Transforming data centre energy infrastructure
As data centres continue to expand in scale and density, they are poised to become significant consumers of power globally. One of the key panels at the Sydney Cloud & Datacenter Convention 2024, held at Sydney CDC on September 12th, 2024, explored strategies for data centres to not only manage their energy demands effectively but also to participate actively in energy markets and support grid stability. Joining the panel were head of VIOTAS Australia Paul Moore, Macquarie Data Centres VP of sales Gavin Dudley, EnergyAustralia key accounts & key partners leader Nicholas Giles, and Cushman & Wakefield’s Australian head of APAC data centre advisory team Alex Moffatt. The panel was sponsored by VIOTAS and moderated by Nick Parfitt of W.Media.
W.Media: what are the key challenges that the data centre industry is now facing in relation to power?
Gavin Dudley: Data centres inherently have an interest in access to power, and we’re watching with interest how the power grid transforms. And it’s not just about the production of power, if it’s the cleanliness of the power…as well as the transmission of power to get to where the power is needed…
Nicholas Giles: Data centres have been an important demand centre for the energy grid, providing flat demand profiles that supported traditional base load generators like coal-fired power stations. I think some of the challenges are, as the energy grid transitions…AI driven volatility and load shapes. We’re not going to have those flat profiles to manage anymore. But on the generation side, we’re also not going to have the flat load profile of the coal fired power station; again, replaced by more intermittent generation.
Alex Moffatt: I think the challenges piece starts from the very beginning in terms of sourcing sites now that they can even get to 300MW plus…the transmission infrastructure was never built to really be able to deal with that scale. And the terminal stations that exist already, some of those are close to capacity. They don’t have another 300-400 meg just sitting idle, that was never the intention, so having to find new locations, and this concept of taking the data centres to the power rather than taking power to data centres, which is a complete change in terms of the mindset for sourcing sites.
Paul Moore: Ireland’s high penetration of wind energy and rapid data centre growth have led to centres consuming over 20% of grid demand, prompting operator interventions like moratoriums – there’s one in place in the greater Dublin area until 2028 – or connection agreements that include imposed flexibility upon the data centre. So I think it’s incumbent on the Australia data centre industry to take the front foot and look at flexibility and look at how data centres can participate and support the grid in that move towards renewable energy before the grid operators have to step in and almost determine how that should happen. Facilitating large data centres is costly, impacting taxpayer energy bills and risking reputational damage if centres don’t support grid stability…Once again, there’s an opportunity for Australian data centres to demonstrate what they can do to support the grid in advance, to change the narrative in the public opinion of what a data centre is and what it can be.
Gavin Dudley: The electricity grid was originally designed around a few centralised generation points, with electricity distributed evenly across the network without significant demand peaks. However, as we transition to a renewable energy future, the grid is evolving to include new transmission hubs to support renewable generation. This shift introduces greater complexity, transitioning from a “few-to-many” supply model to a “many-to-many” dynamic. Transmission infrastructure is often where challenges arise in adapting the grid for renewable energy. Data centres, however, can play a crucial role in facilitating this transition. Their steady and substantial power demand often provides grid operators with the financial backing needed to upgrade transmission lines in specific regions. This helps accelerate access to power and improve grid infrastructure. By committing to predictable energy consumption, data centres can contribute positively to grid stability and the growth of transmission capabilities.
Nicholas Giles: I’ve come back to the point around data centres providing a really important demand centre that can support infrastructure, and that’s across generation, renewable assets, transmission…they can provide grid stability…I think we’re past the tipping point with the energy transition now, and we’ve got to a point where we’ve got to embrace it. And I think as an industry, the data centre industry has a has a unique opportunity to participate in it because of the growth that we’re forecasting.
Paul Moore: I think an interesting thing to underscore that growth is Australian Energy Market Operator (AMEO) launched their electricity statement of opportunities report…2024 marks the first time that data centres have made it into the large industrial load category…they’re talking about 10 terawatt hours of additional capacity from [DCs], like 2033 I think, which is a phenomenal level.
