Watt’s the rush? Data centres plugged into the grid race!

Data centre developers are newer to the pains of obtaining grid connections. For developers of renewable generation and battery storage systems, the fight to get connected to grid networks is a familiar battle. Grid networks around the globe are often creaking at the seams due to decades of underinvestment.

While renewable generation projects have been attracting investment for years, the infrastructure that supports their deployment has failed to keep up. Often, this is because the monopoly infrastructure is state-owned or more stringently regulated, with the investment required to deliver planned expansions and reinforcements requiring approval from regulators or governments. This means investors are facing a host of issues in trying to connect their projects, including:

• Long delays due to required grid reinforcements;
• Supply chain pressures from global demand resulting in escalating costs and further delays;
• Regulatory uncertainty, with many jurisdictions assessing and changing prioritisation and connection of renewables, and also treatment of batteries that require both export and import capacity. 

This is the state that data centre developers have found the market in, and they are likely to face the same issues. With ever more power-hungry data centres and hyperscalers being planned to deal with the vast quantities of data that our modern world runs on, and the rise of AI which has exponentially increased that need, grid capacity and securing power is an issue that can put a spanner in the works of the best laid plans.  

This is clearly demonstrated by recent developments in Great Britain, with the system operator carrying out a long overdue grid connection reform – a year long process that halted M&A activity and project development activities industry wide.

Of course, there are solutions to grid constraints. The classic example is connection to private wire generation and distribution systems, ones that incorporate batteries to ensure that back up power is available. While such measures may not completely avoid the need for a grid connection, they can vastly reduce the import capacity required, allowing data centres to come online sooner – by a matter of years rather than months.

Data centre developers, alongside their advisors, should clearly be considering grid access and power purchase arrangements alongside their general equipment manufacturing lead times and construction timelines. It is key to understand the regulatory and legislative landscape in the relevant jurisdiction so that arrangements can be made within the bounds of local law. We are well placed to advise, having worked across a number of jurisdictions, particularly in relation to project development and power purchase arrangements. 

If you’d like to discuss any of these issues further, get in touch with the authors or your usual Clyde & Co contact.