Ireland's data centre estate: future foundation or digital millstone?￼
Ireland has a problem with data centres.
We have a lot of them, 70 or so, and more in planning. As early as 2019, the industry group Host in Ireland reported that Dublin had surpassed London to become Europe’s largest data hosting cluster, capturing a quarter of the European market.
At home, this has raised much concern with energy usage and environmental footprints being central to objections. Certain politicians have latched onto this, referring to data centres as ‘guzzlers’ of energy that produce no real benefit to the economy or the community.
With many high-profile companies, from Microsoft to Google, Facebook (Meta) to Amazon, and TikTok, all siting major data facilities here, what is the truth of Ireland’s data centre estate? Is it the foundation of our future digital economy, or a digital millstone thats set to cause blackouts?
Energy is one of the primary concerns when it comes to data centres. The national grid company EirGrid released its All-Island Generation Capacity Statement in 2021 that said energy demand uncertainty is being driven “by economic activity, assumptions on energy efficiency and the growth of large energy users and data centres.”
Reports of rolling blackouts and a potential winter of discontent further clouded the debate on the benefits of data centres.
Addressing this issue, it must be acknowledged data centres use a lot of energy.
According to the Commission for the Regulation of Utilities, Ireland’s current 70 or so data centres have connection agreements for more than 1,800 MW, with up to 2,000 MW of additional requests made to Eirgrid. Some 1,000MW of the requested capacity were received within the last year.
This represents 11% of grid capacity, but Eirgrid has estimated this could be up to 28% by 2030, based on existing connections. Furthermore, if all proposed data centre projects were connected, this could jump to 70% of grid capacity by 2030.
That all sounds like an awful lot, and in the public debate, data centres are often characterised as profligate users of energy, costing the country a resource that might see citizens at a loss.
In terms of efficiency, the research would suggest otherwise. A report from 2020 by a group of university academics found that despite a 6-fold increase in the data being processed since 2010, data centre energy consumption worldwide had only risen by 6% to 2018. Furthermore, data centre direct emissions followed a similar trend. In Ireland, according to the Host in Ireland Bi-annual report for May 2021, data centres in Ireland were responsible for 1.85% of Ireland’s emissions, rising to 2.2% by 2025.
The sheer volume of data centres in this country means that the overall consumption figure is large, but in terms of efficiency of use, there are few industries that can match the demand growth versus energy consumed ratio.
Delving further into the energy issue, and the topic of sourcing arises. Most large tech companies that employ vast data centres have significant sustainability commitments and goals. These are perhaps best characterised by the Climate Neutral Data Centre Pact, a self-regulatory initiative by data centre operators and trade associations committed to the European Green Deal, to achieve greenhouse gas reductions by leveraging technology and digitalization towards the goal of making Europe climate neutral by 2050. The pact says “to ensure data centres are an integral part of the sustainable future of Europe, data centre operators and trade associations agree to take the following actions to make data centres climate neutral by 2030.”
Central to these efforts are Power Purchase Agreements with sustainable energy producers, which in Ireland primarily means wind. This sourcing not only promotes the private development of wind energy in Ireland, it directly supports it with investment and development, as characterised by Amazon. The company has already brought online a Cork windfarm, to be followed by Donegal and Galway projects, that will collectively add 229 MW of renewable energy to the Irish grid each year, reducing carbon emissions by 366,000 tonnes of CO2 and producing enough renewable energy to power 185,000 Irish homes annually.
Another negative that is often cited for data centres is water consumption, which is a is a major issue. According to a report in the Business Post, in planning documents for Amazon’s network of data centres in Dublin, permission was sought for a facility in Dublin 17 where it could use 296,000 litres of water a day, with another on Belgard Road using 319,680 litres per day, and a site in Blanchardstown using 328,800 litres per day. These are high figures, no matter which way they are looked at, but putting them in context, 1 litre of beer, on average takes 60 litres of water to produce. At Diageo’s St Jame’s Gate facility, the main brew house produces 720 million litres of stout, ales and other beers, a year. By the previous ratio that requires some 118 million litres of water per day, versus the Amazon total for its Dublin network of sites of less than 1 million litres per day. Nonetheless, this is something the industry has to address, and inline with sustainability commitments, reduce.
Another major question raised is the economic value of data centres in Ireland. While the direct investment benefits are often cited, the longer-term benefits are harder to quantify.
The Host in Ireland Bi-Annual Report for 2021 reports an expected construction investment of around €1.3 billion for 2022, following €1.25 billion in 2021, and more than €1.1 billion in 2020. Added to this is the fact that the energy and water consumption figures reflect massive income for the respective utilities.