W.Media: What’s in it for the data centres to have a stable grid and help stabilise it?
Gavin Dudley: Clearly, data centres want to service their clients which are often large cloud providers and all of the providers that we all now use every day. What is of benefit for data centres is having a good relationship with those grid providers and the generators and giving them clear forecasting around where their demand is coming [from], so that you can work together and have the power available at a time when the data centre is likely to have that load.
Paul Moore: We’re putting huge pressure on the grid but the younger generation is also very, very conscious of future sustainability and what we’re doing around climate change. And I think when they eventually put two and two together, that watching all those Netflix shows actually impact climate change, and that’s not abundantly clear in many cases. I think that consumer is going to want to see that sustainability message they understand, and they’re going to select data centre providers and jurisdictions that are greener, that are doing more for climate sustainability…
Nicholas Giles: I’ll take a different tack and say that’s probably going to lower your cost base…If you’re working with power operators or transmission or government and you’re building business cases together, your going to lower the cost base for your electricity supply, which is going to be your main cost base nine times out of 10 for a data centre…In terms of the outages across a broad spectrum of things, and that reliability piece is super important, and how data centres interact with the market and their ability to provide stability services or things like demand response and those sort of opportunities that’s going to prolong that reliability piece and guarantee your supplier.
Gavin Dudley: As we move to more renewables, particularly solar and wind; it doesn’t produce power at the same consistent rate of an old coal powered fire station. It generates peaks and troughs of power in the grid. And that is a challenge to electrical providers and grid operators and generators. And so what you talked about there with demand response was: data centres making a quick response to grid movements – that then enables more renewables to be added to the grid…there’s an opportunity for data centres to be a force for good because by helping the stability of the grid, we can then introduce more renewables to the grid.
Alex Moffatt: This reliability piece is twofold. One is not having to rely on your own generation to keep the data centre running…its also the micro-balancing in the stabilisation piece [to] assist the grid in terms of keeping it operating…underwriting the rest of the grid infrastructure enables upgrades to hardware that may be 50-60 years old. So there is some real community good being done in these upgrades. And then as a business, there’s certainly starting to be this arbitrage market that if you can either store that power or generate the power, you can then sell that back into the grid to help stabilise it as well.
Paul Moore: The other thing from providing frequency stability services, which data centres these days are equipped to do, as part of the capital cost outlay of installing the equipment on site, there is also revenue to be gained…the monetary benefit as well as the public perception…the support for the grid and downward pressure on energy costs as well. There is an opportunity to monetise assets that are already essentially a sunk cost on the site. OEMs will tell you that very short, shallow discharges of a battery is quite a gentle thing to do. And the nature of the frequency stability markets is that you might only respond a handful of times a year, 6-10, times a year, for a very short duration, typically around a minute, and that’s a very gentle way to treat a lithium battery, as opposed to continually cycling it.
W.Media: What’s the profile of data centres for which this kind of technology is most suitable?
Nicholas Giles: It’s the ability to participate in things like demand response or participate in the energy market is up to the provider. It’s going to be – they always say flexibility is king – that your ability to participate in these markets is ultimately going to lower your cost base through additional revenue streams as well as supporting the grid. I think there’s an economic piece to it, and there’s also a sustainability piece.
Gavin Dudley: As a provider of electricity services, do you see this favourably?
Nicholas Giles: Absolutely. We’re always looking to engage with partners who have sustainability agendas and who commit to decarbonising the economy through access to renewable energy or energy efficiency schemes or reducing scope one, two and three emissions on their own back…What we found in the renewable space power purchase agreements (PPAs)…is that having a partner who has key sustainability goals is a really advantageous thing – when seeking finance, when seeking to run a partnership that takes an offtake together…We see that a lot, probably in the FMCG type businesses, that consumers have a certain set of expectations, and I expect that to flow through the rest of the economy.
W.Media: We’ve covered the why for grid interaction and demand response, but how do you make it happen?
