Can a Growing Data Center Industry Avoid a Power Crisis?

Data Center 2025: A Modern Quest for Power

Stop us if you've heard this one before: a hero is charged with a mighty task; to save the realm from an impending disaster and serve the needs of its subjects. To do so, the hero must claim a power never before wielded by humanity. But in seizing this power, will our hero become savior or tyrant?

* ahem *

Ok, let's be fair; the data center industry doesn’t quite rise to the definition of "hero," but it is the protagonist in a story of growing peril. And while demand for electricity might not threaten to plunge the world into a thousand years of darkness, it has rightly been identified as a problem with potentially global consequences.

In this month’s edition of Bytes & Insights, we’ll identify the factors elevating the importance of data centers, examine how the industry is both responding and contributing to the potential crisis, and evaluate what measures it can take to avoid overwhelming the power grid on its path to prosperity.

Can Data Centers Fuel Economic Growth?

The role of the data center in recent years has been nothing short of transformative. The value of the U.S. data center market is projected to more than triple from 2024 to 2034—a figure which underscores how these facilities have rapidly become pivotal assets in a world increasingly driven by data streams and constant connectivity.

As the role of data has expanded and demands have grown, cloud computing has almost entirely shifted from traditional on-premise servers to offsite storage, with massive amounts of ever-evolving data housed in data centers. The accelerating demands of AI and machine learning (especially generative AI applications) and digital transformation powered by 5G networks have supercharged this process. These factors are collectively intensifying the need for high-performance facilities capable of processing huge volumes of data in real time.

Data centers quite literally power the digital economy, granting them a singularly important status in any future economic development. With this growth comes a range of opportunities for businesses and local economies. Data centers have become a major component of non-residential construction, shifting priorities in real estate and infrastructure investment. Hyperscale data centers operated by tech giants, colocation facilities shared by multiple businesses, and enterprise-owned centers all contribute to this economic expansion; however, not all available project sites are suitable for data centers, and as the industry and demand for its services grow, developers must become more aggressive and innovative to keep pace. Expansion is hindered by significant challenges, including power supply limitations, extended supply chain delays for critical infrastructure components, and a persistent shortage of skilled labor.

The drive to find reliable and resource-rich locations that can support data center operations’ power, real estate, labor, and supply chain needs reflects the industry’s adaptive approach. As data centers continue to change how businesses process information, their impact extends beyond technology infrastructure; these facilities are now central to economic and commercial development in urban and rural settings. Addressing impediments to expansion will be crucial for ensuring that data centers can support the next generation of digital transformation, AI advancements, and real-time data processing needs.

Byte: Data centers have become a serious force in the global economy, serving as critical pieces of infrastructure that pump the lifeblood of the digital world in which we all engage. As our reliance on the data center model increases, the stakes are raised for its successes and failures. 

Continue reading on gray.com for more insights, trends, and, industry news.

The Demand Dilemma

Exponentially increasing data from AI, machine learning, and digital transformation mean that we need to build the next generation of data centers five years ago. Since time travel’s out of the question, that leaves now as the next-best option. Capacities must increase, efficiencies must improve, and the rate of expansion must quicken to match demand.

Surge in demand is pushing the industry to reimagine its infrastructure to support increasing server densities and more intensive computing loads, yet this also pushes the physical limitations of the U.S. power grid.

In 2023, data centers consumed about 4.4% of all electricity in the U.S. Experts predict this number to triple by 2028. If there is an urgent need for more data centers, then the need for more robust power generation and transmission capabilities is even more dire. It’s little surprise, then, that securing a reliable power supply is now the most critical factor in data center site selection and overall viability.

Although there is sufficient overall generation capacity, many traditional markets are hindered by aging infrastructure and insufficient transmission systems. Experts warn that transmission systems need to expand by roughly 60% by 2030, while prolonged lead times for essential components like transformers and switchgear further compound the problem. Innovative transmission solutions, including high-capacity lines, microgrids, and AI-driven management, have all been proposed to close these gaps, but the questions of cost and timing to implement these solutions cast doubt on their ability to sufficiently control the problem.

In response to the increased demand and power capacity challenges, data center designers and developers are rethinking traditional facility designs, constructing more energy-efficient, multi-story hyperscale campuses that not only reduce construction costs but also enhance power efficiency. Additionally, developers and their construction partners have begun adopting proactive measures such as super-early equipment ordering and warehouse storage to counter supply chain delays.

Without significant improvements in power supply and transmission infrastructure, the explosive growth in data center energy demand will soon outpace the capabilities of existing power grids. Aging infrastructure, slow supply chains, and labor shortages in key construction trades further complicate the landscape. As the industry continues to innovate with more economical and efficient design, addressing power and infrastructure challenges will be critical to sustain the industry’s long-term expansion and ensure it can support the digital economy’s ever-growing needs.

Byte: Escalating demand for data center services has a direct relationship with demand for electricity—a finite resource with scarce additional capacity given current U.S. generation and transmission capabilities. To avoid overwhelming the grid and arresting its own progress Data center developers must improve their facilities’ energy efficiency and contribute to improved power infrastructure

Want to learn more? Read the full article—and much more—on gray.com. 

Onsite Power Generation: Sensible Plan or Pipe Dream?

Data center owners and power grid operators have a common incentive to develop solutions to the industry’s power problems. While a consensus is yet to emerge, one thing is certain: without a change in tack, the domestic data center industry—and by extension, the digital economy— is headed for a crisis.

Onsite power generation and distribution is a commonly suggested solution to this problem. On its surface, it makes perfect sense; if generation capacity is already pushed to its limits and transmission lines cannot manage the loads demanded by data centers, then what better solution than to build it yourself? It’s a very American, very bootstrap response, and doggone it, it just might work. But it’s hardly that simple.

True, onsite power generation could solve the grid problem by increasing local capacity and eliminating the dangers of aging and inadequate transmission lines, but the obstacles to developing and maintaining this infrastructure are significant.

Benefits

·      Increased uptime

·      Long-term utility cost savings

·      More consistent power quality

·      Greater potential for sustainability

Challenges

·      Higher startup and maintenance costs

·      Extended equipment lead times

·      Added need for skilled labor

·      More land required

Developers are exploring a variety of power solutions to bridge the gap, but questions remain: what form of generation will strike the necessary balance between speed/cost of implementation and efficacy/long-term viability?

Solutions to meet current and future energy needs range from on-site gas generation and fuel cells to battery storage and even small modular nuclear reactors. While any solution using fossil fuels will face scrutiny regarding carbon footprint and long-term reliability, modern solutions face a significant but different set of hurdles. Onsite solar can power an operation, but the electrical loads of data centers would require large farms, which increase campus sizes, raising the cost of new builds and narrowing the pool of viable construction sites. Small nuclear reactors may also be intriguing for their powerful generation capacity and smaller footprint, but the regulatory obstacles, long developmental timelines, and high costs render this solution practically impossible for immediate use.

It's unlikely that a single approach will emerge as an immediate and complete solution for the industry’s challenges. An innovative but diversified approach will allow industry leaders to cast a wide net to evaluate strengths, weakness, and opportunities. Once the code is cracked, however, expect a new race—one that puts data center owners’ power needs in their own hands.

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