How to achieve significant growth under tougher conditions?
The data center industry is experiencing a continuously high demand, from both, Hyperscalers (such as Google, AWS, Microsoft, etc.) as well as enterprise customers, for capacities in the coming years. The growth is without alternatives since Germany is only number 27 in the world (no. 11 out of 27 EU countries) when it comes to digitization. Data center capacity is the base for all the data created by hundreds of new applications for almost every part of work and life. Therefore the potential is huge. However, strengthening regulations in Germany are bearing the risk of shifting focus to other European countries for further expansion.
Property and power – the impossible search?
We are facing increasing hurdles in developing new projects due to the scarcities of land, renewable power and grid capacities in the top tier regions. As a consequence, our timely horizon is expanding to a medium to long term planning focus of future capacities. In some cases, waiting for power availability is already exceeding 10 years, fostering alternative energy solutions in micro grids. Securing capacities and the ability to build new data centers is now the key!
Working trustfully together with municipalities, providing transparency to our market, will help educating municipal decision takers. The chance to attract new, future-oriented businesses and to position themselves as forward-thinking, with creative digital concepts, will trigger their interest in data center allocations and willingness to provide the necessary land. Low latencies are still required for business critical applications and a local data center will ensure the highest and fastest availability. The German Data Center Association is playing an important role to enable the relationships between our data center industry and governments, at all different levels.
After years of growing formats with up to 3-digit MW capacities, the above constraints might as well lead the market towards smaller edge deployments. Numerous concepts for decentralized and integrated urban locations, including smaller data centers, are in the making, still lacking the operators, yet.
EnEffG – challenge or opportunity?
The upcoming Energy Efficiency Act (EnEffG) will challenge all players in the industry. With the mandatory waste heat reuse all data centers will need to be ready to provide excess heat to external off-takers. Municipalities and district heating providers are seen as major consumers of this waste-heat. Few providers are exercising or planning heat-re-use concepts, while all operators have identical decarbonization targets to reach. Given a seamless cooperation of all stakeholders, successful heat re-use cases are possible, but the feasibility of the given quotas are strongly doubted. However, we see the first projects being implemented in metropolitan areas, where a district heating is in place. At the same time, the fairly old, high-caloric district heating grids in Germany have a limited interest to connect to datacenters with low-caloric excess heat.
Last but not least, data center operators fear the EnEffG’s setting of 1,2 as PUE target. This is relevant to all data centers going live after July 1st, 2026, including many projects currently undergoing the final planning stage. These will need to be redesigned or changed, in order to comply to the EnEffG.
HPC & AI – massive capacities needed?
With the most recent trends on the application side, there is an enormously increasing capacity demand developing. HPC as a high density, power hungry application is now used in many different industries and enterprises. Since almost a decade we are seeing some of the capacity moving to the Nordic countries, but there is a strong trend to also build up more HPC capacities in Germany again.
The other growing trend with high demand is AI. Many AI applications require the highest grade of security and data sovereignty. To reduce the risk and increase the comfort level, companies are planning to install their capacities in Germany.
Power generation – is the German energy mix set in stone?
By the end of the nuclear era in Germany, the energy mix became more carbon-heavy. Lacking hydro power and sufficient renewable power capacities in general, power from wind and solar are neither weather independent nor efficiently storable in scale, yet. As such, 100% renewable power coverage for business and private consumers in this country. Despite these facts, the EnEffG demands for 50% renewable energy use by January 1st, 2024 and 100% renewable energy use by January 1st, 2027.
An openness for new technologies and ways of power generation is key for innovative developers and data center operators. Several companies are currently developing new concepts for both, power generation and back up solutions. Amongst them, fuel cell technology running on hydrogen is one of the most discussed alternatives, these days. Concepts are under development in the data center industry and in close partnership with the energy providers NDC-GARBE is at the forefront of these.
Liquid cooling – will that help significantly?
For almost a decade, liquid cooling solutions have been discussed intensely in many different ways. Implementing direct chip cooling or immersion cooling could help to reduce the temperatures in data centers, hence lessen building heights and construction costs. Besides the higher temperature of waste heat from direct cooling, liquid cooling increases the efficiency of the heat transfer to the district heating, since losses through the extraction of energy from liquid media are much lower than from air.
Although the technology is fully developed, liquid cooling is awaiting general acceptance from cloud providers and hyperscalers to become “state of the art”. Taking the recent developments and political target settings into account – we expect this to come rather sooner than later.
Future predictions for 2024 and beyond
Despite the constraints described, it seems unlikely that Germany will lose its global role or attractiv environment. Hyperscalers’ priorities might shift to other European countries with less regulation and available resources. This could dampen the pace of German digitization. More likely we expect the local economy to stay a key demand driver and reliable generator of data. Excelerated by the need for virtualization, automation, communication, HPC as well as AI, embedded in the most secure constitutions the demand for capacities will continue to drive market growth.
There are further data center projects under development with hundreds of MW’s in the most thought-after German cities of Frankfurt and Berlin. These are mainly developed for or by Hyperscalers. In addition to that, Tier 2 locations, such as Duesseldorf, Hamburg, Nuremberg and Munich, are seeing additional new projects, mainly from enterprise users and colocation providers. All of these future capacities will add to the gravity of existing data centers.
These are the top recommendations and priorities, to successfully deliver new capacities and to supply the growing demand:
- Think medium and long term for property and power availability:
- Sustainability by design.
- Lean construction and design.
- Tailored design towards the end user needs.
- Waste heat reuse is mandatory.
- The EnEffG is setting the new standards & boundaries for Germany.
- Edge deployments will increase.
The German data center market is expecting significant growth in the upcoming years. The entire industry will contribute with innovative solutions and forward thinking concepts.