Renewable energy use in data centers has become critically important as the growing energy consumption of these facilities, driven by cloud computing and AI, contributes to their substantial environmental footprint. To achieve the goal of net-zero emissions by 2030 and facilitate the energy transition, data centers must adopt sustainable energy solutions to power their energy-intensive operations, including servers and cooling systems.

Data centers utilize renewable energy sources, such as solar, wind, hydroelectric, geothermal, and biomass power, to reduce their carbon footprint and environmental impact. By adopting renewable energy, data centers minimize their reliance on fossil fuels and contribute to a more sustainable future.

Dgtl Infra explores the various renewable energy sources that data centers can harness to power their operations. We also analyze the numerous benefits of adopting renewable energy for data center operators, such as reducing their carbon footprint, achieving cost savings, and meeting the demands of environmentally-conscious hyperscale customers. However, implementing renewable energy in data centers is not without its challenges, and we discuss the obstacles that need to be overcome, including intermittency, location dependence, and initial investment costs.

Renewable Energy Sources for Data Centers

Data centers utilize a variety of renewable energy sources, all of which produce carbon-free electricity (CFE) with zero direct emissions. These sources include solar, wind, hydroelectric, geothermal, and biomass technologies.

1. Solar Power

Solar power harnesses energy from the sun and converts it into electricity using photovoltaic (PV) panels or mirrors that concentrate solar radiation. When sunlight hits the PV panels, the photons knock electrons loose from their atoms, generating a flow of electricity. The direct current (DC) electricity produced by the solar panels is then passed through an inverter to convert it to alternating current (AC) electricity, which is used to power data centers.

Aerial View of Google Data Center in Saint-Ghislain Belgium with Solar Panel Farm Renewable Energy
Source: Google.

Solar power systems can be installed on rooftops, mounted on the ground, or integrated into the data center building’s architecture. The amount of electricity generated depends on factors such as the size and efficiency of the solar panels, the amount of sunlight available, and the angle at which the panels are installed.

To ensure a steady supply of power, solar energy can be stored in batteries for use when sunlight is not available. For example, a data center can integrate its existing Uninterruptible Power Supply (UPS) battery backup system with solar power. During the day, the solar panels can charge the UPS batteries, and the stored energy can be used to power critical loads during a power outage or when solar power is not available, such as during the night.

2. Wind Power

Wind power is a renewable energy source that harnesses the kinetic energy of moving air to generate electricity. The primary components of wind power systems are wind turbines, which consist of blades mounted on a tall tower. As the wind blows, it causes the blades to rotate, driving a generator that converts the mechanical energy into electrical energy.

Amazon Turbines Generating Clean Electricity at a Large Wind Farm in Expansive Forest
Source: Amazon.

The wind turbines used for powering data centers are typically located on-site or in close proximity to the facility to minimize transmission losses and ensure a reliable supply of renewable energy. These wind turbines are usually large-scale, with heights ranging from 165 to 330 feet (50 to 100 meters) or more. The blades, which can span up to 165 feet (50 meters) or longer, are designed to optimize the capture of wind energy. A generator, located in the nacelle at the top of the tower, produces alternating current (AC) electricity.

The AC electricity generated by the wind turbines is then transmitted through cables to a transformer, which steps up the voltage for efficient transmission over short distances. The high-voltage electricity is then sent to a substation within the data center campus, where it is stepped down to a lower voltage suitable for use in the facility.

3. Hydroelectric Power

Hydroelectric power is a renewable energy source that harnesses the energy of moving water to generate electricity. Large-scale data centers use hydroelectric power plants to provide a reliable and sustainable energy supply.

Aerial View of a River Winding Through a Forest with Hydroelectric Dam Generating Power

The process of generating electricity using hydroelectric power involves the following steps:

  • Water is stored in a reservoir created by a dam built across a river
  • When electricity is needed, water is released from the reservoir and flows through a pipe (penstock) to a turbine generator located downstream
  • The flowing water spins the turbine blades, which are connected to a generator. The generator converts the mechanical energy of the spinning turbine into electrical energy
  • The electricity produced is then transmitted through power lines to the data center
  • After passing through the turbine, the water is released back into the river downstream

For hydroelectric power plants to be considered truly sustainable, they should be certified by third-party organizations such as the Low Impact Hydropower Institute (LIHI) or the Hydropower Sustainability Standard. These certifications aim to ensure that the plants minimize negative environmental impacts.

