White paper: Net zero operation through a clean power strategy
The data centre industry is almost exclusively driven by electrical power. Power comes generally from the power grid into the installation, and it is distributed to the IT equipment (ITE) and the auxiliary elements required to maintain the needed environmental conditions. To influence the operational environmental footprint of the data centre, one of the most evident fields it seems imperative to attack is the source of the electricity supply. In this article we will see the different angles one can take to establish a clean power supply strategy, from employing conservative and non-technological measures to more radical and complex actions. We will also briefly treat the societal challenges that can bring renewable energies and their access to them and finally show that the electricity supply to the data centre is not the only source of clean power that a data centre is related to, but also the excess heat resulting from its operations.
Power purchase agreements (PPAs):
The most common way of decarbonizing the sourcing of electrical power is by contracting PPAs. Besides ensuring fixed prices for future operations, PPAs buyers are interested in the renewable energy certificates (RECs) that are associated to the renewable assets. For every MWh produced, the asset has the right to claim for a REC, which endorses the renewa- ble origin of that energy produced, generating what we also call guarantees of origin (GOs). PPAs usually include these certificates, which allows the buyer to claim the responsibility of the avoided emissions.
There are generally two sorts of PPAs: virtual/financial PPAs and physical PPAs. The first ones are a hedging mechanism where the buyer agrees on a strike price with the seller. The agreement will be financially settled based on the difference between the strike price and the wholesale market price: if strike price is higher than the wholesale market price, the buyer would pay the difference but if the strike price is lower than the wholesale market price, the seller will pay the difference to the other party. A virtual PPA will be backed by the producer with a number of assets (mostly renewable), but these will not be necessarily explicitly linked to the agreement.
On the other hand, in a physical PPA, the buyer buys the energy directly from the asset at the strike price. There is a physical transfer of the energy from the asset to the grid but as it seems obvious, there will be times when these assets do not generate any electricity even if the consumer will still need to be supplied. The power consumed will then have to come from other assets connected to the grid and hence the real carbon footprint will equal the one to the grid at that moment. With physical PPAs a volume of clean energy is purchased for a period of time and in total, that volume purchased by the buyer will be carbon-free but not on an hourly basis.
There are different kinds of physical PPAs depending on the way the power is produced and consumed (see Figure 1).
Figure 1 – Different types of structures for physical PPAs. Source: LDES Council and McKinsey1
24/7 renewable energy PPAs:
There is a way of purchasing energy that is getting more attention from the corporations willing to reduce their operational carbon footprint: 24/7 matched PPAs. While a PPA based exclusively on solar or wind energy can reduce up to 70% (see Figure 2) of the emissions compared to dragging power from the grid, a 24/7 matched PPA aims to equalize power consumption from the buyer and electricity generation within an hourly basis. Please note that clean energy also can include non-renewable energy sources without GHG emissions or whose emissions are completely captured and stored or transformed.
Figure 2 – Estimation of real emissions per electricity unit for different types of PPAs. Source: LDES Council and McKinsey2
Each megawatt hour of energy used has to be backed by a megawatt hour of renewable energy supplied within the same power grid. This is done by essentially two means: accurately measuring -at the energy source and at the consumption- and oversubscribing a mix of renewable electricity generation, which will definitely make this product a more expensive one (see Figure 3)
Figure 3 – Costs (in €/MWh) for 24/7 consumers for different energy purchase strategies targeting clean energy supply in year 2025 in 4 different countries (Ireland -IE-, Germany -DE-, Denmark -DK- and the Netherlands -NL-), taking as a base scenario (100% RES) a purchase strategy covering the annual consumption with renewable energies (mostly employing a PPA) and comparing it with scenarios with different Carbon Free Energy (CFE) targets (98% and 100%) using different technology palettes (Palette 1: onshore wind, utility slcae solar, battery storage, Palette 2: adding long-duration energy storage, Palette 3: adding gas power plant with 100% GHG capture sequestration and clean dispatchable technologies such as closed-loop geothermal or nuclear systems)3
The utility or the electricity producer will need to allocate for this contract several renewable assets of different kinds capable of covering the power demand of a data center all through the day and the year on an hourly basis. A 24/7 matched PPA is, as for now, the best way for a company to be sure that the carbon footprint of the grid power sourcing is at a minimum. On top of that, 24/7 PPAs, due to the overdemand of renewable power generation, will also have an impact in the amount of renewable power released into the grid but not delivered to the buyer (for those times where the consumption is lower as the generation), generating surplus of renewable energy that can be stored and released afterwards or can be sold to the grid, hence making more clean power available to the local grid and its communities3,5.
