Are power purchase agreements making data centres cleaner?
The latest is a letter penned by more than 100 UK parliamentarians, including a former secretary of state for defence, urging ministers to impose tougher regulation on the most powerful AI systems.
Aside from these worries, concerns persist about the environmental impact of data centres.
The tech industry’s rejoinder has been to set up power purchase agreements (PPAs) to meet their data centres’ electricity needs from renewable sources.
Google hit the headlines last year when it announced a PPA would take 100MW of power from the Moray West wind farm in Scotland to match the electricity needs of the new 100MW data centre in Waltham Cross, Hertfordshire.
These kinds of PPA arrangements can incentivise the growth of renewables by creating a source of capital expenditure for such developments, says Cesar Ruiz, a doctoral researcher at Exeter University.
“Through the market-based PPA, you can create a PPA with a generator that is physically really far from the point of demand,” he says.
Malavika Gode, a senior advisory associate at Aurora Energy Research, says PPAs can provide renewable assets with an additional route to market.
“It provides them with a bit more diversification in income,” she says, noting how a renewable generator may have a Contract for Difference for part of its capacity, and a PPA for the rest.
Problems with PPAs
But there are two problems with the use of such PPAs. That’s according to Foxglove, which campaigns on the environmental and social impact of technology, including the sustainability of data centres.
The first and most obvious point is that renewable generation is intermittent by its nature because wind doesn’t blow and sun doesn’t shine the whole of the time, argues Dr Tim Squirrell, head of strategy at Foxglove.
Data centres, however, particularly those housing large language models for training artificial intelligence, are meant to run around-the-clock, 365 days a year. At a public inquiry into plans for a new data centre in Buckinghamshire, which is understood to be lined up for occupation by Amazon, the scheme’s agent justified the inclusion of a back-up diesel generator on the grounds that it is “critical” that the facility is constantly online.
On top of this, congestion on the grid means that much of the renewable power being generated in places like Scotland cannot be transported to sites in the Southeast of England, where Google’s data centre and many like it are located, Foxglove says.
This means that when the renewable energy provided by a PPA is not being generated, the data centre will be reliant on a grid that is still far from running on 100% low carbon electricity.
Gode agrees. “In the UK, you have loads of wind in the north, like in Scotland. Even if you have loads of renewables, if you can't push electricity physically to the south, then you still have to have gas generation.”
Barny Evans, director of sustainability and ESG at town planning consultancy Turley, says a data centre that has signed a PPA with a solar farm will only be able to rely on power from this source of generation for a limited period of the year.
“There is maybe a couple of thousand hours a year where that correlates to the energy demand (from the data centre). Most of the time, it's not doing anything,” he says.
There are “valid concerns” around how data centres are using PPAs organised on the basis of annual usage, says Gode. “You might be buying credits to match your demand but you're still consuming gas power.”
Offering PPAs that match the time when electricity is generated and consumed provide a solution, she says.
A role for time-matched contracts
Under this kind of agreement, the PPA would be designed so that every hour of the user’s demand would be matched with an hour of green power supply, Gode says. “If you had timestamped certificates, then you wouldn't need to connect your data centre physically to the wind or solar farm. You could buy through the grid but you could have the certificates and the PPA contracts to back up the fact that every hour has been matched with one unit of green.”
Such contracts are far from the norm in the PPA market, and they are not being offered by many suppliers, she adds.
But these kind of PPAs have been used for projects supported by the government’s Hydrogen Allocation Rounds scheme. Time-matched PPAs enable those receiving support for powering electrolysers, which split water into hydrogen and oxygen, to show they are using green electricity.
And several hyperscalers are interested in these time-matched PPAs, says Gode.
While time-matched PPAs may help to get developers and operators off the hook over accusations of greenwashing, they are an “expensive” option, she says: “You have to have a lot of solar and wind in your portfolio.”
Having solar and wind generation across different regions makes such arrangements easier, Gode says. “If you own or were contracting with a large portfolio, you might not have wind in Scotland and maybe you have onshore wind in East Anglia or solar at the same time.
“The first 50% to 70% of hours are relatively easy to match. But then as you get towards 100%, the cost of each incremental hour that you have to match is going to be higher, because there are some hours when there just isn't a lot of geographical correlation, so the cost goes up.”
Totally time-matching data centres’ demand with low-carbon generation does not appear to be feasible yet, Gode says: “You could have 80% fairly easily, and then maybe 90% would be expensive but still possible. Beyond 90% at the moment seems unlikely because of the cost.”
What could help this approach work is that corporates already tend to report their emissions in real time, says Evans. “You'll see those big holes because generators are over-generating sometimes, and under-generating at others.”
Another solution, Gode says, is to have batteries on site, which could be charged when the share of renewable generation on the grid is high. However, again, this is a relatively expensive option for developers.
It could help too if biomass is considered a source of green electricity supply because this can generate on demand, like fossil fuels, she adds.
In a report recommending approval for the Buckinghamshire scheme, the planning inspector George Baird responds to environmental concerns about data centres by pointing to the government’s recognition that they are fundamental to the functioning of society and the economy.
However, the government should take a closer look at where data centres are getting their energy from, says Squirrell: “We don't think the government is paying enough attention to the demand that this is likely to create on the grid, given that we're looking at something that at a stroke adds several percentage points onto the national demand.”
