Big Tech Tenants Blocking Key Reductions To Data Center Energy Use, Experts Say

The world’s largest tech companies have ambitious sustainability goals, but experts say hyperscalers' leasing teams are standing in the way of measures that would reduce the amount of energy many of their data centers consume. 

Tech giants like Amazon, Google, Microsoft and Meta tend to be at the front of the pack when it comes to corporate efforts to reduce carbon emissions and pursue sustainability targets. This has extended to their massive portfolios of owned and leased data centers, which have generally become more efficient in how they use the hundreds of megawatts of power allotted to them.

But operators of third-party data centers, for whom these cloud and social media behemoths are by far the largest tenants, say that these hyperscalers continue to insist on contract terms that stand in the way of simple steps that could drive down energy use further. Their primary frustration is the continued prevalence of requirements to keep server halls colder than is necessary, parameters that effectively mandate unnecessary energy use and make data centers more expensive to build and operate. 

Colocation data center operators said they are pushing to change these cooling standards in every lease negotiation. But Big Tech tenants have largely been unwilling to budge. 

“If we as an industry could get more reasonable [contracts] for what goes on inside a data center, it would decrease the cost to deliver it, it would decrease the cost of the lease, and it would decrease the amount of power that gets used,” Sabey Data Centers President Rob Rockwood said. “It would very much be a more efficient operation overall.”

An Amazon Web Services spokesperson declined to comment on the issue. Google, Microsoft and Meta didn't respond to requests for comment. 

While most of the power consumed by a data center is used by servers and other IT gear, a significant share of overall energy use is devoted to cooling the facility to prevent that equipment from overheating.

The percentage of power used for cooling can vary significantly between data centers, depending on factors ranging from local climate to the building’s design, but experts peg cooling as typically accounting for between 30% and 55% of total energy use. That is a massive amount of electricity in an industry where a single campus uses more power than tens of thousands of homes. 

Exactly how cold data centers need to be is specifically detailed in contracts between data center operators and their tenants. These service-level agreements are negotiated as part of the leasing process and lay out a range of performance standards for both parties. Failure to keep temperatures in a data center within these parameters carries serious financial repercussions for the facility’s operator, often allowing the tenant to terminate the agreement entirely.  

But industry insiders said the cooling requirements that cloud providers and other major tech companies insist on writing into SLAs are outdated, with new high-end servers and other IT equipment typically used by hyperscalers capable of withstanding higher temperatures with no additional risk of failure. Data center operators are cooling their server halls more than is necessary in order to adhere to the terms of SLAs, experts said, and adjusting these agreements represents an opportunity to reduce power consumption. 

“We have new thermal guidelines that tell us that we can raise the temperatures in the data center significantly, which gives us the ability to economize many more hours out of the year,” said Dave Meadows, director of technology at cooling systems manufacturer Stulz USA. “I'm talking about turning off the compressors in the air conditioners or the chillers, which is important because that’s about 80% of the cooling power that is going into that facility.”

Companies like Amazon Web Services, Google and Microsoft have started expanding temperature guidelines to improve energy-efficiency at the data centers they own and operate themselves, industry insiders said. But in leased facilities operated by third-party providers, they have been almost universally unwilling to shift these parameters when negotiating new leases, much less make changes to existing SLAs. 

This has become a significant source of frustration for data center providers. 

Beyond the unnecessary power consumption, hyperscalers’ insistence on maintaining existing thermal guidelines can make data centers more expensive to build and maintain. With significant monetary penalties for even briefly exceeding temperature limits, data center providers are effectively forced to overdesign buildings and cooling systems to account for extreme scenarios like extended heatwaves that may never occur during the life of the building. This means more cooling equipment to install and maintain, driving up both development and maintenance costs. 

“At the hyperscale level, if you own your own data center, you're probably prepared to take some of these steps to mitigate these emissions, but at the colocation level, we're signing leases with SLAs where if we're in violation of those, it gets pretty expensive,” said Stuart Lawrence, vice president of product innovation and sustainability at Stream Data Centers, speaking at Bisnow’s DICE East event in May. “Because of that, we’ll generally design based on the worst-case scenario.”

The tenant-friendly nature of SLAs reflects the unusual power dynamic that has emerged between data center operators and their hyperscale tenants over the past decade. Because just a handful of companies account for such a large share of leased data center space, it gives those companies tremendous negotiating leverage. Hyperscale tenants have been able to come to the table with their own boilerplate leases and SLAs that they will often refuse to change in any substantial way. 

The resistance to adjusting thermal standards in SLAs is largely a product of how hyperscalers approach lease negotiations with third-party providers, industry insiders said. The process is typically led by the tech companies’ procurement teams, who specialize in negotiating, not the nitty-gritty of data center cooling. 

While companies like Amazon, Google and Microsoft likely have sustainability groups and data center engineering teams who would support implementing new cooling guidelines that would improve energy-efficiency, they are almost never part of the conversation in negotiations led by procurement teams that are often incentivized not to deviate from the hyperscler’s standard contract, insiders said.  

“I've even had it admitted to me by a tenant that their procurement group gets graded on how many of their specific clauses they can keep in a document, and so they're financially driven through their comp structure to make sure that the SLA goes through without any changes,” said Tim Bright, executive vice president at T5 Data Centers. “It goes completely contrary to their ESG group, who is trying to make the most efficient facilities and have real corporate directives to do so.”