Data Centres in Ireland – Energy Concerns

Our Data Centres team provides an overview of the current data centre market in Ireland, focusing on the issue of their energy consumption and setting out the options for powering these centres.

Energy constraints for data centres

According to a study by Bitpower in October 2024, €15 billion has been invested in building data centre facilities in Ireland. The study found that a future construction pipeline of €8 - €10 billion is at risk due to energy constraints and planning delays. The study outlines that data centres in Ireland are using around 6TWh of electricity per year, out of Ireland’s total annual electricity demand of 28TWh. These findings coincide with the Irish Central Statistics Office’s calculations that data centres used approximately 21 percent of Ireland’s electricity in 2023.

The problem at hand is not unique to Ireland, however. To keep pace with the rapid adoption of AI in the USA, data centre power needs are projected to roughly triple by 2030, rising from 3–4% of total US power demand today to 11–12%. Similarly, Europe’s data centre power demand is also expected to triple by 2030, according to McKinsey.

Connection agreement constraints

The substantial electrical load, both current and anticipated, required by Irish data centres has already triggered a significant regulatory response. The Commission for the Regulation of Utilities (CRU) published a decision in 2022 regarding the future regulation of the electrical connection of data centres in Ireland. The decision was effectively the first major intervention to regulate the way that electrical load, as opposed to electrical generation, can access the Irish grid. Under this policy, the electricity system operators are required to apply the following criteria on a case-by-case basis to determine whether a connection offer should be made to an applicant data centre:

• The location of the data centre applicant, relative to whether it is within a “constrained” or “unconstrained” region of the electricity system, and
• The ability of the data centre applicant to provide flexibility in their demand by reducing consumption when requested to do so by the relevant system operator in times of system constraint. This criterion includes both with, and without, the use of dispatchable on-site generation and/or storage, which meets appropriate availability and other technical requirements as may be specified by the relevant system operator.

Application of this decision, including as to which areas in Ireland are regarded as “constrained”, is reviewed on an ongoing basis.

It has been reported that Ireland’s electricity transmission system operator, EirGrid, will not accept any new connection agreements for data centres in the greater Dublin area until 2028, due to a lack of capacity. More recently, Eamon Ryan, the outgoing Minister for the Environment, Climate and Communications, commented that there were physical constraints that would prevent new data centre connections until the end of this decade.

Aside from issues of electricity availability, the further development of data centres has also been the subject of debate due to its implications for Ireland’s ability to reach the targets set under its Climate Action Plan. As part of setting out its approach to these issues, the Government published a “Statement on the Role of Data Centres in Ireland’s Enterprise Strategy” in July 2022. This Statement included a set of national principles or “preferences” for data centre development that aligned with national policy.

Drain on the national grid – examples of renewable energy solutions

To address the current drain on the national grid, many in the data centre industry voice the need for any investments in data infrastructure to proceed alongside investments in wind and solar electricity generation capacity. For example, in 2024, Microsoft signed a power purchase agreement to procure energy from the 30MW Lenalea Wind Farm in Co. Donegal. This initiative supports Microsoft’s goal of powering its data centre operations with 100 percent renewable energy.

There are clear drawbacks with the use of renewable electricity by a data centre. The primary issue is the intermittency of energy, which must be balanced against the 24/7 baseline operation of data centres and the electricity needs of the wider grid. Wind power varies constantly and is dependent on wind speed and atmospheric conditions. Similarly, solar power is available only during daylight hours and, even then, will vary depending on season and cloud cover.

Electricity storage solutions, including the use of batteries, can help remedy the issue of intermittency. However, sceptics are not convinced that renewable energy alone can provide adequate power to sustain the requisite development of data centres to power the digital economy and the ever-increasing demands of AI. In addition, Ireland’s Climate Action Plan commits the Irish Government to review its policies on data centre growth to keep it in line with emissions and renewable energy targets.

Alternatives to wind and solar

The growth of data centres and the adoption of AI rely on the availability of electric power, so what can be done in Ireland to address the issue?

Hydrogen

Hydrogen has been described as a ‘zero emissions fuel’, as the cells do not produce carbon emissions or other pollutants. Hydrogen could be used for the storage of energy generated from renewable sources, that is then transported and stored before being used to power data centres. In this context, hydrogen could replace diesel generators, as the cells convert stored green hydrogen to electricity, producing no more than pure water as a byproduct.

Ireland’s adherence to the EU’s Gas and Hydrogen Markets Directive (Directive (EU) 2024/1788) and Regulation (EU) 2024/1789, as well as international requirements, will determine whether the hydrogen solution ultimately deployed qualifies as low-carbon or green hydrogen. Ireland has until mid-2026 to transpose Directive 2024/1788 into national law.

Natural gas

To overcome local power constraints, many Irish data centres are exploring the use of on-site natural gas-fired electricity generation. One of the obvious issues with using natural gas to power data centres is that this would make it more difficult for Ireland to meet its climate-related targets. It is worth noting that Gas Networks Ireland, the operator of the Irish natural gas grid, is not currently providing new natural gas connections pending finalisation of the CRU’s Large Energy Users Connection Policy.

Nuclear

In the USA in 2024, Google signed a deal to use small nuclear reactors (SMRs) to provide 500 MW of 24/7 carbon-free power. Similarly, Amazon entered into an agreement with Energy Northwest to develop four SMRs, which are expected to provide up to 960 MW of capacity. Data centre developers in the UK and US are also developing their own designs. However, in Ireland, the Electricity Regulatory Act 1999 bans the use of nuclear fission for electricity generation. It may be worth revisiting this outright ban, as the minimum efficient scale of the technology continues to decrease, and the technology is deployed in comparable jurisdictions without adverse safety events.

Battery energy storage systems

Utility-scale battery technology may assist with improving the efficient application of renewable energy in this space. Battery storage systems can be charged during periods of plentiful, cheap renewable electricity and then used to run the host data centre during periods when renewable electricity is unavailable. However, batteries remain prohibitively expensive when priced against the objective of completely shielding a data centre from the consequences of renewables intermittency.

Comment

There are a variety of energy options for powering data centres. The capacity constraints in the Irish electricity grid and Ireland’s commitment to its Climate Action Plan highlight the need for action. The focus should be on facilitating the development of new sources of renewable electricity, such as wind or solar power, to support the energy needs of data centres.

However, there is no avoiding the fact that the 24-7 requirements of data centre operation are fundamentally incompatible with currently available renewable electricity technologies. Whether, and how quickly, this incompatibility can be resolved, will determine whether Ireland can continue to claim leadership in its ability to host data centres.

For more information and expert advice, contact a member of our Financial Services or Energy teams.

The content of this article is provided for information purposes only and does not constitute legal or other advice.