Aside from these worries, concerns persist about the environmental impact of data centres.
The tech industry’s rejoinder has been to set up power purchase agreements (PPAs) to meet their data centres’ electricity needs from renewable sources.
Google hit the headlines last year when it announced a PPA would take 100MW of power from the Moray West wind farm in Scotland to match the electricity needs of the new 100MW data centre in Waltham Cross, Hertfordshire.
These kinds of PPA arrangements can incentivise the growth of renewables by creating a source of capital expenditure for such developments, says Cesar Ruiz, a doctoral researcher at Exeter University.
“Through the market-based PPA, you can create a PPA with a generator that is physically really far from the point of demand,” he says.
Malavika Gode, a senior advisory associate at Aurora Energy Research, says PPAs can provide renewable assets with an additional route to market.
“It provides them with a bit more diversification in income,” she says, noting how a renewable generator may have a Contract for Difference for part of its capacity, and a PPA for the rest.
Problems with PPAs
But there are two problems with the use of such PPAs. That’s according to Foxglove, which campaigns on the environmental and social impact of technology, including the sustainability of data centres.
The first and most obvious point is that renewable generation is intermittent by its nature because wind doesn’t blow and sun doesn’t shine the whole of the time, argues Dr Tim Squirrell, head of strategy at Foxglove.
Data centres, however, particularly those housing large language models for training artificial intelligence, are meant to run around-the-clock, 365 days a year. At a public inquiry into plans for a new data centre in Buckinghamshire, which is understood to be lined up for occupation by Amazon, the scheme’s agent justified the inclusion of a back-up diesel generator on the grounds that it is “critical” that the facility is constantly online.
On top of this, congestion on the grid means that much of the renewable power being generated in places like Scotland cannot be transported to sites in the Southeast of England, where Google’s data centre and many like it are located, Foxglove says.
This means that when the renewable energy provided by a PPA is not being generated, the data centre will be reliant on a grid that is still far from running on 100% low carbon electricity.
Gode agrees. “In the UK, you have loads of wind in the north, like in Scotland. Even if you have loads of renewables, if you can't push electricity physically to the south, then you still have to have gas generation.”
Barny Evans, director of sustainability and ESG at town planning consultancy Turley, says a data centre that has signed a PPA with a solar farm will only be able to rely on power from this source of generation for a limited period of the year.
“There is maybe a couple of thousand hours a year where that correlates to the energy demand (from the data centre). Most of the time, it's not doing anything,” he says.
There are “valid concerns” around how data centres are using PPAs organised on the basis of annual usage, says Gode. “You might be buying credits to match your demand but you're still consuming gas power.”
Offering PPAs that match the time when electricity is generated and consumed provide a solution, she says.
A role for time-matched contracts
Under this kind of agreement, the PPA would be designed so that every hour of the user’s demand would be matched with an hour of green power supply, Gode says. “If you had timestamped certificates, then you wouldn't need to connect your data centre physically to the wind or solar farm. You could buy through the grid but you could have the certificates and the PPA contracts to back up the fact that every hour has been matched with one unit of green.”
Such contracts are far from the norm in the PPA market, and they are not being offered by many suppliers, she adds.
But these kind of PPAs have been used for projects supported by the government’s Hydrogen Allocation Rounds scheme. Time-matched PPAs enable those receiving support for powering electrolysers, which split water into hydrogen and oxygen, to show they are using green electricity.
And several hyperscalers are interested in these time-matched PPAs, says Gode.
While time-matched PPAs may help to get developers and operators off the hook over accusations of greenwashing, they are an “expensive” option, she says: “You have to have a lot of solar and wind in your portfolio.”
Having solar and wind generation across different regions makes such arrangements easier, Gode says. “If you own or were contracting with a large portfolio, you might not have wind in Scotland and maybe you have onshore wind in East Anglia or solar at the same time.
“The first 50% to 70% of hours are relatively easy to match. But then as you get towards 100%, the cost of each incremental hour that you have to match is going to be higher, because there are some hours when there just isn't a lot of geographical correlation, so the cost goes up.”
Totally time-matching data centres’ demand with low-carbon generation does not appear to be feasible yet, Gode says: “You could have 80% fairly easily, and then maybe 90% would be expensive but still possible. Beyond 90% at the moment seems unlikely because of the cost.”
What could help this approach work is that corporates already tend to report their emissions in real time, says Evans. “You'll see those big holes because generators are over-generating sometimes, and under-generating at others.”
Another solution, Gode says, is to have batteries on site, which could be charged when the share of renewable generation on the grid is high. However, again, this is a relatively expensive option for developers.
It could help too if biomass is considered a source of green electricity supply because this can generate on demand, like fossil fuels, she adds.
In a report recommending approval for the Buckinghamshire scheme, the planning inspector George Baird responds to environmental concerns about data centres by pointing to the government’s recognition that they are fundamental to the functioning of society and the economy.
However, the government should take a closer look at where data centres are getting their energy from, says Squirrell: “We don't think the government is paying enough attention to the demand that this is likely to create on the grid, given that we're looking at something that at a stroke adds several percentage points onto the national demand.”