Paul Moore: I define frequency response more as a power response, so very short duration. And that really means that when you think of demand response, a lot of people immediately think, “Oh, we’re going to shed load”. In a response like that, because it’s a UPS driven type response, there’s actually no load shedding involved…so you’re not actually changing the operating profile of a data centre to do it. You’re leveraging an asset that’s already on site. The second category is the more traditional demand response, where you’re looking at a peak event like very hot summers’ day…when you’re trying to avoid consuming power in critical periods. In that sense, I think data centres are going to have to start looking at the various workloads that they’re doing. Not all workloads are actually real time workloads, a lot of workloads at data centres handle are batch-based or delay tolerant processes…If the data centre can use those sort of things as flex, then you know, full energy market participation becomes a reality.
Alex Moffatt: Storage exists in most of the existing data centres now and we have these short spikes that they can help to manage. At the moment, the generation piece is only a backup. It’s a diesel generator. The idea of using diesel generators to generate power into the grid is fairly counterintuitive to what we’re trying to achieve. But as they move to green hydrogen, and some of that generation being viewed as green and renewable, you actually have the ability for the data centre to start to become a generator, at least in peak periods into the grid. We’ve started to see it already, with green hydrogen generators replacing some of the diesel generators, certainly some projects that are proposed at the moment having gas peaking turbines on site at the data centre itself – you’re talking a 300MW data centre – you can actually justify building your own power plant as a peaking generator and feed not only the data entire grid for hundreds of kilometres around.
Paul Moore: I agree, but I think that data centre of the future is going to be something of a microgrid. So behind the meter storage in a much bigger capacity than something like a UPS…best systems for battery, energy storage, like what we see in a utility scale at the moment. But because data centres are growing to such a scale, that type of scale of storage, can sit behind the meter as well. And together with an EnergyAustralia offer like matching PPA type contracts to match the wind and solar – use the storage then to shape the profile of the data centre to suit those types of contracts as well.
Gavin Dudley: Some of those mega data centres are being proposed to act as training sites for AI and typically the way those AI training cycles work is that you’ll have a portion of time where the job’s being staged and the storage and network uses a lot of the electricity, but it’s a very small amount compared to the total load of the pod, and then, in a timed way, start the AI training process. The reality is, you go from a couple of megawatts of usage to 10s of megawatts of usage, often in 90 seconds or so. So it’s a massive load, but these can be scheduled. So it will be interesting to see as we go forward, the ability of the AI training grounds to do their scheduled deep training runs where they’re really drawing from the network and do that in a timed way with the network operator.
Paul Moore: Middle of the day is perfect, running against solar plants…
Nicholas Giles: The key point in all of this is understanding your flexibility of your load profile. So understanding what processes take place at a data centre day to day, and what your opportunities are from a demand response capability…work out what you can do, from a load drop point of view, and work out whether there’s technology or aggregators like Viotas that can help out with that…It’s around finding out that flexibility and your ability to maximise your usage when that energy price is cheap. It seems pretty simple, but with the intermittency of renewables coming into the grid, like solar hours, the cheapest time of the day is always 11am, or 12pm these days. But certainly, anyone who’s been in Australia for the last couple of weeks knows that it’s been pretty windy and the energy price has been negative for the vast majority of that. That presents an opportunity for data centres which have flexibility to interact in that market and optimise their energy position. Sounds pretty good to be able to use energy and get paid to do so, but that’s what’s happened in the spot market.
W.Media: What are the technologies for energy storage, required to make some of these processes work?
Nicholas Giles: There’s some really aggressive storage targets that need to be hit over the next seven, eight years. What we’re seeing at the moment is there are a number of BESS large grid scale battery systems that are getting rolled out. There needs to be more, quite frankly, and the scale at which they need to be built and delivered. I think a lot of the challenges around energy infrastructure in Australia at the moment are social licence challenges and particularly there’s delivery timeframe challenges. We’ll need to get moving. Things like the Capacity Investments Scheme obviously helped…but certainly more of the same. It needs to be rolled out at scale and quickly and efficiently.