4. Geothermal Energy

Geothermal energy harnesses the natural heat stored in the Earth’s interior for power generation. For data centers, geothermal systems are created by drilling deep wells into hot rock formations and using a heat exchanger to transfer subsurface heat to a fluid, such as water. This heated fluid is then pumped to the surface, where it passes through a turbine connected to generators, producing electricity to power the data center. The cooled fluid is reinjected into the ground to be reheated, creating a closed loop.

Aerial View of Google and Fervo Geothermal Plant in Nevada for Renewable Energy and Mountains in Background
Source: Google.

Geothermal plants can be built near data centers, reducing transmission losses. These systems take advantage of the stable temperatures found deep underground, providing a reliable and consistent energy source. While the initial drilling and setup costs are high, geothermal energy offers a sustainable, long-term solution for powering data centers with a smaller carbon footprint compared to fossil fuels.

The U.S. Department of Energy estimates that geothermal energy could provide 90 to 132 gigawatts (GW) of generation capacity to the grid by 2050, with the potential for significantly more. Currently, geothermal energy systems are primarily being built in the western United States, including California, Nevada, Utah, Oregon, and Hawaii, where hot rock formations and geysers are most abundant.

5. Biomass Energy

Biomass energy for data centers involves burning organic materials, such as wood chips, agricultural waste, or purpose-grown energy crops, to generate electricity. The biomass is typically combusted in a boiler to produce steam, which drives a turbine connected to a generator, creating electricity. Alternatively, biomass can be gasified to produce biogas, a combustible gas that fuels a gas engine or turbine for power generation. The generated electricity is then used to power the data center.

Biomass Energy Woodchips and Palm Kernel Shells Fuel Biogas Cikarang Listrindo
Source: PT Cikarang Listrindo.

Biomass is considered a renewable energy source because the plants consumed can be regrown, theoretically making it carbon-neutral. However, for biomass and biogas to be truly sustainable, they should be third-party certified through standards such as ISO 13065:2015 or The Green-e Renewable Energy Standard for Canada and the United States to meet certain environmental sustainability criteria.

Benefits of Renewable Energy Use in Data Centers

Renewable energy offers numerous advantages for powering data centers, from reducing environmental impact to cutting costs and enhancing reliability.

1. Reduced Carbon Footprint

Renewable energy sources such as solar, wind, hydroelectric, geothermal, and biomass produce minimal greenhouse gas emissions compared to fossil fuels. By powering data centers with clean energy, the carbon footprint and environmental impact of these energy-intensive facilities can be significantly reduced.

Reduced Carbon CO2 Footprint Arrow Pointing Down from Cloud with Energy Efficiency and Environmental Impact

Data centers currently consume approximately 2% of global electricity. With the rapid growth of cloud computing and artificial intelligence (AI), this energy consumption is projected to increase to about 10% of total electricity demand by 2030. Transitioning data centers to renewable energy sources can reduce their carbon emissions by 80-90%, making it a critical step toward mitigating climate change and ensuring the sustainability of the digital economy.

2. Cost Savings

While renewable energy infrastructure requires upfront investment, its operational costs tend to be lower and more predictable than those of fossil fuels, which have volatile prices. This helps data center operators better forecast and manage energy expenses.

Investing in renewable energy can reduce a data center’s operating expenses by 20-30% over a 20-year period. According to the International Energy Agency (IEA), the levelized cost of electricity (LCOE) for solar PV and onshore wind has dropped by 85% and 56% respectively since 2010, making renewables an increasingly cost-competitive choice for long-term energy planning.

3. Energy Security and Reliability

By diversifying energy sources and reducing reliance on the grid, data centers can enhance their energy security. This approach mitigates risks associated with grid instability and price fluctuations, delivering a more reliable and cost-effective power supply.

