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