Ireland's Data Centre Sector Is Set For A Boom — If It Can Solve Power Quandary

Home to global tech’s corporate giants, Ireland is a key European data centre market. But the industry has come under immense scrutiny over the past few years because of soaring energy consumption, an issue that is holding back new development.

Yet while some claim that data centres are too energy-greedy, others counter that the sector has been let down by poor energy management planning by the state, is frantically innovating to minimise energy use impact, and has been hit by a failure of supply rather than demand.

In 2022, data centres consumed 18% of Ireland’s electricity, up from 5% in 2015, according to the Central Statistics Office.

That led state grid authority EirGrid to create a de facto moratorium in Dublin, meaning that it will not supply any new connections until at least 2028 and will only consider applications on a case-by-case basis. That impasse has left a handful of developers seeking planning permission for new developments, with Vantage and EdgeConnex appealing rejections and CyrusOne awaiting a verdict. 

The Paris-based International Energy Agency said in its latest report, published 24 January, that Ireland has 82 data centres, a total that is expected to grow 65% in the coming years and that the IEA predicted will consume nearly a third of Ireland’s total electricity by 2026.

The three big players globally and in Ireland are Amazon, Microsoft and Google. Meanwhile, specialists such as Equinix, CyrusOne and Digital Realty lease data services to corporate clients and the big three under agreements called colocation deals. 

While Dublin is the smallest colocation market among the European Tier 1 hubs — joined by Frankfurt, London, Amsterdam and Paris — it is the largest hyperscale market and has huge potential. 

“Out of those Tier 1 markets, Dublin is the fastest-growing in terms of colocation data centre space,” said JLL Associate Director and Data Centre Research Lead Daniel Thorpe, who helped author a report on the global data centre market published on 31 January.

In 2022, the data centre market grew by a quarter. As of 2023's third quarter, it had grown by 21%, so the full year 2023 is likely to be similar, Thorpe said.

“Out of those core markets it also has the lowest vacancy rate,” he added. “Pre-leasing activity has been incredibly high in Dublin. Any new data centre space that comes to market we're likely to see fully pre-leased 18 to 24 months before it's completed.”

Energy has emerged as the key topic not just in Ireland but globally, with the new JLL report dedicated to the subject.

“We’re also seeing the onset of AI changing the requirements for data centres that feeds into their design and operation and also the strategic location,” Thorpe said. “Power is both an opportunity and a threat. While there might be issues around connecting to the grid or grid capacities, we're also seeing some real innovation to overcome these issues.”

Planning Disputes

Despite the planning impasse around Dublin, 14 data centres are under construction, and there are 40 approved to start building across Ireland.

But more are stuck in planning disputes after a 2021 report in which EirGrid predicted “electricity supply challenges” this decade in part because of the growth of large energy users such as data centres.

Those acting for the industry say that it is not the drain on energy that is widely portrayed.

“We welcome the commitment in the government's Climate Action Plan to accelerate renewable deployment and decarbonise the economy faster, with up to 80% of renewable energy on the grid by 2030,” Ibec Cloud Infrastructure Ireland Director Michael McCarthy said.

“CII members are the largest purchasers of renewable energy on the planet, already committed to bringing 1,100 megawatts to the system — without government subsidy or cost to the exchequer,” he added.

He said he is hopeful that by 2030, Ireland will have developed a significant suite of offshore wind generation, providing ample renewable energy for residential and commercial requirements, so the issue is more about the immediate challenge. As a result, McCarthy said that compromise and pragmatism are needed to bridge the intervening years.

For now, schemes are getting bogged down in planning. The Big Tech companies have continued to push ahead with building data centres, including TikTok, with its Project Clover sites now operational, and Amazon, which secured planning permission to build three new data centres in north Dublin last September but is now faced with at least five third parties contesting Fingal County Council's green light for the project.

This follows five objectors lodging appeals with An Bord Pleanála against Amazon Web Services firm Universal Developers' planning permission for three new hyperscale data centre buildings with a combined power load of 73 MW on 65 acres at Cruiserath Road, Dublin 15. One AWS data centre is already operational on the campus, while construction work continues on two more.

“That may sound like there's going to be zero developments coming through, but that's not the case. We're still seeing planning approved for data centres,” Thorpe said.

“What they need to do is factor in both a sustainable power and provide heat reuse or on-site power generation. Most of the cloud providers rank among the world's biggest buyers of renewable energy, and by partnering with renewable-energy projects and companies, these cloud providers have a real ability to transform and drive the energy infrastructure sector.”

That could be a boon for Ireland, where land is not a challenge around most of the key metros — and where artificial intelligence may mean data centres do not have to be as close to residential and business conurbations — while Ireland is strategically located between North America and Europe and the subsea cables go via Ireland.

In the meantime, the tech companies have been trying to promote the benefits of data centres, and AWS has been on the offensive. In a recently published report, it said AWS has increased economic output in Ireland by over €11.4B since 2012, contributing nearly €2.4B in economic output in 2022 alone.

Pointing The Finger

Others believe that data centres have become the scapegoat for Ireland’s struggling grid, including Equinix, which operates five data centres clustered around Dublin.

“Data centres are making enormous investments in decarbonisation and act as good grid citizens,” Equinix Managing Director for Ireland Peter Lantry said in a letter to The Financial Times. “They are creating solutions that give capacity back to the grid, such as on-site generators and battery storage, which allow them to function off-grid.

“They are also providing the digital infrastructure needed to come up with solutions to climate change. In Dublin, our de facto data centre moratorium continues. As a location that prides itself on its ability to attract the world’s biggest enterprises, let’s hope that word about our short-sightedness doesn’t get out.”

Impeding the construction of new data centres “could significantly impact our economic future,” according to an appeal lodged by Servecentric against a decision by the Fingal County Council to refuse a new data centre for Blanchardstown Corporate Park, Ballycoolin, Dublin 15.

In the appeal, Linda Colleran, senior planner at Tom Phillips + Associates, on behalf of Servecentric, said there is an emerging trend of Dublin local authorities refusing applications for data centres regardless of the operator's commitment to flexibly supply power to support the national grid sustainably.

But solutions are being found. Ireland is set to house Europe’s first data centre powered exclusively by fuel cells as part of a project led by Korean firm SK Ecoplant and Irish power generation and renewable energy company Lumcloon Energy. They plan to build a data centre powered by solid oxide fuel cells in County Westmeath, around 50 miles west of Dublin.

In addition, Amazon was the first company in Ireland to deliver unsubsidised corporate power purchase agreements for renewable energy, meaning renewable energy is being delivered to the grid at no direct cost to energy consumers. Its first CPPA project, located in Cork, is fully operational, with Galway and Donegal to follow. In total, these will add 229 MW of renewable energy to the Irish grid each year.

In Dublin, AWS worked with the South Dublin County Council to deliver the Tallaght District Heating Scheme, which will provide low-carbon heat to public sector, residential and commercial customers from recycled heat supplied by its local AWS data centre. This is something seen far more commonly in places such as Germany, Thorpe said, adding it could become popular in Ireland.

McCarthy said there are many reasons Ireland is attracting the major data centre players, but if the energy infrastructure challenges are not resolved, there remains a risk they could go elsewhere.

“Remember, a lot of the data centres are also in Ireland because of the climate, which requires less cooling technology to reduce the heat in the servers,” he said. “We've got them here. We need to keep them here.

“The government does not want to see a press statement at 5 o'clock on a Friday from a Big Tech company saying, ‘Bye, Dublin. Hello, Milan.’ So that's a consideration in terms of enterprise policy. The demand argument is overplayed. It’s supply.”