On-site renewable energy generation, such as rooftop solar panels, adds an extra layer of resilience. It provides backup power during grid disruptions and outages, enabling data centers to maintain critical operations and reducing the need for diesel backup generators.

A grid-interactive UPS (uninterruptible power supply) system, also known as a bi-directional UPS, can supply power to a data center during a grid outage. Additionally, it can interact with the electrical grid to provide various services, such as frequency regulation, voltage support, and demand response. This is made possible by the energy storage capabilities of the UPS, typically in the form of batteries.

4. Incentives and Tax Breaks

Many governments offer financial incentives, such as tax credits, grants, and rebates, to encourage the adoption of renewable energy. Data center operators can take advantage of these incentives to offset the initial costs of implementing renewable energy projects.

Incentives and Tax Breaks Coins in Ascending Order with Plants Growing Next to Earth Financial Benefits

For example, the U.S. government offers the Investment Tax Credit (ITC) for solar energy installations and the Production Tax Credit (PTC) for wind power projects. Additionally, some states and local governments provide further incentives, such as property tax exemptions and expedited permitting processes.

These incentives and tax breaks significantly enhance the financial viability of renewable energy projects for data centers, making the transition to clean energy more attractive and cost-effective in the long run.

5. Reputation and Customer Demands

Utilizing renewable energy demonstrates a commitment to sustainability goals and corporate social responsibility (CSR). This commitment enhances a data center operator’s reputation, attracts environmentally-conscious customers, and provides a competitive edge.

Leading hyperscale companies, which are also the largest customers of data centers, such as Amazon, Microsoft, Google, Oracle, Meta (Facebook), Apple, and TikTok, are increasingly demanding that data centers use renewable energy sources. Meeting these customer-driven sustainability requirements is becoming essential for data center operators to secure and maintain business from these major clients, who have set aggressive net-zero targets for their computing and connectivity footprints.

Challenges of Using Renewables for Data Centers

Data centers are increasingly looking to power their operations with renewable energy sources like solar, wind, hydroelectric, geothermal, and biomass, but this energy transition comes with several significant challenges and obstacles that must be overcome.

1. Intermittency and Variability

Renewable energy sources like solar and wind are highly intermittent and variable, meaning their power output fluctuates based on weather conditions, such as sunlight and wind speed, as well as the time of day.

Data centers require a constant, reliable power supply 24/7, so managing the variability of solar and wind energy during “peak” and “off-peak” hours is a significant challenge. For example, if a data center operator builds a solar farm with a 100-megawatt (MW) capacity, it may only receive 30 to 60 MW of power due to factors such as weather conditions, time of day, and transmission losses. Similarly, a 100 MW wind farm might only deliver 30 to 60 MW of power to the data center because of variability in wind speed and direction.

These inconsistencies in power generation and delivery force data centers to remain connected to the grid and supplement their renewable energy sources with traditional power during off-peak hours.

Below is an example of the gaps between Google’s carbon-free energy supply and a specific data center’s electricity demand over the course of a year. The green spikes represent the variable nature of renewable energy sources like solar and wind, while the white gaps illustrate the times when Google’s data centers must still rely on carbon-based power to meet their energy needs. This data highlights the key challenge of intermittency and variability in transitioning data centers to fully renewable energy.

Google Hourly Carbon-Free Energy Supply Gaps at Data Center for Electricity shown in Chart
Source: Google.

In general, renewable energy sources can only meet data center power requirements for about half the day. This coverage increases slightly, typically by 2 to 4 hours, when battery storage is incorporated into the system. To address this challenge of intermittency and variability, data centers often incorporate energy storage and backup power systems into their operations.

A microgrid can incorporate energy storage systems and backup power to manage the variability of renewable energy sources like solar and wind. For example, at night time, when solar power is unavailable, the data center can draw power from the main grid. During the day, excess renewable energy can be sold back to the main grid. This bi-directional relationship helps the microgrid balance the intermittent nature of renewable energy sources and deliver a stable power supply for the data center.

