Are the German Energy Transition and the Data Centre Industry on a Collision Course?

Staffan Reveman Baden-Baden, Germany. Management Consultant and Lecturer. Comments as a Journalist on the energy policy. Actively involved in site selection issues for energy-intensive industries.

The Dilemma for Germany

For the data centre industry, electricity is an essential production resource which must be available around the clock and of high quality. By the end of 2022, Germany will have phased out more than 22 gigawatts of 24/7 available secured power. By 2030, we will phase out more than 40 percent of the secured power. At the same time, we will need between 50 and 100 percent more secured power for our data centres by 2030. Possible or not?

How are we planning in Germany to have even larger digital infrastructures with less and cleaner electricity? One no longer needs to talk about the significance of digital infrastructures – just as one no longer needs to talk about the rapidly-growing need for computing power. However, one should ponder alternative locations and waste heat use and, in so doing, also see the big picture because: "With climate activism on the rise companies will no longer be able to ignore their climate footprints."

Fridays For Future – the pupils call for renunciations, but we are still planning new big data centres – are the generations compatible or are we living in parallel worlds?

 A quote from Brad Smith, President/Chief Legal Officer, Microsoft Corp.: ”Across the tech sector we need to recognize that the data centers will rank in the middle of next decade among the largest users of electrical power on the planet”

Then it came harshly and unexpectedly in Amsterdam

“Effective immediately, the metropolitan region of Amsterdam will stop the construction of new computer centres in this region – at least temporarily. A resurgence would prescribe new requirements for environmental protection.”

“The arrival of data centers is in a way a consequence of our own consumption and lifestyle. We want to be online all day long on our phones and laptops,” said Marieke van Doorninck, alderman for Amsterdam Sustainability and Spatial Development (source: Hosting Journalist). “To a certain extent, we will have to accept the associated infrastructure, but space in Amsterdam is scarce. As municipalities, we therefore want more control over the establishment of new data centers and we ask them to contribute to the sustainable tasks of the city as well. We are going to make demands in the area of making residual heat available free of charge for the heating of homes and the use of green electricity.”

In Germany as well, the unpleasant news arrived: The Acting Director of the Energy Division of the City of Frankfurt/Main, Paul Fay, took a position in an interview with Datacenter Insider on 12 March 2020: “I can well understand the decision made by Amsterdam. (...) The development and the new construction of data centres have since taken on a dynamic so that one no longer knows at all when and where the next big data centre will be set up. The centres have also become bigger; that is to say: The requirements for the connected power load have increased immensely. In this context, there have increasingly been technical problems: Above all, the electrical grid must be able to provide the required power output which is needed in the data centres.”

The Politicians Have Sometimes Understood This – the Investors, Planners and Operators Apparently Not Yet

The Federal Council of Germany in Berlin (Bundesrat) has observed that the data centres consume extremely large amounts of electrical power. In the draft of a law to reduce and end coal-fired generation and to change additional laws (German Coal Phase-Out Act), Printed Document 51/1/20, it becomes clear on page 69 how serious the situation is:

“The district-free cities of Offenbach and Frankfurt/Main have been classified to the Southern Region. The necessity can be found in the Grid Development Plan for Electrical Power from 2019 to 2030. This makes it clear that the Rhine-Main Region lies south and/or southwest of the greatly-overloaded very high-voltage lines whereby the grid bottleneck can thus be reduced by maintaining and/or newly creating electricity-generating capacities in both of the aforementioned cities. This is also of significance because, in both cities, coal CHP facilities are still being operated which, without a corresponding incentive, will be in danger of being closed in a few years and not replaced. The electricity shortage which is foreseeable as the result of the big increase in the construction of data centres in the region would thus be once again massively intensified.” 

Germany: Resistant to Best Practices?

But the Dutch Data Centre industry already offered waste heat upon a free-of-charge basis in 2017 anyhow. In the neighbouring country, this had the result that the waste heat from the data centres located there was classified in 2018 as “renewable energy”. However, in Germany, we are still far away from doing this.

I consider the Dutch decision to be the right one and it is also urgently required in Germany. However, I ask myself repeatedly why we in Germany are apparently so “allergic” to initiatives from abroad. We almost regard “best practices” in the neighbouring countries as being an insult. Why? We now see what is happening in Frankfurt and Offenbach and do not act accordingly.

