Tackling the economic and sustainability realities of long-term energy supply security

Written By

Rob Elder
Vice President

at

Bulk Infrastructure

From war in Europe to the climate emergency, sustainability and price volatility are challenging everyone to think differently about power as Rob Elder, vice president, Bulk Data Centers explains.

There could be no better illustration of the geopolitical complexities of energy policy in 2022 than a compromise deal being struck by EU member states to end Russian oil imports by sea but not through pipelines. The goal of course is to prevent indirectly funding Russia’s war in Ukraine.

Energy security has taken over from the Covid-19 pandemic as the number one short to medium economic vulnerability for Europe.

When it comes to long term planning this leaves companies facing some tough choices. This is most apparent in Germany, where manufacturing is the engine of its economy.

Germany’s industrial manufacturing sector accounts for over 200 TWhs or around 41 per cent of its electricity consumption. For context 5.5 million people in Germany work across the huge manufacturing sector. Trading Economics states: “Manufacturing of machinery and equipment accounts for 12 per cent of total production; motor vehicles, trailers, and semi-trailers (12 per cent); basic metals and fabricated metal products (10 per cent); computers, electronic and optical products, and electrical equipment (10 per cent).”

In the current climate that strength has also exposed companies to energy market price shocks and supply volatility. Around 15 per cent of German electricity is produced using natural gas. And now coal is back. It has been reported that because of the current situation Germany and the rest of the EU are retaining coal powered generation capacity and may become more reliant on burning more coal than planned over the short term. Currently in Germany there are around 9 GWs of coal power plant capacity and 1.6 GW of oil power generation capacity.

According to Euractiv.com (Fearing Russian supply cuts, Berlin puts oil and coal power plants on standby, 24th May 2022): “On 18 May, EU Green Deal chief Frans Timmermans admitted that the EU had “no choice” but to continue burning coal…Germany may have to do just that. While Berlin wants to stop using coal entirely from 2030, it will now pay coal power plant operators up to €1 billion a year to keep plants at the ready.”

An energy policy dilemma emerging in Germany

For good measure, the country has a strong and growing sustainability policy agenda on the use of renewables and phasing out fossil fuel dependence in order to combat climate change. At the same time, German production line operators who want access to sustainable electricity are stuck to a grid heavily dependent on coal and gas for security of supply.

So, what is the reality for the long-term supply of sustainable energy in Germany and other exposed European economies? How can German companies balance power supply, environmental and economic sustainability?

In a complex energy market one way for companies to address the greenness of their energy supply is to buy MWs and TWs of Guarantees of Origin certificates, most of which come from Scandinavia. Many German companies have taken this option.

Is lift and shift an option for more sustainably powered German manufacturing?

German and other European companies seeking sustainable solutions are unlikely to resort to the wholesale offshoring of their production facilities. Where would they go?

But what may be true for fixed factory and plant infrastructure is not necessarily true for data centres. Some firms already recognise that when it comes to data, they can seek the best combination of sustainability and energy price options to host their IT infrastructure. This is especially true where data sovereignty is not a concern.

At the front and centre of any decision on a data centre location, is of course the issue of security of supply. Clearly nowhere in the world is completely immune to energy supply threats or detached from the global energy market. That said, some territories such as Norway have a more sustainable energy profile, producing a surplus of renewable energy.

In 2020 Norway had an electricity production record of 154,2 TWh from over 1600 hydropower plants with a combined capacity of 136.4 TWh accounting for 90 per cent of its power production. Fifty-three wind farms produce 13.1TWh per year and account for 6.4 per cent of the country’s electricity. Thermal energy produces 3.4TWhs and solar around 40MW. The Norwegian government recently announced its commitment to enhance offshore wind farm development by increasing the number of wind farms to 1,500 by 2040. These projects will produce 120TWh of electricity.

According to Jovita Januskeviciute, Research Analyst at DC Byte, Norway’s data centre market has grown 16 per cent in the last five years to around 1.3GW and has the potential to grow by more than 60 per cent by 2027.

Navigating the storm

Electricity security vulnerabilities and supply shocks, such as those caused by the war in Ukraine have pushed dependence on Russian oil and gas onto the front pages.  Other vulnerabilities that companies must consider are long term. The large-scale energy sector transition required to meet climate change targets for cutting emissions by 2025, 2030 and 2040 means thinking in terms of decades. 

Energy intensive sector companies exposed to electricity price shocks and supply volatility issues can never be completely insulated from outside forces. Companies seeking long term green power alternatives without sacrificing connectivity for their scalable workloads, are looking north to firms such as Bulk. Just recently we welcomed Genesis Cloud, a German cloud provider for flexible performance-intensive workloads to our NO1 campus in Southern Norway to host their expanding cloud platform.

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