2. Location Dependence

Renewable resources are location-dependent: some areas are better suited for solar energy, others for wind, hydroelectric, or geothermal power. In the United States, these renewable resources have a significant presence in the following states, which also have large concentrations of data centers:

  • Solar: California, Nevada, Arizona, Texas
  • Wind: Texas, Iowa, Oklahoma, Kansas
  • Hydroelectric: Washington, Oregon, New York (Upstate), Northern California
  • Geothermal: California, Nevada, Utah, Oregon

Data centers need access to adequate renewable power, which can limit their location options. These facilities either need to be built closer to existing or new renewable power generation sites, or renewable energy needs to be brought closer to where data centers are already being built. This avoids the issue of transmitting renewable energy from remote generation sites to data centers, which can result in power losses.

The cost of renewable energy varies significantly by location, depending on factors such as resource availability (e.g., abundant sunlight or wind), technology costs (e.g., solar panels and wind turbines), financing (e.g., cost of capital and interest rates), and government policies (e.g., incentives, subsidies, and regulations).

Here are some specific examples of the cost of renewable resources in different countries, measured in U.S. dollars per megawatt-hour ($/MWh):

  • United States:
    • Utility-Scale Solar PV: $28-$41/MWh
    • Onshore Wind: $26-$50/MWh
  • Germany:
    • Utility-Scale Solar PV: $56/MWh
    • Onshore Wind: $67/MWh
  • Australia:
    • Utility-Scale Solar PV: $52/MWh
    • Onshore Wind: $54/MWh

The variability in renewable energy costs across regions presents a challenge for global data center operators seeking to adopt sustainable energy solutions. The financial viability of such projects heavily depends on local resource availability, technology costs, and government support.

3. Space Constraints

Generating enough renewable energy to power a data center, particularly with solar panels or wind turbines, requires significant physical space that may not be available on the data center premises.

Apple Renewable Energy Large-Scale Solar Project in Brown County Texas Powering its Data Centers
Source: Apple.
  • Solar Panels: On average, solar panels produce about 10 watts per square foot. To generate 1 megawatt (MW) of power, approximately 100,000 square feet (around 2.3 acres) of solar panels are needed. For large-scale data centers with power capacities of 50 to 100 MW, this area requirement can rise to millions of square feet and over 100 acres, which is challenging to accommodate on-site or with adjacent land
  • Wind Turbines: A single large wind turbine can require around 1.5 acres of space to account for the turbine itself, access roads, and safety regulations. To generate 50 MW of power, around 75 acres of land would be needed to support multiple turbines, which is often not available within or adjacent to many data centers

Due to these physical space constraints, off-site renewable energy generation is often necessary to power data centers with clean energy. For example, Google’s $600 million data center in New Albany, Ohio, is powered by a 50 MW solar farm. The solar farm, built by Invenergy, spans approximately 400 acres and is located 10 miles away from the data center site, illustrating the significant land requirements for renewable energy generation.

Off-site renewable energy generation for data centers has disadvantages compared to on-site generation, including higher transmission losses, as well as reduced reliability and control over the power supply, given that it often involves entering into power purchase agreements (PPAs) or purchasing renewable energy certificates (RECs) from third-party providers.

4. Initial Investment Costs

Building renewable energy generation and storage systems for a data center involves significantly higher upfront capital costs compared to connecting to the conventional electrical grid, even if it results in lower energy costs over time. This financial barrier can be challenging for some companies.

Constructing dedicated renewable energy infrastructure, such as solar farms or wind turbines, for a data center requires an initial investment that is two to four times higher than simply connecting to and purchasing electricity from the existing grid. These costs include land acquisition, equipment, installation, grid integration, and energy storage systems like batteries, leading to a payback period for the initial investment ranging from 5 to 10 years or more.

Moreover, there are often long lead times between these initial investments and the resulting greenhouse gas reductions. For instance, with new solar and wind projects, it can take years for contracted projects to be constructed and begin generating clean electricity.

5. Infrastructure and Grid Integration

Integrating renewable energy into data center power infrastructure poses significant challenges. It requires specialized power electronics, energy storage, monitoring, and control systems, as well as navigating complex grid interconnection processes and regulations.