Beyond that, the effects are less tangible. A Copenhagen Economics report from 2018 found that when considering the direct, indirect and induced effects of data building and operation, Google’s investments in the data centres and supporting infrastructure, has a supported economic impact of €5.4 billion in GDP cumulatively over the period 2007-2017. Direct effects are mainly construction spend and jobs, while indirect is the knock-on of that spend going into the wider economy through suppliers and partners. Induced benefits are the benefits of spend from the likes of employee wages.
However, this is not the full story.
Ireland has a breakdown of nearly three quarters (73.9%) hyperscale data centres, versus wholesale, colocation and private data centres. The hyperscale are the Google, Amazon, Facebook, Microsoft, et al, facilities. The rest are the providers of hosting and data services direct to customers.
These smaller data centres, though only relatively speaking, are the ones that host everything from the local shop’s ecommerce site to banks, financial institutions, and other multinational companies. These facilities can be thought of as the modern equivalent of 70s and 80s industrial or trading estates, where businesses of all sizes can have a digital presence. Proximity to such services is still of benefit, in encouraging the development of digital services, especially in the small to medium enterprise space, as providers often engage in consultancy and partnership with clients to develop their digital capabilities. Local availability, with local knowledge and market knowledge has a powerful effect to enable SMEs to access and exploit the digital economy.
Government initiatives such as the Trading Online Voucher Scheme reflect the importance of a digital presence for smaller Irish businesses, which are reliant on a digital infrastructure provided by the data centre estate.
However, this stems from just 25% or so of the data centre estate, what of the rest? Apart from the major income of the utilities and the construction investment, there are other side benefits. There is a phenomenon in economics called the cluster effect. It is where one industry, successfully operating in a geography attracts others. IBM came to Ireland in 1956, Microsoft in 1985, and Intel in 1989. Now, there is also Google, Meta, Twitter, TikTok, Slack, and many more. As each such company invests and develops here, the gravity effect attracts more investment from each, as well as more internationally.
Indeed, An Tánaiste, Leo Varadkar, has argued that companies with Irish data facilities are much more likely to bring and keep other operations here, describing data as “a really valuable commodity, like gold or diamonds”.
Another notable phenomenon, a soft benefit, is perhaps not uniquely Irish but certainly one that reflects a national trait. Irish people tend to integrate into multinational corporate culture very well. They tend to be highly educated, highly motivated and to progress to the highest ranks of technical and business leadership. However, Irish people also like to come home. It has been observed on many occasions that Irish people returning to the country after a career in multinationals, in the tech, as well other sectors, often identify a need or service that they could provide back into a company or vertical. Hence there is a vibrant start-up community of companies that provide sophisticated services back into multinationals, providing employment and talent pathways locally.
A related cultural phenomenon was remarked upon by no less than the sitting CEO of Microsoft in 2005, when the company was marking its twentieth anniversary here. Steve Ballmer remarked that when the company took engineers direct from universities in cultures that were far from that of the US, it often had high drop rates. This was not due to any technical deficiency, but rather cultural acclimatisation was the issue. The company found that by placing these engineers in Dublin, Limerick or Cork for a year first, the Irish culture was more welcoming and accommodating, even as they worked hard in their first placements. Ballmer said that the drop out rates were reduced by orders of magnitude from the practice.
All of this brings us back to the value of the data centre estate in Ireland to the country as a whole, from economic, environmental, and social perspectives.
As the world looks to decarbonise our economies and our lives, those states that have relied heavily on fossil fuels are looking to invest in other areas to take their economies into the future. In 2021, the Saudi Ministry of Communications and Information Technology (MCIT) launched an $18 billion plan to build a network of large-scale data centres across the Kingdom to serve as a digital foundation for its future. Similarly, the UAE city of Dubai has launched a plan to have 40,000 jobs in the metaverse sector by 2030, adding an expected $4 billion to the economy.
Ireland’s data centre estate represents the digital infrastructure that will be a vital part of any digital economy for the future. With sufficient investment nationally in developing more sustainable energy from renewable sources, that estate can be further developed to allow Ireland to compete internationally. With other countries racing to invest in what Ireland already has, the case becomes clearer.
And a final point worth considering is Ireland’s commitment to reduce emissions. Even as we look to develop new sources of renewable energy while committing to reduce sectoral emissions in agriculture, transport and manufacturing, and others, these ambitions will rely heavily on a smart grid, digital monitoring, and analytics for management and reporting. These efforts and ambitions all rely on digital services and infrastructure that will be served from data centres across data networks. The data centre estate and its attendant infrastructure already exist here, giving Ireland a first mover advantage.
Ireland’s ambitions for a digital economy powered by carbon neutral energy will rely heavily on digital infrastructure that is costly and complicated. Were there not already a highly developed digital services industry in this country it would be required to develop these ambitions. As reflected by other states’ investment intentions, future economies will be digital economies and the advantage of an extensive data centre estate and infrastructure is akin to the old advantage of oil in the ground or gold in the hills.
- Paul Hearns