By ESG Analyst Jonah Leduc
While most of us often focus most of their ESG-tailored attention on spotlight technology service corporations and conglomerates, the majority of their business practices and energy consumption lie at the heart of their software infrastructure providers. These are data centers, which are massive infrastructure holders around the world that consume over 300 terawatts, and around 2% of total global energy demand, annually1. Consequently, as the demand for digital infrastructure continues to soar with cloud computing and artificial intelligence computing requirements, data center companies are facing increased pressure to address environmental sustainability, social responsibility, and ethical governance practices. In this newsletter edition, we will look at the ways some of the world’s leading digital infrastructure providers are changing their ESG practices from an environmental perspective.
This imperative to the “green” cloud has gained traction, with data center companies facing mounting pressure to adopt sustainable practices across their operations. From renewable energy adoption and energy efficiency measures to sustainable infrastructure design, data center operators are navigating challenges and opportunities in their pursuit of environmental stewardship and corporate responsibility.
1. Renewable Energy Adoption:
Renewable energy adoption stands as a cornerstone of sustainability efforts in data centers, given their substantial energy demands. In response to growing environmental concerns and the imperative to reduce carbon footprints, data center companies are increasingly investing in renewable energy sources such as solar, wind, and hydroelectric power to power their operations. According to a study by BloombergNEF, corporate renewable energy procurement reached a record high of 23.7 gigawatts (GW) in 2020, with technology companies leading the way.
A prime example is Google’s Renewable Energy Commitment. Google has been a trailblazer in renewable energy adoption within the data center industry. In 2017, Google announced that it had reached its goal of purchasing enough renewable energy to match 100% of its global electricity consumption. The company has invested billions of dollars in renewable energy projects worldwide, including wind and solar farms, to power its data centers and achieve carbon neutrality. Google has also pioneered innovative approaches such as power purchase agreements (PPAs) and virtual power purchase agreements (VPPAs) to directly fund renewable energy projects and increase the share of renewable energy in the grid. Additionally, this has become a potential area of investor concern with large institutional investors backing large transformational projects for data centers and their energy sourcing. As recently as December 2023, Blackstone and Digital Realty, the largest global provider of cloud- and carrier-neutral data center, and interconnection solutions, have partnered in a 7 billion dollar deal to develop hyperscale data center campuses. The campuses are planned to support the construction of 10 data centers with approximately 500 MW of potential IT load capacity2.
- Energy Efficiency Measures
Secondly, data centers are notorious for their high energy consumption, driven by the constant demand for computing power and cooling systems to maintain optimal operating conditions. The International Energy Agency (IEA) estimates that global data center electricity consumption doubled between 2000 and 2005 and has continued to rise significantly since then1. To address the environmental impact of their energy consumption, data center operators are implementing a variety of energy efficiency measures to optimize resource utilization and minimize energy waste. These measures encompass technological innovations and facility design improvements aimed at reducing overall energy consumption and improving efficiency.
Data center companies are leveraging technological innovations to enhance energy efficiency across their operations. Virtualization, for example, allows multiple virtual servers to run on a single physical server, reducing the number of servers needed and decreasing energy consumption. Additionally, advancements in hardware design, such as the use of energy-efficient processors and solid-state drives (SSDs), help minimize power usage while maintaining high-performance levels. According to the Uptime Institute, implementing energy-efficient measures such as virtualization, airflow optimization, and advanced cooling systems can result in energy savings of up to 40%. In recent years, Microsoft has been leveraging artificial intelligence (AI) and machine learning (ML) algorithms to optimize the energy efficiency of its data centers. Through predictive analytics and real-time monitoring, Microsoft can dynamically adjust server workload and cooling systems to match demand and environmental conditions. This proactive approach has enabled Microsoft to achieve significant energy savings and reduce its carbon footprint across its global data center infrastructure.
- Sustainable infrastructure Design
Lastly, Sustainable infrastructure design is critical for minimizing the environmental impact of data center facilities throughout their lifecycle. The Green Electronics Council reports that the construction and operation of data centers contribute to approximately 2% of global greenhouse gas emissions, highlighting the urgency of adopting sustainable practices in facility design and construction. Data center companies are increasingly integrating green building standards, energy-efficient materials, and renewable energy technologies into their facility design and construction processes. According to the U.S. Green Building Council, LEED-certified buildings consume 25% less energy and 11% less water than non-certified buildings, resulting in significant environmental benefits.