Right to renewables?
Since the amounts contracted are very high, PPAs have usually become a mechanism only in the hands of powerful companies to reduce their scope 2 emissions. PPAs would then allow corporations to achieve part of their sustainability goals while that renewable energy power results less available to the rest of the society, who has then to “resign” and use a power mix with less carbon free and more expensive sources. PPAs are increasing in number and in some European countries such as Spain, PPAs are covering nearly 10% of the total capacity 6,7. Data centre industry is getting a higher contribution to the global power usage (up to 1,3%) and data centre companies are among the top five corporate offtakers of renewable power purchase agreements. Resistance is being held from local communities regarding the new developments and its high requirements on (renewable) power supply9.
Usually, the PPAs are backed by renewable power plants built expressly for the power purchaser but it is inevitable to believe that if the global potential of building these plants is X and companies are requiring for their PPAs Y capacity, the potential available for the rest of the society will be X -Y. Ultimately, we can postulate that some power purchasing policies could act against the UNSDG 7, the access to clean and affordable energy to everyone10. A good practice in the industry and, in particular the data centre sector, could be to neutralize the capacity used by their developments by adding an increment of the same capacity in the power generation stock via new renewable energy plants. This is something it can only be done if the data centre and the renewable energy power plants developers are within the same planning umbrella: to assign to each MW of data centre capacity an additional MW of redeployed renewable energy somewhere else within the same region to neutralize the potential impact caused to the renewable proportion of the power grid left available to the rest of the society. This principle of not using existing power capacity but building new can be called “additionality on renewable energy capacities” and is being prone by companies such as Google11 or AQ Compute12. This latter even doubles the bet and ensures that any new data centre project will automatically have associa- ted extra renewable power development besides the one that is going to need on its own.
Ideally, a data centre would be able to directly produce the renewable power it needs. Direct power generation hap- pens on-site or at a nearby plot (less than a couple of km) making possible a direct connection. Some hyperscalers are already outfitting their developments with on-site power plants13. The biggest challenge associated with this is to remain reliable and at the same time have a zero-carbon footprint. The power plants we are seeing on data centre sites are rat- her nuclear plants14 or gas turbines11. The latter is a very reliable source of energy (can be sourced by a pipeline, can be easily stored and the infrastructures and logistics associated to it are well established) but not the most efficient nor the cleanest one (max. 60% efficiency for combined cycle plants and 0,2 kgCO2eq/kWh el15). The price of renewable energy generation is decreasing year after year (see Figure 4)
Figure 4 – Global levelized cost of electricity (LCOE) of different production sources16
The idea of owning your own power supply it is not new at all and has been historically practiced by some industrial sectors such as the metallurgy. As mentioned before, the impulse to be greener and hence more accepted by society is very powerful in the data centre industry. It seems logical to put the focus on decarbonizing the power supply in such an electricity driven sector, so we are seeing the first cases of onsite renewable generation. Gas turbines ran with H2 could be the first step, but they do not solve the emission of NOx linked to the burning of the fuel. Instead, H2 fuel cells are being shaped as an alternative so far17. Developing wind and solar parks directly linked to data centres18 are also un- dertaken projects by other companies19, sharing the plants the same plot with the data centres or being in a reasonable distance from the data centre, and commonly in combination with energy storage facilities. Other future technologies such as geothermal electricity generation (using the organic Rankine cycle) are showing that the response will need to be multi technological to become truly carbonless while remaining reliable.
