Surging Energy Demand for Data Centres
The rapid expansion of digital technologies has intensified the pressure on energy providers to find ways to increase power generation . Meeting that demand for power will require ingenuity and careful planning .
We anticipate a continued surge in the demand for data centre capacity across Europe and the Middle East , driven by digital transformation and the rapid adoption of AI and cloud-based services .
The increasing energy needs of these facilities are expected to prompt closer collaboration between data centre operators and energy providers to secure reliable connections to larger power generation sources , including renewables . Financial institutions may play a key role in structuring innovative financing solutions to support the development of energy infrastructure and grid interconnectivity .
The rising power demand is creating three key challenges for digital infrastructure investors :
1 . Power prices have become increasingly volatile in recent years .
2 . There is also a risk of power prices rising in the medium to long term .
3 . Grid investments are lagging behind increased demand for grid connections .
Data centre owners and power infrastructure investors are increasingly finding ways to work together to accelerate the delivery of large power-hungry data centre campuses required by hyperscalers . We expect other infrastructure funds with complementary skillsets to collaborate , though significant amounts of capital are required for both digital infrastructure and the power infrastructure components . These can be capitalised separately to address different investor bases and risk / return profiles - including some of the risks mentioned above - or there may be circumstances where it makes sense for them to be put into the same structure . We expect most investors will keep their investments in separate structures , with framework agreements between them relating to information sharing , coordinating development pipelines and rights of first refusal relating to each other ’ s projects .
Recent Notable Matters
• Quantum Switch Tamasuk Limited — advising on construction and other precedents for use in the development of data centres
• Khazna Data Center Holdings Limited — providing general compliance advice relating to the FCPA , UKBA , Export controls and data privacy
• Baker Hughes Incorporated — in relation to infrastructure services transaction involving data centre , server , data storage and backup , network , and security and monitoring management , and disaster recovery services in addition to data centre / colocation transactions
• Nuveen — in relation to the acquisition of Vantage Data Centers from Silver Lake Partners by investor consortium led by Digital Bridge Holdings , LLC
• TIAA — in relation to the formation of investment platform with institutional co-investors to acquire enterprise-class data centre businesses
The Year Ahead
While rising energy costs and grid constraints may pose challenges , investments in energy-efficient technologies and on-site generation capacity are likely to mitigate some of these pressures , ensuring operational resilience and sustainability . bracewell . com