This is evident through Apple’s LEED-Certified Data Centers Apple. The company has achieved LEED certification for several of its facilities, including its data center in Maiden, North Carolina. Apple’s data centers are powered entirely by renewable energy sources, including solar and biogas. The facilities feature energy-efficient lighting, advanced cooling systems, and water-saving fixtures, contributing to reduced environmental impact and operational efficiency. Additionally, a leading data center provider in the United States, Switch Inc. operates with 100% of its energy consumption from sustainable sources and operates with proprietary modular technology. This allows the company to scale on an as-per-unit basis and maintain sustainable land use relative to its energy capacities – a feat other companies across the digital infrastructure space are beginning to implement. Switch was even recognized for awards presented to the company by Greenpeace and S&P for their infrastructure models, carbon neutrality, and investing $129 million in energy usage improvements in their facilities3.
For all the momentum being garnered across the digital infrastructure space, within corporations, and the capital being deployed by the financial sector, there still remain challenges to be overcome:
- Energy Storage: Renewable energy supplies are often variable due to fluctuations in sunlight levels and wind, requiring energy storage systems such as batteries to stabilize supply. Though battery technology has made significant strides, the sustainability challenges and environmental costs associated with mining precious metals and rare earth minerals for batteries remain.
- Economic and Financial Challenges: The massive shift from fossil fuels to renewable energy comes with considerable financial costs. While investment in renewables has increased, a lack of financial backing from governments and large organizations can slow progress. Alternatives such as crowdfunding are being explored to help fund projects in the renewable energy sector.
- Infrastructure Challenges: Many areas lack reliable, large-scale energy grids to support the widespread use of renewable energy. Electric grid systems are often underfunded, poorly maintained, and insufficiently stable to meet the growing demand for renewable energy driven by rising domestic use, electric vehicle adoption, and industrial transition.
- Land Use: Balancing the demand for energy with other land-use requirements, such as housing and food production, is a significant challenge for the renewable energy sector. Utilizing valuable agricultural land for wind or solar power generation can cause conflicts. Offshore wind installations offer a potential solution, though costs are higher than for land-based installations4.
Ultimately, the efforts to integrate sustainability into data center operations represent a pivotal shift towards responsible environmental stewardship within the industry. Throughout this report, we have examined key pillars of sustainability, including renewable energy adoption, energy efficiency measures, and sustainable infrastructure design, all aimed at mitigating environmental impact and enhancing operational efficiency. These initiatives are being led both by data center operators, such as Google, Microsoft, and Switch Inc., but just as importantly by large private and institutional investors who are channeling capital to ease the transition of clean digital energy at the backbone of our software consumption. As the world’s data center operators continue to navigate the intersection of technology and sustainability, the journey towards greening the cloud represents a collective push towards a more resilient and environmentally conscious digital infrastructure. By embracing renewable energy, implementing energy-efficient practices, and prioritizing sustainable design, the data center industry can catalyze positive change, setting a new standard for responsible innovation across the digital ecosystem.
References
- IEA. “Data Centres & Networks.” IEA, www.iea.org/energy-system/buildings/data-centres-and-data-transmission-networks. Accessed 15 Feb. 2024.
- Digital Realty and Blackstone Announce $7 Billion Hyperscale Data Center Development Joint Venture, Blackstone, 7 Dec. 2023, www.blackstone.com/news/press/digital-realty-and-blackstone-announce-7-billion-hyperscale-data-center-development-joint-venture/.
- ESG and Data Centre Industry: Challenges and Trends, Techerati, www.techerati.com/features-hub/esg-data-centre-challenges-trends/. Accessed 15 Feb. 2024.
- Jones, Anthony. “Digital Goes Green: More Data Centers Migrating to Renewable Energy.” I.S. Partners, 24 Nov. 2023, www.ispartnersllc.com/blog/data-centers-renewable-energy/.