To effectively use the generated renewable energy, data centers are increasingly building their own microgrids, which act as localized control systems to manage the integration of renewable energy generation, energy storage, and the data center’s power requirements, while addressing the complexity of integrating with the wider electrical grid.

Strategies for Implementing Renewable Energy in Data Centers

Implementing renewable energy in data centers involves both off-site and on-site projects. Off-site renewable energy projects, such as Power Purchase Agreements (PPAs), Renewable Energy Certificates (RECs), and green tariffs, are located away from the consumer’s site. On-site renewable energy generation, including rooftop solar panels and energy storage systems, are situated at the consumer’s location.

Power Purchase Agreements (PPAs)

Power Purchase Agreements (PPAs) are long-term contracts between a renewable energy developer and a buyer, such as a data center operator, to purchase electricity at a pre-determined price for a set period, usually 10 to 25 years. This arrangement allows data centers to procure renewable energy without upfront costs or operational responsibilities.

Power Purchase Agreements PPAs Professionals from Agreement on Solar Panels Renewable Energy Data Center

Under a PPA, the developer – typically a utility company or independent power producer – builds, owns, and operates the renewable energy project. In turn, the data center agrees to buy the electricity produced. The price is either fixed or escalates predictably, providing long-term price stability and hedging against rising utility rates.

PPAs can be structured as either physical or virtual. In a physical PPA, the renewable energy is delivered directly to the data center. In a virtual PPA (VPPA), the data center receives renewable energy certificates (RECs) while the electricity is sold into the grid.

PPAs enable data centers to meet sustainability goals, reduce their carbon footprint, and support new renewable energy development. They offer a way to procure renewable energy at scale without capital investment or technical expertise. Simultaneously, PPAs help developers finance the construction of new utility-scale solar and wind projects.

Renewable Energy Certificates (RECs)

Renewable Energy Certificates (RECs), also known as Renewable Energy Credits (RECs), are tradable, market-based instruments that represent the legal property rights to the environmental and social benefits of renewable electricity generation. Each REC certifies that 1 megawatt-hour (MWh) of electricity was generated from a renewable energy resource and fed into the grid.

Renewable Energy Certificates RECs Dense Forest with CO2 in the Clearing Surrounded by Trees Data Center

Data center operators purchase RECs to offset their electricity consumption from the grid, even if they don’t have direct access to renewable energy sources. By buying RECs, data center operators financially support renewable energy projects and can claim the environmental benefits associated with the renewable energy generated.

RECs are issued when renewable energy is produced and are tracked through a registry system, such as APX’s North American Renewables Registry (NAR), to ensure there is no double counting. Data centers can either purchase RECs bundled with their electricity from their utility or buy unbundled RECs separately from a renewable energy project or REC broker.

I-RECs (International Renewable Energy Certificates) are similar to RECs but are used in countries outside of North America, where no national or regional tracking systems are in place, providing a standardized and reliable means for documenting and tracking renewable energy consumption internationally.

Green Tariffs

Green tariffs are utility-offered programs that allow large energy consumers, such as data centers, to purchase 100% renewable energy directly from the utility at a fixed rate. Here’s how they work:

  1. Utility Collaboration: The data center operator partners with the local utility company to negotiate a green tariff agreement
  2. Renewable Energy Procurement: The utility company procures renewable energy, often from a specific renewable energy project, on behalf of the data center
  3. Fixed Rate: The data center agrees to pay a fixed rate for the renewable energy over a long-term contract, typically 10 to 20 years. Companies essentially pay a premium on their electricity bill to guarantee that a certain portion of their consumption is matched with renewable energy production
  4. Renewable Energy Certificates (RECs): The data center receives RECs for the renewable energy purchased, which can be used to meet sustainability goals and demonstrate the use of clean energy
  5. Grid Delivery: The renewable energy is delivered to the grid, and the data center continues to receive electricity from the grid as usual

Green tariffs offer a straightforward way for data centers to support renewable energy development without the complexities of direct Power Purchase Agreements (PPAs) or on-site renewable generation. These programs also provide long-term price stability and assist utilities in meeting renewable energy mandates.

