New discussions around ESG, emerging solutions around water reclamation, massive renewable energy projects, and all of this surround an industry poised to grow. How fast is this industry growing? Let me put this in perspective. In a single day, we saw two of the industry’s largest mergers and acquisitions happen. A couple of days ago, American Tower Corporation announced that it would buy data center developer CoreSite for $10.1 billion, making a bold move into the data center business. It was the largest acquisition at the time. How long did that record hold? Less than a day. Later that same morning, investment giants KKR and Global Infrastructure Partners announced that they would acquire data center developer CyrusOne for $15 billion, taking the company private and becoming the largest data center deals of all time.
Let’s be clear about one thing … this isn’t paperware or marketing material any longer. As these mergers aim to reshape the digital infrastructure industry, focusing on renewable energy and improving data center operations takes front and center. Sustainable finance is the next frontier in data center development, which takes precise aim at our industry’s climate responsibilities and responses. A recent post from Data Center Frontier notes that investors will be part of the green energy revolution as they seek to align their portfolios with climate resilience. There will be more green funding deals in the future, driven by investors’ growing appetite for sustainable options. According to Morningstar, 76 new climate-aware funds were launched globally in 2020, which now tracks more than 400 mutual funds and exchange-traded funds globally that have climate change as a critical theme.
“Sustainable debt is likely to go through the roof this year,” said Dr. Richard Mattison, the CEO of Trucost, a unit of S&P that assesses corporate risk from climate change. “This year, we expect to see many more funds springing up targeted at sustainability and green outcomes. Where investors want to put their money is going to lead to a huge change in capital markets, and most financial institutions recognize that.”
Sustainability is a growing priority for infrastructure funds, which have become one of the most important investor classes in the data center sector.
“Infrastructure funds are clearly focused on ESG and sustainability,” said Pim Rothweiler, head of TMT (Tech, Media, Telco) at ING Capital, an early leader in sustainable finance.
Dr. Richard Mattison also noted another critical point: “We are sitting in the middle of the largest wealth transfer in history.” He estimates that younger Americans will inherit between $24 trillion and $68 trillion in wealth.
“The majority of millennials would prefer to make sure their investments have some kind of positive impact. We will have heightened disclosure requirements to prove your fund is green and to make sure that the companies you invest in are green.”
As a millennial, I agree. This is important.
So now what? We know that industries follow the direction of investments. This means that the digital infrastructure industry is about to get a whole lot more funding for green technologies. And, that gives us the unparalleled opportunity to be exceedingly creative.
Going Green: Reaching Real Sustainability Goals
A recent WSJ article noted that to meet global energy demand and climate aspirations, investments in clean energy would need to grow from around $1.1 trillion this year to $3.4 trillion a year until 2030. The investment would advance technology, transmission, and storage, among other things.
“The world isn’t investing enough to meet its future energy needs, and uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets,” the IEA report said. It added that ramping up renewables would require greatly enhanced spending in other sectors, such as mining, to produce and refine the raw materials needed for wind turbines, solar arrays, and utility-scale battery storage.
Although we’re not quite there yet, we are making progress. Greener sources have gained market share in the U.S. and Europe, aided by government subsidies and other policies to reduce the use of coal, the dirtiest fossil fuel. In 2019, before the onset of the pandemic, the U.S. consumed more renewable energy than coal for the first time since 1885.
Is it time to say so long to fossil fuels? Well, we’ve begun this process, but it might take a little while. “We’re starting the long, long goodbye,” states Bob Fryklund, a strategist at IHS Markit.
As a part of this ‘long goodbye,’ we’re seeing the private sector move beyond government regulations and waiting for new legislation to pass. Today, leaders are creating green technologies that will drive a more sustainable digital future. Here are some creative examples to get excited about:
- Dominion Energy’s Coastal Virginia Offshore Wind Project. In July, Dominion Energy announced an extraordinary project. The proposed 2.6-gigawatt Coastal Virginia Offshore Wind (CVOW) commercial project will be the largest planned offshore wind farm in the United States. “I’m thrilled to see this project underway as it’s an exciting step toward a clean energy economy that creates good jobs in the Commonwealth,” said U.S. Senator Tim Kaine (D-VA). “I will keep pushing for clean energy investments in Virginia to boost our economy and build a more sustainable future.”
- Switch’s Regional Water Improvement Pipeline Project. There’s a lot of sunshine in Nevada, but not a lot of water. Governor Steve Sisolak joined leaders from every local government in the Truckee River region to celebrate the commencement of the construction of the Regional Water Improvement Pipeline Project. The sixteen-mile pipeline will deliver 4,000 acre-feet of treated effluent water from Truckee Meadows Water Reclamation Facility (TMWRF) in Sparks to the Tahoe Reno Industrial Center (TRI Center). The project led by TRI Center and Switch is the first regional public-private partnership in Nevada history to engage the support of each municipality and agency in Northern Nevada. Partners include the State of Nevada, City of Reno, City of Sparks, Washoe County, Storey County and Truckee Meadows Water Authority, and several prominent private sector partners such as the Master Developer of TRI Center Switch and other leading technology companies. Farr West Engineering is the construction manager for the project. Switch operates a 1.3 million square foot data center at the Citadel campus. The company intends to build up to 7.2 million square feet of IT capacity and a total power capacity of 650 megawatts. The pipeline will support all of the water requirements at the campus when it is completed in the first quarter of 2023.
