A recent study reveals that data centre operators and investors expect significant growth, spurred by AI needs, yet face challenges with power supply and sustainability.
Recent research conducted by global law firm DLA Piper has revealed a burgeoning optimism among global data centre investors and operators regarding the sector’s growth, primarily driven by the increasing reliance on artificial intelligence (AI). Approximately 70% of respondents anticipate enhanced investment in data centre projects over the next two years, reinforcing the strong link between AI technologies and data consumption needs. The study highlighted that machine learning and natural language processing are particularly significant drivers of demand for data centre capabilities.
Almost all participants in the survey acknowledged the escalating need for data centres to support AI functionalities; however, they also raised critical concerns about the stability and availability of power supplies. An overwhelming 98% indicated that these power supply issues heavily influence their decision-making regarding new data centre initiatives, with half of the respondents categorising this as a primary barrier to investment.
The global data centre market is projected to reach an estimated valuation of approximately $300 billion in 2024, according to analysis by TMT Finance, which partnered with DLA Piper for this research. As the market undergoes transformation, a compound annual growth rate (CAGR) of roughly 10% over the following five years has been forecasted, leading to a potential market value of $483.15 billion by 2029.
Utility companies in the United States are currently facing challenges in responding to surging requests for power delivery from potential data centre sites. Many of these requests may not be fulfilable until the 2030s. As a result, utility providers are increasingly demanding significant upfront, non-refundable payments from investors for land and commitment to securing power sources. Developers are now often required to finance the essential infrastructure, such as substations, that enable power delivery to their sites.
Sustainability has emerged as another crucial consideration, with 70% of investors expressing concerns regarding the energy and water consumption associated with data centres. This sentiment is expected to intensify over the next two years. Regulatory measures introduced by the EU, including the European Climate Law and its Energy Efficiency Directive, indicate a shift towards greater accountability for data centre operators in managing and mitigating emissions.
Anthony Day, a Partner at DLA Piper, underscored the critical role of data centre capacity in both the AI landscape and the broader global economy. He emphasised the necessity for substantial investment across the industry, coupled with a coordinated framework involving policymakers, investors, and power providers. Day noted that resolving power supply challenges should be prioritised to unlock the full potential of AI.
Alanna Hasek, another Partner at DLA Piper, pointed towards the broader implications arising from the energy transition, which has sparked an increased demand for access to electrical grids. Data centres now find themselves in competition with renewable energy projects and electric vehicle charging stations for grid capacity. As utilities struggle to manage these competing demands, Hasek indicated that data centre investors may increasingly be required to bankroll their own grid connections. This trend is expected to extend beyond the US, impacting markets around the globe.
As the intersection of AI technology and data centre infrastructure continues to evolve, the findings suggest that while the outlook for the sector remains robust, significant challenges surrounding power supply and sustainability must be addressed to ensure the continued growth and effective operation of data centres in the future.
Source: Noah Wire Services
- https://norway.dlapiper.com/no/nyhet/global-data-centre-market-confident-about-ai-fuelled-growth-despite-concerns-about-power – Corroborates the optimism among global data centre investors and operators regarding the sector’s growth driven by AI, with 70% anticipating enhanced investment.
- https://www.dlapiper.com/en/insights/publications/tech-index/tech-index-2024 – Supports the significance of AI as a key area for potential business growth, with 63% of respondents identifying AI as crucial for future competitiveness.
- https://norway.dlapiper.com/no/nyhet/global-data-centre-market-confident-about-ai-fuelled-growth-despite-concerns-about-power – Highlights the critical concerns about power supply stability and availability, influencing decision-making for new data centre initiatives.
- https://www.dlapiper.com/en-ca/insights/publications/ai-outlook/2024/leaders-work-to-align-energy-infrastructure-with-growing-demand-for-ai-data-centers – Mentions the projected electrical demand growth for AI data centers, expected to increase by 160% by 2030, and the challenges in power supply.
- https://transacted.io/ai-boom-drives-data-center-investments-amid-rising-risks/ – Discusses the impact of AI on data centre power and cooling requirements, and the challenges faced by traditional data centres in meeting these new demands.
- https://norway.dlapiper.com/no/nyhet/global-data-centre-market-confident-about-ai-fuelled-growth-despite-concerns-about-power – Supports the forecasted market valuation and growth rate of the global data centre market, including the projected CAGR and market value by 2029.
- https://www.dlapiper.com/en-ca/insights/publications/ai-outlook/2024/leaders-work-to-align-energy-infrastructure-with-growing-demand-for-ai-data-centers – Details the challenges faced by utility companies in responding to surging power requests from data centres and the need for upfront payments and infrastructure financing.
- https://www.dlapiper.com/en/insights/publications/tech-index/tech-index-2024 – Highlights the growing concern about sustainability, energy, and water consumption associated with data centres, aligning with regulatory measures like the European Climate Law.
- https://norway.dlapiper.com/no/nyhet/global-data-centre-market-confident-about-ai-fuelled-growth-despite-concerns-about-power – Emphasizes the critical role of data centre capacity in the AI landscape and the broader global economy, as underscored by Anthony Day from DLA Piper.
- https://www.dlapiper.com/en-ca/insights/publications/ai-outlook/2024/leaders-work-to-align-energy-infrastructure-with-growing-demand-for-ai-data-centers – Discusses the broader implications of the energy transition and the increased demand for access to electrical grids, as pointed out by Alanna Hasek from DLA Piper.
- https://transacted.io/ai-boom-drives-data-center-investments-amid-rising-risks/ – Supports the need for a coordinated framework involving policymakers, investors, and power providers to address power supply challenges and ensure the continued growth of data centres.
