COVER STORY: Data centre sustainability scrutiny puts emissions in the spotlight

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Huge technology-fueled increases in energy consumption, driven by digital acceleration, the global expansion of hyperscalers, and the emergence of cryptocurrencies in the last decade is shifting the performance of data centres to the heart of the corporate sustainability debate.

With 30 trillion dollars worth of cash flooding into impact investment funds during the last decade according to McKinsey and Co, companies are coming under much tighter scrutiny from ESG focused investors. That trend continues unabated, with Bloomberg reporting in February that Global ESG assets are on track to exceed $53 trillion by 2025.

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Further pressure is being applied by consumers and employees who increasingly make values-based decisions about what to buy and where to work.

Globally, data centres are already responsible for approximately two per cent of the world’s carbon emissions, on par with the aviation industry. Regulation is increasing in the space, adding to the pressure to reduce the huge level of emissions for which data centres are responsible.

Those emissions are set to grow dramatically.

The hyperscalers in particular are on something of a tear of late.

Typically, these are massive companies like, Facebook, Amazon, Google and Alibaba that want to stake out dominant positions in the public cloud and cloud services industries, while also extending their business into adjacent sectors.

According to North Ridge Partners, an investment advisory business that assists technology companies in the Asia Pacific with strategic financial advice, M&As and capital raisings, there are about 600 hyperscale data centres globally.

In their August Tech Round Up newsletter, they noted, “Significantly, almost a hundred of those were built in 2020 alone. There are believed to be another 200 under construction around the world. And while approximately 40 per cent of those are in the US, demographic trends will see the region’s share shrink in the coming year.”

And, according to the company, countries in the APAC region, especially in South East Asia will capture much of the growth.

Demand is coming from large corporations who believed they can capture cost, innovation and sustainability gains from partnering with the digital giants.

Global property giant Lendlease is a case in point. It has made a public commitment to exit from its data centres by end of calendar year 2022, and has partnered with Google Cloud as part of its pledge to reach net-zero by 2025.

Harvey Worton, Lendlease Group Co-CIO told Digital Nation Australia, “Google Cloud intends to run 24 by seven carbon-free energy through its data centres, and be able to do that by 2030, which is something that we are absolutely aligned with.”

Harvey Worton Group Co-CIO, Lendlease

Moving away from its current third-party data centres, Lendlease expects the Google Cloud partnership to help the business reduce its IT carbon footprint.

While the company has been measuring its own energy emissions, water efficiency and waste generation, overseen by external auditors at KPMG, since 2014, Worton says that the partnership with Google will also increase the organisation’s ability to track and measure its emissions moving forward.

“Google publishes all of its energy scores so we will know at any one time, how are we doing in terms of carbon consumption across regions across the globe,” says Worton.

Regulation

Tiny Haynes, senior director and analyst at Gartner, says when it comes to regulation, emissions are categorised into three scopes.

Tiny Haynes, senior director, research, Gartner

“There's the scope one, which is a carbon emission which happens as a result of a process. So for example, when you generate electricity. And data centres do actually generate electricity with their own diesel generators when they come off the main supply,” says Haynes.

“There’s scope two, which is carbon emissions which are indirectly generated by the process, which includes consumption of electricity, [and] data centres have huge amounts of electricity consumption. And scope three which is materials recycling.”

According to Ilona Millar, Head of Baker McKenzie’s Global Climate Practice, the National Greenhouse and Energy Reporting Scheme requires that scope one emitters have a “safeguard mechanism baseline” within which they are expected to contain their emissions. If they exceed this threshold they are required to submit carbon credit units.

Ilona Millar, Head of Baker McKenzie’s Global Climate Practice

Data centres, however, as primarily scope two emitters, are exempt from this baseline.

“When we look at data centres, they're primarily a consumer of electricity. So, they fall into that basket of companies that are required to, if their emissions are above the thresholds, to report on their energy consumption. But as we're talking about scope two emissions here, they don't have safeguard mechanism baselines, like a company that is producing large volumes of greenhouse gases in their operations would otherwise have,” says Millar.

Businesses can offset their carbon emissions by entering into a Power Purchase Agreement (PPA), which, according to Aylin Cunsolo, Partner in Energy and Resources at Baker McKenzie, allows for the development of new renewable energy projects.

Aylin Cunsolo, Partner in Energy and Resources at Baker McKenzie

Cunsolo says that the traditional form of a PPA is when a business purchases renewable power directly. Other PPAs do not include the physical transfer of electricity but instead act as a “financial instrument or a hedge”.