- Equinix’s Green Finance Framework. Equinix sold 1.1 billion Euro in green bonds in February and will use the proceeds to fund green energy projects to support the company’s data center footprint. The notes have an average interest cost of 0.66 percent, representing a 2.215 percent reduction in cost compared to the company’s existing Euro-denominated notes. By using the green bond to refinance the credit line it used for green energy acquisitions, Equinix realized 11.1 million Euro in savings.
This was the company’s second green bond, following a $1.35 billion green bond in September 2020. Equinix has developed a Green Finance Framework based on the Green Bond Principles, a set of guidelines that promote transparency in green debt disclosures
- Switch Gigawatt 1: The World’s Largest Behind-the-meter Solar Project. Switch, and Capital Dynamics announced three ground-breakings in Nevada, which, along with an earlier phase, will continue Switch Founder and CEO Rob Roy’s Gigawatt Nevada solar energy and battery vision to develop one of the largest solar footprint and battery storage projects in the technology industry. With these new ground-breakings in Clark and Storey counties, plus the original Townsite development, Gigawatt 1 will soon generate a total of 555 MW of solar power using the latest First Solar panels and create 800 MW hours of battery storage leveraging Tesla Megapack technologies. Additionally, the Storey County location will be the largest behind-the-meter solar project globally, producing 127MW and including a 240 MW hour battery storage system. Behind-the-meter projects generate power off the public grid, placing no burden on legacy public utility production.
- Japan: The World Leader in Floating Solar Panels. A recent post from the World Economic Forum puts it best … How do you increase your solar energy output when you need all your land for agriculture and housing? Take to the water. The world’s first floating solar plant was built in Japan, in Aichi Prefecture in central Honshu. The country’s many inland lakes and reservoirs are now home to 73 of the world’s 100 largest floating solar plants and account for half of those plants’ 246 megawatts of solar capacity. The biggest Japanese floating solar plant sits behind the Yamakura Dam at Ichihara in Chiba Prefecture. It covers 18 hectares, can power nearly 5,000 homes, and saves more than 8,000 tonnes of CO2 a year.
- Microsoft’s Data Center Beneath the Sea. Microsoft’s Project Natick team deployed the Northern Isles datacenter 117 feet deep to the seafloor in spring 2018. For the next couple of years, the team of researchers and technologists actively monitored, tested, and began to understand better the data center’s servers’ performance and reliability, but underwater.
The idea with this submerged infrastructure was that a sealed container on the ocean floor could improve data centers’ overall reliability. After pulling the system out, what did Microsoft learn? Underwater data centers can be very practical, highly reliable, and exceedingly energy-efficient, and sustainable. Leveraging 100% locally produced renewable electricity from on-shore wind and solar, offshore tide, and wave, Microsoft found that the servers in Natick Northern Isles showed a failure rate of 1/8th that of our land-based control group. Further, the planned length of operation without maintenance is five years.
“We are populating the globe with edge devices, large and small,” said William Chappell, vice president of mission systems for Azure. “To learn how to make data centers reliable enough not to need human touch is a dream of ours.”
- The Power of the Tidal Turbine. This one is super exciting. A tidal turbine weighing 680 metric tons and dubbed “the world’s most powerful” has started grid-connected power generation at the European Marine Energy Centre in Orkney, an archipelago located north of mainland Scotland. In a recent announcement, Scottish engineering firm Orbital Marine Power explained how its 2-megawatt O2 turbine had been anchored in a body of water called the Fall of Warness, with a subsea cable linking it to a local electricity network on land. It’s expected that the turbine, which is 74 meters long, will “operate in the waters off Orkney for the next 15 years,” the company said, and have “the capacity to meet the annual electricity demand of around 2,000 UK homes.”
- The Nuclear-Power Data Center. A recent DCD post discusses how Rolls-Royce plans to offer small nuclear reactors to US-based cloud operators so their hyperscale data centers can have net-zero emissions and be independent of the electric grid. Small modular reactors (SMRs) are under development by a consortium led by Rolls-Royce. They could potentially power data centers or other infrastructure that needs a steady low-carbon energy supply, which may not be available from the local electricity grid.
This is Where YOU Come In
Thanks for making it this far into a pretty long blog. Although there are many things to be excited about as it relates to more sustainable solutions, not much of this is possible without you. At the upcoming AFCOM Data Center World 2022 conference, a significant focus will be on using sustainable technologies. This includes power, supply chain, water reclamation, building and construction, and even hiring practices. We need to keep having these conversations. However, now that there is massive funding behind sustainable ventures, this is the time to move from conversations and commit to real action. This might mean reflectively asking what you and your company are actively doing to get to net-zero carbon emissions. And what you’re doing to help your digital industry progress.
There is absolutely no slow down in this space. None at all. We are all digital natives, using digital tools to survive. The most significant difference now is that these tools will be delivered in the most sustainable way possible. Maybe you’re not quite ready for a nuclear-powered data center. Perhaps you’re still exploring how new energy sources can help your business. Between now and the next couple of years, you will need to move from planning and discussions to action and deployment. Don’t get left behind during one of the most critical green energy pushes in our industry’s history. This is your chance to create a sustainable digital tomorrow.