The Local and District Heating Network Operators Have Little Interest in This

Precisely in the area of waste heat usage, two “camps” have developed. Although it would be a higher expenditure for the data centre operators, many of them are in favour of this, but nonetheless miss the willingness to cooperate and suitable business models among the local and district heating network operators.

Conversely, the other side documents the lack of interest because they usually generate energy and/or heat from coal- and gas-fired power plants. Thus, the need for supplemental heat is more than limited.

But, ever so slowly, the dawn approaches: Even the coal-fired power plants have a “limited remaining life time”. The Coal Commission has told us that the supplying of electricity and heat from coal-fired power plants is finite. Sector coupling is the buzzword and suddenly in demand. And: Sector coupling should be mandatory! I consider it to be urgently required right now to prepare German data centres as well as local and district heating networks for this. But that means: Intensively studying “best practice” and the business models in the EU (outside of Germany) and our implementing them here in Germany.

Best Practice in Sweden

Sweden is the farthest along in the area of waste heat use from data centres. For more than 40 years, data centres in cities like Stockholm have cooperated closely with district heating network operators. Because sustainability is part of the reason of state, the Northern Europeans also like to show how everything works. Thus, the ZDF and Pro7 TV stations were on-site and produced reports for German television. Indeed, Sweden has developed into a coveted location for the hyper-scalers – with or without heat reuse. Facebook began and, in Lule?, near the Arctic Circle, two large server facilities were constructed. At present, the third is being constructed. Personally, I estimate the required power to be far more than 100 megawatts.

For Facebook, northern Sweden is and remains a location for the future. The electrical power is fossil-free and consists 100 percent of hydropower from the 13 gigantic hydroelectric power plants along the Lule ?lv River. Conversely, AWS prefers Greater Stockholm area and has constructed three large data centres there which became operational at the beginning of 2019. Google has purchased more than 100 hectares of construction site land approx. 160 km northwest of Stockholm and intends, according to its application for the environmental permit, to construct 5 server facilities with a substation and an office building. There, multiple high-voltage lines come together from the North. A few months ago, Microsoft purchased two big construction plots with a total of 130 hectares north of Stockholm. Moreover, Microsoft has purchased even more construction site land for a cloud data centre in Staffanstorp near Malm? in southern Sweden.

Not completely unimportant for all data centre operators and their customers: The lower costs for electricity in Scandinavia. One sample calculation in this regard: If one data centre operator constantly needs 1 megawatt, that means 8,760,000 kilowatt hours of electricity consumption and, in Germany, annual costs of approx. 1.4 million euro. In Sweden, the same quantity during the same timeframe costs somewhat more than 400,000 euro. The savings thus amount to almost 1 million euro per year and megawatt. In addition, for the data centre operators in Sweden, there is also additional income generated from the waste heat! The energy which is sent to the heating networks is compensated. We do not need to wonder in Germany why the hyper-scalers are increasingly opting to go to Scandinavia.

CO2 emissions factor in Germany

In 2019, the CO2 emissions factor for the electricity mix in Germany was estimated to be approx. 400 grams per kilowatt hour (Sweden 14 grams per kilowatt hour). Admittedly, the CO2 emission in the years after the German Reunification declined which is why 1990 is gladly used as the reference date. However, this decline was attributable to above all the de-industrialisation in the former East German States. Fossil free nuclear power will be phased out until end of 2022. Coal power until end of 2038!

German data centres consumed 14 terawatt hours of electricity in 2018

Energy consumption of servers and data centers in Germany in the years 2010 to 2018 (Source: Borderstep Institute, Berlin)

According to studies from the Borderstep Institute, German data centres consumed approx. 14 terawatt hours of electricity in 2018. It must be assumed that, in 2020, the development will be to approx. 15 terawatt hours. At approx. 400 grams of CO2 emissions per kilowatt hour, it means that the data centres in Germany will cause CO2 equivalent emissions of more than 6 million tons in 2020.

The ten biggest polluters in Europe measured in megatons in 2018. Are our German Data Centres soon on the list?     