Besides the generation, the focus is to be set in the energy storage since, even having an outnumbered quantity of renewable energies on site will never ensure a total match with the data centre consumption. Some tech companies are involved in the Long Duration Energy Storage (LDES) Council and equally advocate for a multi-technological response to the energy storage problematic20. Lithium-ion batteries are still dominating among the chemical batteries, but other ones are showing their potential such as flow and solid-state batteries. Other methods to store energy are compressed air batteries21 (air is compressed into an underground hole employing excess of electricity and will return electricity as it is released through a turbine) and gravity storage22 (lifting “bricks” with the excess energy and recovering it from its fall, actioning an electrical generator).
Energy storage will be key for data centres because it does not only allow a higher ratio of clean energy but can also ensure the reliability of the data centre, delivering back-up power in case of power supply failure, allowing to mitigate the usage of diesel generators that are being employed so far. A data centre could theoretically run 24/7 on them but most always relies primarily on the power grid because it is cheaper and cleaner. Diesel gensets are then chosen as a “safe net” and are mostly used for routine checks 10 to 30 hours per year. The consumption and pollution of the diesel generators (the main contributor to the Scope 1 emissions) represents less than 1% of the typical carbon footprint of a data centre company23. Diesel gensets would run less than 30 hours per year for maintenance reasons and in the worst cases for 1 to 2 days until the major failure that caused their usage can be repaired. The economics still do not justify on its own the exchange of a diesel genset with an adjacent fuel tank dimension for 48h operation by an equivalent density of Lithium-ion batteries for the same duration (see Figure 4).
There might be a moral duty (if regulation is not forcing us before) to tackle this last step to get to zero carbon ope- rations, but also the deployment of back-up generation alternatives to diesel gensets could serve a supplementary objective. By deploying large scale clean energy storage facilities, the data centre could also act as a grid stabilator and offer its surplus of renewable energy to the grid. As a matter of fact, some regional power grids offer important fees to big consumers to suddenly and temporary disconnect them from the grid in order to re-equalize the frequency24 when needed. Analogously, a data centre can decide to disconnect itself from the grid during power price peaks to reduce its operating costs and even carbon footprint (highest power grid prices occur when renewables are not enough to face the demand and non-renewables enter the mix)25. This is where H2-based technology in combination with other storage mechanisms could become so relevant. Moreover, the installation of large-scale back-up systems could support the power grid in its decarbonizing mission. The data centre could hence become a power “prosumer” instead of being only a consumer.
The data centre as the core of a multi-faceted development does not need to be only limited to the power it consumes and the related PPAs, on-site generation or storage. The IT equipment (ITE) hosted in a data centre employs electricity in essence to store and manipulate information using mostly microelectronics (some photonics as well), in essence chan- ging the status of bits. By doing this, almost the entire energy supplied to it is transformed into heat (see Figure 5). All the other auxiliary elements present at the data centre are also mostly electrical energy based. Power switching, trans- mission and storage devices generate around 5-10% of losses, which are released in the form of heat. Rotating machines in charge of moving masses such as pumps and fans are ultimately transferring their energy into the environment in the form of heat as well. Compression cooling machines add electrical energy to drive thermodynamic processes, transfer- ring the heat from the ITE to the outside.
Figure 5 – Approximative flow diagram for the energy balance inside of a data centre. Source: Yang Luo et. al, A decision support system for waste heat recovery and energy efficiency improvement in data centres, Applied Energy, Volume 250, 2019, Pages 1217-122426
We need to get used to seeing a data centre not as a huge electricity consumer but as an important thermal source. Heat recovery has been done since around a century in industrial contexts and as a byproduct of electricity generation. While heat reuse from data centres is not a very common practice is currently gaining a lot of attention and several projects have been already developed, in particular in Europe as shown in Figure 6.
