upgrading electricity transmission and distribution infrastructure in densely populated urban areas is both time-consuming and expensive. In some congested urban areas such as New York’s Brooklyn and Queens areas, infrastructure upgrades have become prohibitively expensive, running into the hundred of millions or even billions of dollars, and taking years to complete. In some cases, utilities are foregoing this option by promoting – and paying for - widespread use of energy efficiency, batteries, demand response (paying customers not to use power during peak periods), and even rooftop solar. Such alternatives may work in mixed-use areas with lower power consumption densities, and high residential loads, but they won’t do much to help a data center-rich area, with high load factors and power densities - and adding new annual loads on the scale of Amsterdam.

Local utilities will likely have to make significant investments in localised infrastructure, getting permits, meeting with neighbourhoods, installing new cables under streets, and putting in new substations and transformers. None of this happens overnight. It takes a very, very long time, which is why the DDA is rightly concerned.

Managing risk: where latency is not crucial, relocation and colocation may be an option

For those data center customers either considering Amsterdam or with operations already located there, one way to quickly minimise future potential risk is to identify the many data-related activities that do not require the low latency for which Amsterdam is prized. Those data activities could be moved to other locations with robust interconnections that meet less stringent latency requirements (in fact, a relatively small portion of data-related activities –such as financial trading – needs super-high latency, and around 80% of normal enterprise applications are non-latency specific) while offering abundant, reliable, renewable and low-priced electricity.

What markets meet those requirements? The Nordic countries – particularly Iceland, Norway and Sweden – fit the bill, as does Quebec. These countries enjoy large quantities of low-priced hydro-electric power, as well as connections that allow data to zip across the globe. Iceland to Amsterdam for example is a mere roundtrip of 36 miliseconds.

Thus, customers with non-critical latency requirements may find that moving data load to other locations may allow them to have their cake and eat it, too. They avoid future potential stress on the Dutch grid while accessing low cost, scalable, reliable and clean power 365x24x7 and remaining connected to the digital world. In light of the DDA warning, perhaps it’s a strategy worth considering.

Note: You can read more about the UK and continental Europe's disconnect with data and the availability of power, in my Mind the Gap report, here.

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