The US state of Virginia has the highest density of data centres in the world. On the one hand, this brings economic benefits, but on the other hand, it increases the demand for energy and jeopardises existing emission targets.

In the suburbs of Washington D.C in Loudoun County in northern Virginia you will find the largest concentration of data centres in the world. For comparison: If you take the six largest data centre locations in the USA together, they still do not reach the dimensions of Loudoun County.

One reason for the high density of data centres in Virginia is that companies have been granted tax breaks since 2010 if they meet certain requirements. These include investments of at least 150 million US dollars, the creation of at least 50 jobs at the location where the data centre is set up and payment of employees that is at least 150 percent of the standard local wage.

Bild von Loudoun County Data Center in Virginia

Data centres drive growing energy demand

The strong growth of data centres poses major challenges for the regional energy supplier, Dominion Energy. It is assumed that data centres in Virginia will be the biggest driver of rising energy demand over the next 15 years. The utility had promised to decarbonise its electricity supply by 2045, thereby complying with the Virginia Clean Economy Act of 2020. However, it admits that the transition to renewable energy is more challenging today than it was a few years ago. The reason for this is an unexpected increase in electricity demand. Currently, the demand for power is expected to increase by 11 gigawatts over the next 15 years. By comparison, an onshore wind turbine generates around 2 to 5 megawatts. If the additional demand were to be met by wind power alone, several thousand wind turbines would need to be built. If Virginia wanted to build additional nuclear power plants, which would be difficult for time reasons alone, it would need around seven of them (assuming an output of 1,400 megawatts for a medium-sized nuclear power plant). For comparison: there are currently two nuclear power plants in Virginia.

The constant and high demand for electricity from data centres not only requires the construction of new power plants and power generation facilities, but also investment in the grids in order to be able to distribute the electricity. It is also possible that new gas-fired power plants will have to be built to meet the growing demand and to be able to react quickly to peak loads. It should be noted that Virginia currently covers around a third of its electricity requirements with nuclear power. However, such power plants take several hours to ramp up, whereas a gas-fired power plant can do this in ten to 20 minutes.

But precisely the possible construction of new gas-fired power plants is attracting criticism because it jeopardises emissions targets. Environmental associations are calling for other ways to respond to the growing energy requirements of data centres instead. These include programmes that enable consumers to adjust or reduce their energy consumption at times of high load – for example, in very cold or very hot weather. Incentives can be provided in the form of reduced electricity prices during periods of low load, for example. The use of electricity storage systems and better transmission systems are also called for.

Data centre providers are driving the transition to renewable energies

The providers of the data centres themselves are pushing for the expansion of renewable energies: Google, for example, is planning to operate its data centres CO2-free by 2023. Amazon is pursuing the goal of CO2 neutrality by 2040.

The question is how realistic these goals are: Amazon alone is planning to invest 35 billion US dollars in new data centres by 2040 – with corresponding energy requirements.

More efficiency required: Green IT

In fact, there are many ways to reduce the energy consumption of data centres and IT infrastructure. This is described by the term ” Green IT”. There are many starting points such as the use of efficient cooling systems, the virtualisation of servers and the recycling and reuse of hardware.

However, this approach alone will not be able to prevent the increasing energy requirements of data centres worldwide.

Are zero carbon and cloud computing incompatible?

The growing energy requirements of data centres worldwide could actually jeopardise climate targets. If it is not possible to generate enough new energy from renewable sources, two options remain: Either electricity providers rely on fossil fuels such as gas, or the expansion of data centres will be limited.

The key here will be to focus more on smart solutions and greater efficiency in IT. There are plenty of approaches for this: deleting data that is no longer required, using efficient cooling systems or prioritising applications are just a few of them.

In addition, users and decision-makers need to become more aware of the issue of resource consumption in IT. Information campaigns and training courses can make an important contribution to this – as can state subsidies for companies that pay particular attention to efficiency.

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What is Hardwarewartung 24 thinking?

As pioneers of the Green IT movement, we have been warning for years about the IT sector’s increasing hunger for energy, particularly due to the growing demand for data centres. Even we could not have predicted that this growth would accelerate at this rate. The introduction of ChatGPT and the penetration of AI technologies into the mainstream acted as a fire starter for the data centre industry.

A vivid example is the rocket-like rise in the share price of Supermicro, a provider of data centre hardware. At the beginning of 2023, the share price was still just over USD 70, whereas in 2024 it had climbed to over USD 1100. Similar developments can be observed with NVIDIA and Microsoft.

Power is the biggest bottleneck in the technological advancement of AI

Virginia is one of the first states in the USA to experience the effects of the data centre boom. But this is just the beginning. Large hyperscalers such as Microsoft, Amazon and Google are already politically securing the last reserves for their expansion, as they know that the public will soon notice the energy shortage and start exerting political pressure. Until then, they are trying to secure their position.

AI is the problem and also the solution

Sam Altman, CEO of OpenAI, noted in an interview with Lex Fridman that power is one of the biggest bottlenecks for AI development. At the same time, however, he said: “AI will solve every problem that AI causes.” If you believe his words and the recent breakthroughs in fusion technology, where for the first time it has been possible to generate more electricity through fusion than is consumed, this problem will be solved in the medium term.

A much bigger problem is…

We believe that the shortage of power for the operation of data centres in the western world will be solved in the medium term. On the one hand, because many data centres are being built in countries that can easily solve the energy problem, such as the United Arab Emirates. These countries can currently provide cheap fossil fuel energy and generate a lot of photovoltaic energy in the short term thanks to the sun. The Midwest and the Arab world could therefore become a new data centre hotspot, with an increasingly renewable energy mix.

The production of hardware is much more complicated. A large proportion of hardware production for data centres is located in Asia, where the energy mix consists of almost 80% fossil fuels, mainly coal, and is very harmful to the climate. As long as hardware production remains in these countries, the IT industry will have a major negative impact on climate targets worldwide.

It is very unlikely that hardware production will be relocated to the West in the short or medium term. Firstly, the cost of power is significantly higher in the West and secondly, it would take several years to set up the necessary production facilities and factories for high-quality chips such as those produced by TSMC. Apart from that, the necessary expertise is also lacking in the West.

It doesn’t help that NVIDIA is now announcing new generations of hardware every year instead of every two years, as this shortens the lifecycle of the hardware in data centres and the carbon footprint of the hardware is heavily impacted by the production phase. The green power in Virginia would only help if the hardware was running for much longer, but the hyperscalers in particular will not want that as they need the capacity of the faster hardware to serve their customers and new AI developments.

Summing Up

In our opinion, the power shortage in the USA and Europe will not be as great as it currently seems because more and more data centres are being built in the Middle East, where there is cheap energy and good opportunities for the expansion of photovoltaics. However, what neither the media nor politicians are paying enough attention to are the emission costs for the production of data centre hardware. Manufacturers are not very motivated to relocate production to the West. The reasons for this are the high costs of building new factories, dealing with trade unions and the higher energy costs in the West. Unless there is a geopolitical event such as China invading Taiwan.

Policymakers have already begun to encourage the willingness to relocate production through subsidisation measures. However, every company, except hyperscalers, should consider whether they really need the latest generation of hardware or whether they should try to use existing systems for longer or opt for refurbished hardware when purchasing. This would extend the life of the hardware and reduce the carbon footprint.

The topic of Green IT is becoming increasingly important in view of current developments in the IT sector. It is not just about reducing energy consumption, but also about considering the entire life cycle in a globalised world and its impact on the climate, emissions and water consumption. We have not touched on these aspects in detail here, as this would go beyond the scope of this report.

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