Excess heat from data centres can be of different qualities and quantities but there are numerous potentials offtakers of that heat:
- Residential: heating and domestic hot water
- Industrial: preheating, cleaning, drying processes among others
- Agricultural: greenhouses, fish farming
- Others: adsorption and absorption cooling, water treatment
Whereas an industrial process will usually require higher temperatures, floor heating used for greenhouses or residential heating can work with temperatures under 30°C. The easiest way to do heat reuse would be to partner with a utility that could remove the heat away from the data centre at the temperature is generated, as if it was a free-cooling method, allowing the data centre to spare chiller time. Nevertheless, the usage of heat pumps for elevating the temperature and storage facilities to sync the heat generation with the heat demand of the offtaker could be recommended. At the utility side, independently from the availability of data centre excess heat, heat pumps developments are equally being considered, especially since the increase of gas prices in the past years29. These heat pumps must extract in the worst case the heat from the ambient air, which in winter can fall under negative °C or as a better alternative use a river with relatively constant positive temperatures. The usage of a waste heat from a data centre of around 30°C would bring a better energy balance and hence savings to the utility. Other fields where currently high-grade temperature heat is used but, with due investigation and at a cost of lower efficiencies, lower temperatures could be employed, are for electricity generation and carbon capture.
Besides the energy and money savings to both parties (the data centre and the offtaker), excess heat reuse has carbon emissions reductions associated. Data centre provider employs less energy to cool, so generates less carbon emissions and will be indirectly responsible for the avoidance of carbon emissions associated to the alternative heat generation that should have been taken place at the offtaker (for example by the usage of a gas boiler to heat).
During this article we have seen how important is to structure a clean energy supply strategy, considering not only a solid purchase strategy but also the technicalities behind its origin. To ensure that the received energy is being simultaneously produced at a renewable power plant can virtually ensure that a data centre is being supplied 100 % with renewable sources.
An aspect that is rising concerns within the population is the increasing control over the renewable energy park by corporations with high demand needs and high purchasing power. Active efforts are being made by some companies at the forefront to ensure that data centres will contribute to add renewable power to the grids instead of depleting societies from this good.
Being directly attached to a clean power supply is probably the best option to ensure a high ratio of real renewable energy flowing into the facility but results also as the most challenging one to ensure reliable and continuous clean energy supply. At that point is where the energy storage technologies become relevant, adding as a benefit for data centres to be turned into active pieces of clean power grids, either disconnecting from the grid to help with the distortions caused by the difficult to predict renewable sources entering and exiting the grid or even acting as “prosumers” and feeding in the grid with their energy surpluses.
These surpluses are also notable in the field of thermal energy, since almost all the energy employed by a data centre is turned into heat that could be potentially used for other applications. These applications range from facilitating simple space heating and supporting known industrial processes to enabling water treatment or cooling energy generation or even more future-oriented carbon capture or electricity generation.
Via scaling up the developments and the interconnected mesh of data hosting, the positioning of data centres as the cornerstone of a broader energetic ecosystem seems inevitable (see Figure 7). We will probably have to be used to seeing data centres not as a risk but rather as a chance for the decarbonization of energy grids.
Further analysis should be done to evaluate the decarbonization of the energy supply together with other highly important KPIs, such as potable water consumption, materials usage and other environmental impacts and their mutual correlations.
 A path towards full grid decarbonization with 24/7 clean Power Purchase Agreements, LDES Council and McKinsey, May 2022
 A path towards full grid decarbonization with 24/7 clean Power Purchase Agreements, LDES Council and McKinsey, May 2022
 Riepin, Iegor, & Brown, Tom. (2022). System-level impacts of 24/7 carbon-free electricity procurement in Europe. Zenodo, p.45. https://zenodo.org/record/7180098
 Never zero if we consider indirect emissions associated to the production and distribution of renewable power.
 Riepin, Iegor, & Brown, Tom. (2022). System-level impacts of 24/7 carbon-free electricity procurement in Europe. Zenodo, p.61. https://zenodo.org/record/7180098
 https://cloud.google.com/blog/topics/sustainability/clean-energy-projects-begin-to-power-google-data-centers https://news.microsoft.com/europe/features/as-the-world-goes-digital-datacenters-that-make-the-cloud-work-look-to-renewable-energy-sources/
 Based on Digital Realty’s ESG Report 2020, Scope1: 32,798 TCO2eq/a for a total of 5,518,773 TCO2eq/a total declared emissions.