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14 Jan 2022

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Will diesel be the savior of the European data center market?

The European data center market will have another record year in 2022. According to a report published late last year by CBRE, more than 394MW of new supply has come online in 2021. Most of the growth is occurring in the FLAP markets: Frankfurt, London, Amsterdam, and Paris. Total supply in these markets increased to 2.6GW. CBRE expects to see fast growth in 2022 and 2023 as well.

However, this growth comes at a cost. In the FLAP markets, power suppliers are barely able to meet the electricity needs of added data centers. The issue is not really a lack of electricity. With a large number of traditional power plants coupled with large-scale wind and solar installations, energy supply isn't the biggest concerns for data center companies in Europe. The main problem is that grids are unable to expand their transmission capacity or build substations fast enough.

An additional issue complicating the FLAP markets is the electrification that is taking place in many European countries - in companies and in households. Due to the Paris and Glasgow agreements, many countries have committed to aggressive sustainability goals. The result is that large parts of European societies and economies are shifting from oil, coal, and gas to electricity as their major energy source. Add to that the fast growing digitalisation of Europe economies. In the coming years, availability and demand of electricity will be more and more out of balance.

Several trade associations (in Dutch) and companies have warned about the current state of the electricity markets, in the FLAP markets but in other markets and countries as well. Companies, universities and government agencies are urged to prepare themselves for possible power outages. They could very well face delays to their digital transformation plans if they don't. For many cases, this means using diesel generators to provide backup power during outages. Europe is speeding up its energy transition while at the same time, the digital transformation in many European countries is requiring record numbers of data centers. It is kind of ironic that a highly polluting energy source like diesel may very well have to come to the rescue.

Photo credit: Aggreko

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