Green Tariffs Program People Shake Hands Near Wind Turbines Renewable Energy Data Centers

For example, Facebook (part of Meta Platforms) has used green tariffs and other tools to enable over 2,600 megawatts (MW) of new solar and wind capacity in U.S. states such as Utah, Alabama, Tennessee, Georgia, and Oregon. Green tariffs allow Facebook to achieve its renewable energy goals for data centers in markets where direct contracts with renewable energy projects are not feasible.

On-Site Renewable Energy Generation

On-site renewable energy generation involves producing renewable energy directly at the data center campus, using methods such as solar panels or wind turbines installed at the facility. This approach allows data centers to generate and consume renewable energy “behind the meter”, meaning the energy is produced and used on-site rather than being purchased from utility companies through the electric grid. This strategy reduces the data center’s reliance on the electrical grid, lowers transmission and distribution losses, and decreases its carbon footprint.

Google Data Center Eemshaven Netherlands with Wind Turbines for On-Site Renewable Energy Generation
Source: Google.

Examples of on-site renewable energy generation for data centers include:

  1. Solar Photovoltaic (PV) Systems: Solar panels are installed on the rooftops of buildings or surrounding land of the data center to convert sunlight into electricity
  2. Wind Turbines: Wind turbines can be erected near the data center to harness wind energy and generate electricity
  3. Fuel Cells: Hydrogen fuel cells are being explored as a potential clean energy source for data centers. They are used to generate electricity through a chemical reaction between hydrogen and oxygen, with water as the only byproduct
  4. Small Modular Reactors (SMRs): SMRs are compact nuclear reactors that can be deployed on-site at data centers to provide reliable, low-carbon electricity. While not strictly renewable given their use of uranium as a fuel, SMRs offer a cleaner alternative to fossil fuels and can complement intermittent renewable sources like solar and wind

On-site renewable energy generation systems are connected to the data center’s power infrastructure, allowing the facility to consume the generated energy directly. Excess energy can be stored in batteries for later use or fed back into the electrical grid.

Energy Storage Systems

Energy Storage Systems (ESS) play a crucial role in integrating renewable energy into data centers. They store excess energy generated by renewable sources like solar and wind during peak production periods and release it when demand exceeds supply. This helps balance the intermittent nature of renewable energy, providing a more stable power supply for data centers. Additionally, ESS can replace diesel generators in data centers.

ESS technologies include batteries (e.g., lithium-ion), flywheels, and compressed air energy storage. Among these, batteries, specifically Battery Energy Storage Systems (BESS), are the most common. BESS store electrical energy chemically and release it as needed. They range in size from small 5-kilowatt (kW) systems to large 100-megawatt (MW) systems, with storage durations typically lasting 2 to 4 hours.

Frequently Asked Questions

Aerial View of Dense Forest with Net Zero in Transparent Sphere Floating Above Many Trees

What is the Difference Between MW and MWh in Renewable Energy?

The main difference between MW (megawatts) and MWh (megawatt-hours) is that MW represents power or capacity, while MWh represents energy.

  1. MW (Megawatts): This is a unit of power, which is the rate at which energy is generated or consumed. It represents the capacity of a power plant or the maximum output it can produce at any given moment. For example, an Amazon data center may have a renewable energy project with a capacity of 50 MW, which refers to the maximum amount of power the project can generate at any instant to support the data center’s operations
  2. MWh (Megawatt-hours): This is a unit of energy, which is the product of power and time. It represents the total amount of energy generated or consumed over a specific period, typically an hour. For example, a specific Amazon data center’s solar and wind farm may produce 250,000 MWh annually, which indicates the total energy the project is expected to generate over the course of a year to meet the data center’s energy requirements

To put it simply, MW represents the maximum rate at which a renewable energy project can generate power for a data center at any instant, while MWh represents the actual amount of energy generated over a period of time to support the data center’s operations.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing. Mary has over 5 years of experience in research and writing for Data Centers.

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