Cloud Sustainability Watch analysis

More demand means large new facilities that need power

A global boom in cloud computing means the world’s technology companies are seeing fast growth in their cloud platform divisions.

As more companies migrate to the cloud and new applications drive usage and demand, cloud providers are banking on continued rapid growth. Generative AI (GenAI) multiplies the scope and pace of expansion. Learn more in “GenAI“

GenAI, with its specialty hardware and cooling requirements, requires almost completely new data centers. It could be tough for smaller cloud companies to meet these needs, making GenAI support a potential differentiator for the Big 3 cloud brands (AWS, Azure, Google Cloud). They have to move quickly to lock in their advantage.

The leading data center operators are building new and upcoming facilities that are enormous, with power draw on par with cities. This exceptional power demand, along with less well-known excessive water consumption, is making it hard to find locations where they can get the electricity they need.

Electrical utilities are exploring solutions to the problem of how to meet spikes in energy demand and overall demand growth in the near term. Some utilities are working on shifting the time or level of electricity use to reduce peak demand. And for example California’s Silicon Valley Clean Energy has a program working with manufacturers in its service area to implement energy efficiency improvements at appealing cost savings.

Demand response programs that reward companies and households for reducing their electricity use during demand peaks are growing quickly, and data center operators are starting to participate. Even more importantly, data centers — notably Google — are using their power storage capacity to become good neighbors by delivering power to the grid during crunch times, becoming virtual power plants.

But some utilities located in data center clusters have no choice but to build out new generation facilities. And many of them are appealing to legislators to roll back mandates for low-carbon power transition. They plan on building new gas plants, familiar infrastructure whose construction timeline is well understood.

A new gas power plant will operate, emitting greenhouse gas and pollution for decades — and cloud computing will be accountable for a share of that damage.

It’s hard to tell which low carbon cloud locations are reducing global emissions and which are shuffling existing renewable supply

The largest tech companies are the largest purchasers of renewable electrical power in the world. They have spent a great deal of money on long term contracts with existing renewables suppliers, and they have partnered with renewable energy developers and utilities to build new generation capacity.

These companies are using Power Purchasing Agreements (PPAs) to point to the new clean power generation facilities they induce to be built by guaranteeing they will buy enough power to make the facilities economically successful. It may not always be the case that they induce construction that would not have otherwise been done, but technology companies are among the biggest funders of renewables expansion.

The technology companies that fund renewable generation with PPAs account for the low carbon power against their corporate greenhouse gas emissions in their disclosures, to support their emissions reductions reporting. The power plants under PPA agreements may not be generating power in a location that allows for an explicit matching of the renewable power production to their data centers’ power consumption. And it is impossible for clean power to match every hour of a data center’s consumption because renewables don’t generate electricity 24 hours every day, so 40 – 70% of emissions match demand. A solution is to add to a PPA an energy storage system such as batteries. 

The leading cloud providers are deploying their influence as large players in local economies and large power purchasers to urge utilities to move faster building out clean energy, such as by striking deals with private clean power developers. They are reported, as in The Wall Street Journal, to be exerting pressure on regulators and developers to strike deals with independent power producers.

In some locations cloud data center operators are building microgrids of renewable power from solar or wind paired with battery storage directly on their data center campuses. These power backups replace high emission diesel generators, and are increasingly becoming “good grid citizens” that deliver power back to the grid during high demand periods.

A data center’s power consumption will wax and wane and the pattern of its power consumption is not aligned with the power supply from the PPA-contracted plant. The result is peak demand in a fossil fuel grid that exceeds any delivery from the renewable plant elsewhere. Google is leading its cloud service category in its progress working toward “27/7 matching” to trace and prove that their data centers’ power consumption is consistently connected to their contracted renewable power supply. In some cases they have built data centers directly adjacent to clean power plants.