(Source: European Commission/statista)

Window Dressing and Illusion

Through “greenwashing”, numerous players endeavour to redeem themselves. The “Green Electricity Certificates” from Norway are very popular. Green Electricity Certificates are transferable Certificates of Origin which companies can purchase separately from physical electricity agreements. They thus constitute a simple option for at least theoretically reducing the emissions created as the result of a company’s electricity consumption.

 With more than 130 terawatt hours per year, Norway is the leader with regards to the export of certificates and a large number of the Green Electricity Certificates go to Germany. Thus, the country issues certificates for more than 50 terawatt hours for consumers in Germany. That so much electricity doesn’t even pass through the existing power lines doesn’t bother us in Germany. The main point is obvious: We want to feel good and have a good conscience. However, on the other hand, it is worth noting that Norway, with its green electricity, can entice companies like Volkswagen to come to Norway for HPC computer centres and the automobile group reports that it is very satisfied with Norwegian hydropower.

I consider it to not be particularly purposeful that some reputable data centre operators actually intensively deal with greenwashing. It simply encompasses one of the physical characteristics of electricity: To always take the shortest route. Thus, each customer always purchases electricity from the utility via the electricity grid from the closest power plants – and certainly not from Norway.

Skilful Marketing

The electrical power disclosure information is misleading; even if it indicates 100 percent renewable energies, this always refers only to the feed paid for by the customer which has been assigned to him financially by the supplier. Because the source of the generation is not recognisable from the power socket, the Certificate of Origin Register for Electricity from Renewable Energies and the labelling obligation actually exist only in order to prevent “double counting”. However, in the case of Certificates of Origin, almost half originate from Norway and up to 90 percent from hydropower.

Thus: The “Renewable Characteristic” is attributed via Certificates of Origin (COO) especially to the green electricity buyers. The other electricity buyers are assigned correspondingly smaller percentages of renewable electricity. However, overall, nothing has changed. In this regard, I consider the following to be absurd:

• Volkswagen is proud of the fossil-free data processing in Norway and justifiably so.
• A data centre operator in Germany does marketing whereby it asserts that it is operating its computer centre with “green electricity” in the form of Norwegian hydropower which is legal, but nonetheless misleading because Germany purchases hardly any electricity from Norway.

Once again: Germany imports approx. 50 terawatt hours per Certificate of Origin from Norway – hardly any electricity. 50 terawatt hours means an average output of almost 6 gigawatts. So much power simply doesn’t pass through the lines between Scandinavia and Germany. Moreover, it also encompasses double counting which is banned. The hydropower cannot be gutted as, on the one hand, a locational advantage in Norway and, on the other hand, as a locational advantage in Germany. The electricity in Norway is and remains fossil-free. The electricity in Germany was and will be encumbered for the foreseeable future with substantial fossil components.

Pure Hypocrisy

The politicians wanted it to be so: “We adorn ourselves in our own country with borrowed plumes!” However, we have a good conscience, but continue to generate vast quantities of CO2 emissions – when will we finally admit our role in all of this? Scandinavia can help, but not like this.

Putting the Supply Reliability at Risk

The Energy Transition Index from McKinsey offers every six months an overview of the status of the German Energy Transition. It states here: “The adopted coal phase-out prescribes the deactivation of 29 gigawatts of coal capacity by 2030 and an additional 17 gigawatts by 2038. In the next ten years, thus during the nuclear energy and coal phase-out, approx. 43 percent of the entire secured power from 2018 will disappear from the grid. Without compensatory measures, the supply reliability in Germany will be at risk. By 2030, based upon model calculations, additional capacities of 17 gigawatts will be required in order to compensate for the closures, in order to balance out the fluctuations among the renewable energy sources and to cushion peak load periods. Otherwise, already beginning in the middle of the upcoming decade, the first bottlenecks could occur which could intensify by 2030.”

German electricity generation from renewable energies and consumption (red) between mid-January and mid-February 2020. The gap is often 40-50 gigawatts big. (Source: Agora Energiewende)

The German Dilemma.

Let's talk about it latest in the fall. During Data Center Day in Würzburg on October 6 or Data Centre World in Frankfurt/Main on November 4 and 5. Or contact me direct: [email protected] twitter @StaffanReveman or LinkedIn.