How Data Centers and Electric Utilities Can Create a Greener Energy Industry

As the major hyperscalers look toward data center infrastructure expansions, with Microsoft planning to invest $1B in data center builds in North Carolina and others planning similar expansions, the data center industry will see a lot of movement in the coming years.

While this growth bodes well for the data center industry, it will not be so advantageous for those looking to meet environmental, social, and governance (ESG) requirements unless systemic changes are made to advance sustainability efforts. Electric utilities are in a similar position, with many facing pressure from government mandates to reach net-zero goals by a certain date.

With these factors at play, now is the time for data centers and utilities to work together to advance a greener energy industry. Some power utilities are doing so by working with local data centers and offering energy efficiency rebates, which are paid on a performance basis over the course of several years to encourage ongoing energy efficiency. This type of relationship can even be mutually beneficial, as energy-efficient data centers can work with power utilities to help balance supply and demand through programs like commercial power sharing.

Fortunately, there are three key practices these groups can follow to effectively cooperate on plans to decarbonize the energy sector.

Develop plans for organizational sustainability at the start

Sustainability plans generate accountability and serve as a tool to show others that the organization is working to meet ESG goals. Yet, reports indicate that sustainability action has fallen short, finding that 73% of organizations rank sustainability as their #2 business priority, with only 33% that say they have created a strategic sustainability plan. Strategic planning is particularly important for those looking to make sustainable changes to data center infrastructure, as enacting these changes takes significant amounts of time, resources, organization, and coordination between entities.

Creating a sustainability plan from the start opens the door for collaboration between data centers and electric utility partners, laying a path for both sides to integrate the other into their plan. It is especially important for data centers to engage early with electric utility partners as energy engineers can provide impactful insights that might affect future plans, like feedback on energy efficient infrastructure design or information on whether the data center is eligible for energy efficiency incentives.

With effective planning between data centers and utilities, joint sustainability initiatives, like shared renewable energy programs or the development of green tariff models that incorporate both data center sustainability requirements and government mandates, can be fruitful for both parties.

Collaborate on equipment designed for efficiency

When looking to purchase new equipment, it is important for businesses in the energy industry to consider not just the materials that the hardware is made with, but also the efficiency with which the product operates in the long run. Making purchases for efficiency will not only reduce operating costs, improving the bottom line, but also preserves resources. For example, an uninterruptible power supply (UPS) that seems affordable at the offset may end up costing more in the long run as it guzzles electricity.

This is another area where data center operators can work with utilities. Operators can engage utility energy engineers to assist in evaluating the overall efficiency of equipment. Utilities tend to be hyper focused on improving the energy efficiency of their customers and partners, as any kilowatt hour a customer does not use is a kilowatt hour the utility does not have to produce. Additionally, if data centers can manage their peak load, this supports a steady supply of energy from the electric utility and helps the utility reduce pressures on the greater grid. Some utilities may even offer incentives that can offset the incremental cost of more efficient equipment.

Digitization is another part of this. Emerging technologies, such as automation and AI-driven predictive energy modeling, enable active measures to reduce carbon emissions in the data center. Investments into environmental monitoring software tools help data center tenants and operators measure, report, and act on the largest emission sources. All in all, considering solutions that are designed to conserve resources will reduce the environmental impact of the data center as a whole, benefiting utilities as they manage electricity consumption.

Engage in the circular economy together

The circularity of the data center is another point of importance, particularly as experts estimate that the average life span of a data center is only 10-15 years. Today, there are many ways for organizations to take part in the circular economy. Programs with services for recycling, repairing, remanufacturing or retrofitting old hardware are a simple way for customers to participate in the circular economy, limiting the number of products that end up in the landfill and lowering carbon impact. This also optimizes the total cost of ownership, as customers can opt to repair or retrofit old equipment for a lower cost than to replace it.

In the coming years, utilities may begin to offer rewards for data centers that run circular, low carbon operations. Current utility incentives are specifically related to the carbon tied to energy sales, meaning that energy efficiency is what is funded now. In the future, the government may provide incentives for product circularity in recycling or repurposing old hardware, similar to incentive programs for refrigerator recycling or e-waste. These programs will improve circularity within data centers, ultimately contributing to the greater adoption of sustainable standards in the energy industry.

Creating an impact

As the major hyperscalers expand their data center portfolios, the industry must prioritize collaborative initiatives, like an energy efficiency incentive program, to lessen the growing impact of the data center on the planet. If data center operations start with efficiency, they can conserve the planet’s limited resources by reducing the amount of energy the utility must procure.

Despite the industry’s historical struggle with going green, data center leaders can boost sustainability with a few key steps. By creating a strategic sustainability plan and acting on it, buying efficient equipment, and recycling defective hardware, data center companies and electric utilities can further the global transition to environmentally friendly practices.