Green leases are good, but the Nordics are better.

Data Center Power

With World Environment Day (5th June) just passed, a very encouraging trend in the world of commercial real estate has been the development of the 'green lease'. A green lease typically involves adoption of building best practices, utilisation of efficient end-use technologies, and associated purchases of renewable energy – in many cases directly from specific renewable energy projects.

The green lease trend has been growing rapidly, with over 1.3 billion square feet of commercial, industrial, and retail space now governed by this contractual approach. As the data economy grows, green leases are a welcome solution for some customers, especially data centers.

Companies such as Digital Realty are offering green leases to their clients. Their goal is to bring green leases into the datacenter industry at scale, and the approach involves a number of key elements. According to Digital Realty, these include:

  1. The sharing of energy data between landlord and tenant, since what gets measured can be benchmarked and often improved upon;
  2. The use of building certifications (such as LEED);
  3. The alignment of incentives between tenants and landlords, a challenge that has perplexed the multi-tenant built space for decades;
  4. Utilisation of data center best practices for energy use, especially related to air conditioning, since AC consumes huge amounts of energy;
  5. Procurement of renewable energy for those tenants who want it. This helps drive construction of new renewables facilities that otherwise would not have been built – a concept known as ‘additionality.’

Approaches to creating more efficient and sustainable data centers are critically important, as researchers estimate that the amount of energy dedicated to data could triple within the next five years – a consequence of a growing number of connected devices combined with increasingly digital economies.

Additionality? Yes. But many data centers may have flexibility to take the next step...

Green leases are not the only way to address these sustainability issues for data centers, nor do they result in a true one-to-one match of renewables produced at the same time they are consumed. Since renewables generate power when the sun shines or the wind blows, they are not fully ‘dispatchable’ - capable of matching output to customer energy consumption patterns.

Much of the time, those resources produce more than the corresponding purchasing facility consumes. Let’s take solar power. Solar arrays will generate a huge surplus from 10 AM to 2 PM – far more than the purchasing data center needs, with this energy delivered into the power grid and credited to the purchaser. The rest of the time, when the sun isn’t shining, that facility is using system power from a grid that is often largely hydrocarbon-based.

There is no question that green leases are good for society, and corporate purchases now account for 9.6% of total U.S. wind capacity and accounted for 16% of the solar added in 2017. They are the best way for the typical large commercial and industrial customer to quickly 'green-up' electricity supplies.

However, those owning - or colocating within - data centers might want to think creatively, go a step further, and consider moving their data requirements to power grids that are both cheaper and cleaner.

Why not move data and processing to cheaper and cleaner locations?

If data-related activities need to stay local, especially for latency reasons, then green leases may indeed be the way to go. However, if the data center tenant is not geographically bound to a specific location (and the vast majority of applications aren't), moving to other power grids is an economic and clean option worthy of consideration.

Most data centers don’t need actually need to be located in the U.S or continental Europe. With today’s high-speed global fibre-optic cable network, data can move in fractions of a second across the planet and there are very few transactions that truly require the low latency associated with activities such as equities trading.

The majority of data storage and processing can indeed be located wherever there is adequate connectivity and bandwidth. As a consequence, there are an increasing number of companies and institutions that look to site and process their data (and especially their High Performance Computing (HPC) workloads) where it is both less expensive and sustainable.

Data nomads are moving north, following cooler climes and cheap, clean hydro

An increasing number of companies are looking to have their cake and eat it, too, by simply moving north where hydro-electric power is abundant and the weather is cooler. Companies can green up data-related energy consumption, with cheap and clean hydro, while also taking advantage of the fact that northern latitudes can result in significantly lower cooling costs.

The Nordic countries and Hydro-Quebec have opened their doors to data centers (though some like Hydro-Quebec have recently become noticeably cooler to activities such as BitCoin mining). Norway has recently created a strategy specifically to attract data centers, and Sweden boasts FaceBook’s Lulea datacenter, just 70 miles south of the Arctic Circle.

For its part, Iceland has long been known for its engagement with the industry. The country’s national energy company, Landsvirkjun, touts its ‘competitive power prices and year-round free air cooling’ and highlights its low total cost of operations for data centers.

Take free cooling, 100% renewable energy supply, and add to it 12-year contracts as low as 4 cents per kWh and you’d have a pretty tough task beating that supply arrangement with a green lease. With the long summer days coming soon, what better time to jump on a plane to Reykjavik and explore your options? You may be surprised at both how feasible it is to relocate your data-related activities and how much money you can save while going green.

Written by Peter Kelly-Detwiler (Guest)

See Peter Kelly-Detwiler (Guest)'s blog

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

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