Gavin Dudley: When you do the projected growth of demand, particularly around AI, video – when you look at Nvidia and others, when they project out how much demand their systems can draw on a network and how many chips they’re planning on making over the next three to five years…certainly we’re hearing concerns about [the industry] not having enough batteries to fill the data centres. So yes, there’ll be a chip supply shortage, but in the medium to long term, there may just be not enough batteries. As a data centre operator, we are competing against the grid scale storage of electricity for the production of batteries for our data centre. I mean, there’s a finite number [of batteries]…We absolutely need a ramp up in electrical storage production.
Paul Moore: I think we need to separate the functionality of batteries into power and energy. So you’ve got power type response in frequency stability response actually doesn’t require much energy, it’s short duration. You’re trying to stop the speed wobble and that’s not as challenging. I think the challenge is the time-based energy, right? And at the moment, lithium is economical in a two to maybe four hour timeframe window, and it isn’t beyond that. So what else do we have? It needs to be a mix of different technologies to make make this whole piece work. It can’t be just a job of batteries that we think of them today. There needs to be other technology in the mix. So whether hydrogen comes into that…pumped hydro on a large scale…because we have to think about periods where it’s three or four weeks at a time…
Alex Moffatt: It goes back to that generation piece. The batteries, realistically are probably four hours, and you’re just about done. There’s no scenario at the moment where you don’t have to have some kind of generation at the data centre. So having a generation that is based either on hydrogen or whatever it may be that actually qualifies as being able to feed green power into the grid and then be able to power yourself as well.
W.Media: What about nuclear? Microsoft’s talking about it. All these North American data centres are being proposed at the moment and they’re generating for themselves and their communities?
Paul Moore: A lot air time has been given to the nuclear model. I think one of the things that we do have to accept is it’s not the answer in the next 20 years. It may be beyond that, for sure. We’ve a problem to solve between now and then. So we need to get on with the business of solving that problem. And nuclear will come when it’s ready, in terms of small nuclear reactors, that sort of technology.
Alex Moffatt: If you’re going to have to have all these generators on site, have hydrogen generators rather than diesel generators and be able to feed the grid, that seems like the near term…
Gavin Dudley: …can’t get hydrogen over about eight or 9% efficiency. There needs to be a lot more research…
Nicholas Giles: I think the energy mix – and we’ve seen some presentations on micro grids today – you’ll see multi faceted energy sources, and there’s a reason it’s called a micro grid – because it’s reflective of what we need in the actual grid. It needs to be an energy mix. And I think if we keep going down the path where we pick the winner or pick the fuel source, without acknowledging the diverse range of fuels, it’s not going to solve the challenges of demand.
W.Media: Where does Australia sit globally in terms of our progress?
Nicholas Giles: Australia’s got some unique challenges because of the sparse population and the range in which the NEM transacts. We’ve got big demand centres in cities and then hundreds of thousands of kilometres of nothing that transmission lines need to connect to. So there’s some unique challenges in that, and how we’ve built our grid around coal fired power stations in regional areas and transmission lines going from that…the biggest challenge for Australia, I think, going forward, is that transmission connectivity and social licence is a massive issue…if you think about transmission lines and where they need to go through…it’s a lot of agricultural land, and a lot of farmers who have grown up on that land and had it within their families for 100-150 years…In terms of the renewable superpower, obviously, Australia is a very sunny place. But with that, you need the storage…We’ve got some unique challenges to our country, and I think sometimes comparing us to other jurisdictions isn’t particularly helpful because of the geographical challenges.
Alex Moffatt: What we’re starting to see is projects where you’re taking data centres of power, and if they are generating power on that scale, that is actually enough to run a regional town or regional area, and that’s partly because of the age of all the infrastructure that’s there. You’re actually able to improve the entire grid for that regional area as part of the data centre and I think that message sometimes gets lost…It’s actually improving regional areas as well as cities…if some of these really large data centres end up in, say, Gippsland or Geelong or the Hunter Valley.
