Managing energy usage for data centres is a challenge – but there are answers within reach

The data centre ‘boom’ is continuing to attract considerable sums in investment, but concerns are also growing around how much energy this nascent industry is already consuming. Data centres’ energy demands are so high both because of the processes they run but also because they require a constant supply of energy, 24 hours a day, seven days a week. Energy consumption is also only set to rise as more and more data centres begin running AI processes in the coming years.

Several causes have combined to drive up energy prices. Although prices have eased since their 2022 peak, volatility persists, making forward planning difficult, especially for energy-intensive sectors such as data centres.

Against this backdrop, it is perhaps unsurprising that major tech companies have been making investments aimed at securing a supply of energy: the ability to control more of one’s own energy costs and carbon footprint has never been more valuable. A tech company running its own nuclear power station to feed data centres might sound futuristic yet it’s fast becoming plausible. Still, most operators can achieve the same resilience at a fraction of the cost through far simpler solutions.

Behind-the-meter solutions

Whilst a number of the factors that have driven up the price of electricity are external, internal changes have also contributed to the change. Network, environmental, and policy-driven charges have all grown steadily which in turn has increased the non-commodity costs of electricity consumption. With investment in modernisation and decarbonisation expected to continue in the UK, these charges are also set to continue trending upwards.

The upgrades these charges are paying for are essential, but the costs are also increasingly being felt directly by end-users. Efficiency upgrades can offset some of these costs but will not be able to bridge the gap. This has left consumers and businesses looking for alternative ways to make meaningful savings.

For organisations such as data centres, whose constant baseload demand and sustainability targets create unique pressures, one of the most effective measures is to make better use of their own sites. Deploying behind-the-meter assets (whether that is solar, battery storage, combined heat and power systems, or even wind) enables businesses to generate, store, and consume energy independently.

Access to energy assets on-site reduces exposure to both the volatility of wholesale energy markets and to some (though not all) liability for network costs. As a result, at a stroke it is possible to lower the costs of energy substantially, whilst also unlocking other benefits.

These include improved resilience with on-site energy assets providing a back-up and, where these assets are renewable, a boost to decarbonisation efforts. For data centre operators, for whom high energy consumption can pose reputational challenges as well as a financial hurdle, this ability to ‘green’ operations can be a particularly important benefit.

A growing number of businesses are looking to ‘asset stack’ behind-the-meter energy by deploying their assets for multiple purposes. For example, pairing rooftop solar with battery storage allows operators to meet portions of their baseload demand on-site, reducing both costs and Scope 2 emissions. Additionally the   battery can provide backup power, participate in flexibility markets, and manage peak-time costs simultaneously, thereby maximising the return on investment.

A beneficial agreement

Businesses can engage in agreements with energy providers to help manage inevitable market fluctuations. Power Purchase Agreements (PPAs) provide predictability on pricing and payment schedules for energy users, as well as potentially assuming the burden of the initial capex costs of installing energy assets.

PPAs, typically running over the span of several years, offer predetermined pricing models and often even dip under projected market rates, thus providing the two-pronged benefit of price certainty in conjunction with energy budget protection.

Price stability in a volatile market delivers clear operational and financial advantages,  – particularly for energy-intensive businesses looking to increase their reliance on renewable sources. Insulation against market fluctuations, and regulatory reform, allows energy users to hedge a portion of their renewables, ready for scheduled demand.

As PPAs develop, becoming increasingly comprehensive in line with growth in renewable capacity, businesses can also tailor their individual agreements to the operational, reputational or sustainable priorities they choose to pursue. For many operators, combining behind-the-meter generation with long-term PPAs delivers the best of both worlds: cost control and renewable energy access.

Demand flexibility and dynamic consumption

Demand flexibility is rapidly becoming one of the most practical ways for energy users to cut costs while supporting grid stability, but it is also creating opportunities for businesses to benefit from their investment in on-site energy assets.

Demand flexibility services reward businesses that exercise their ability to adjust consumption, taking pressure off the grid when possible – creating a mutually beneficial structure that encourages collective stabilisation measures.

By aligning their energy use to periods of lower demand or higher output, businesses are able to take advantage of dynamic pricing structures that charge on the basis of half-hourly data. By taking periods of low output into account, significant savings can be made by organisations whose power needs fluctuate at certain times of the day.

Data-led optimisation of energy consumption allows energy use to be offset in advance, by employing the use of onsite lithium-ion batteries to store and output energy at higher periods of demand effectively. Taking dynamic peaks and troughs of demand periods into account, energy-intensive industries can access sharper forecasting, and in turn deploy more accurate renewables budgeting.

Ultimately, there won’t be a one-size-fits-all approach that works for every data centre. However, developing the right bespoke plan – which integrates on-site generation, battery storage, or signing a long-term PPA to ‘asset stack’ a combination of different energy assets – offers a practical path to greater cost certainty and sustainability. Such plans represent arguably the most affordable and achievable steps data centre operators can take now to access a more reliable and sustainable supply of energy.