“By entering into a PPA with a wind or a solar farm, that allows that wind or solar farm to get financed, and therefore constructed because it's providing fixed revenue certainty over a long period of time. So, in that way, the business can be seen to be supporting new renewable energy projects, and thereby effectively reducing emissions associated with electricity in the grid,” says Cunsolo.

Dzmitry Markovich, Vice President of Engineering at Dropbox, a Californian based collaboration platform provider said, “It’s important to understand the difference between carbon credits, which don’t reduce emissions, and carbon offsets, which do. However, offsets are only a small part of the solution.”

Dzmitry Markovich, Vice President of Engineering at Dropbox

Markovich encourages businesses to find tangible ways to reduce their own carbon footprint instead.

Dropbox claims it has reduced its data centre carbon footprint by 15 per cent in the last year by increasing its power usage effectiveness (PUE).

“First, we looked at outside air economisation — using our systems to bring in outside air at lower temperatures. It’s the equivalent of opening a window in a hot apartment for natural cooling on a windy day instead of cranking up the air-conditioning,” he says.

“We identified airflow inefficiencies in our data centres using computational fluid dynamics thermal analysis. This helped us take into account how air could be wasted through leaks or issues with airflow at our sites.”

The company is also sourcing 100 per cent renewable electricity to power its data centres.

Renewable energy

According to Gartner’s Haynes, the biggest factor determining a data centre’s level of sustainability is where they source their energy.

“The factors to think about with the data centre is the energy which is consumed, the source of that energy. If you go for a coal-fired power station, then you're going to be looking at about a kilogram of carbon emission per kilowatt. If you look at gas-fired, it's about point four kilograms per kilowatt and it's very negligible if you go from nuclear,” says Haynes.

When it comes to the adoption of renewable power, Chris Thorpe, the CEO of Leading Edge Data Centres says that while the adoption of renewables powering data centres has increased in the last year and a half, he expects supply to increase going forward.

Chris Thorpe, the CEO of Leading Edge Data Centres

“I think one of the biggest challenges is the actual grids aren't designed necessarily to take that power in. So there's some challenges to overcome there. But I can see this market, particularly in Australia, because we've got a large supply of sunshine that I think the market is going to change quite significantly, over the next sort of two to three years,” says Thorpe.

Power storage is another challenge facing the renewable energy sector, and according to Haynes, while battery technology is advancing, there is still some work to be done before all data centres will be powered entirely by renewables.

Hydro, however, looks the most promising.

“The wind and solar are unpredictable or at least are not consistent. Hydro is. There is currently a hydroelectric generator being put in place in the Orkneys, which is about a two-megawatt generator, which is sort of the first of its kind. So I think we are starting along this journey to putting in a lot more renewable, but we've still got a long way to go,” says Haynes.

Pressure on providers

Thorpe suggests that businesses should consider the sustainability credentials of their supplier base to understand the commitments of the entire value chain.

He told Digital Nation, “You have to look at all your supplier base, as in who you're working with, and what steps they're taking sort of down the chain as to how efficient or what steps they're taking to reduce their actual energy consumption.”

“People are going to start making business decisions as to who they partner with, depending on what their carbon emissions are, and what their stance is going forward as far as sustainability.”

According to Joe Craparotta, VP of IT business at Schneider Electric, the expansion of hyperscalers and the rollout of edge computing could lead to doubling the amount of data centre capacity in Australia in the near future.

Joe Craparotta, VP of IT business at Schneider Electric

“We are tracking at the moment nearly two gigawatts of data centre capacity to be built out in the next three to five years,” says Craparotta.

“It could be a doubling or two and a half times what we currently have today, which is significant. It's material.”

For businesses that outsource to data centres, Craparotta highlights the importance of asking hard questions in order to develop a deep understanding of the credentials of the co-lo facility.

Craparotta says, “How efficient are they? How sustainable? What's their sustainability program? What does it look like today? What does it look like into the future? Can they measure it? Do they have the technology to measure their consumption in real-time and their sustainability metrics going forward?”

These questions will all become increasingly important as regulatory frameworks ask businesses to report on their scope one, scope two and scope three carbon emissions.

“In Europe, we're seeing that already being regulated. In Australia, not just yet, but I would suggest any organisation that's outsourcing really understand where you're putting your IT workload,” says Craparotta.

 

Credit: The mini-documentary was produced by Josh Lundberg, Matthew Ryan and Tejas Bhat.

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