AI is sparking a data centre boom – now the sector must meet new demands, writes Lisa Duignan, director and data centres sector lead, Europe, at Turner & Townsend
As society’s reliance on data has grown exponentially, so too has the need for data centre space. Recent surges in the development of generative AI have accelerated this trend, escalating the demands on the infrastructure that enables everything from running conference calls to e-commerce.
The pace of growth across the sector is proving to be a double-edged sword. The amount of power required to run and cool AI data centres is pushing energy availability to the limit. Bottlenecks are forming as demand outstrips supply of both skills and equipment.
As these challenges become more acute, there is mounting pressure on supply chains and developers to innovate and find new ways to unlock faster delivery.
Tackling power pressures from AI data centres
While this is not a new issue, spiking demand and questions around sustainability have thrown an intense spotlight on the topic of power availability in recent years. Turner & Townsend’s Data Centre Cost Index 2024 (DCCI) found that 92% of sector leaders see power availability as more important than the location of new projects, with clients’ greatest concern now being energy consumption and efficiency.
As more projects compete for connection to grids, power solutions will be crucial both to meet corporate and consumer demand and to keep mixed public opinion around data centre development on side.
Tokyo, the world’s most expensive market in which to build a data centre, at US$14.3 per watt, has seen recent demonstrations take place against data centre development due to concerns around energy usage and environmental impact.
Major players such as Microsoft and Google are working to navigate this challenge by committing to generate their own clean power to fuel their data centres, including exploring nuclear power in the form of small modular reactors (SMRs).
Elsewhere, clients are considering the merits of technology such as digital twins and alternative cooling techniques to improve energy efficiency. Scandinavian markets are benefiting from the latter, as developers leverage the colder climate and easier access to renewable energy.
This demand is being reflected in higher prices – our data shows that Oslo, Copenhagen and Stockholm have jumped to the ninth and joint 10th most expensive global markets in which to build a data centre.
It will take time, investment and collaboration across public and private sectors to alleviate issues around energy generation and efficiency in the data centre market.
In the meantime, many developers are looking to newer markets in search of more availability in power grids.
Unlocking supply chains
We’re seeing this trend bring its own challenges. Strong competition for skills and materials continues to push costs upwards. This is particularly true in newer markets, where less mature supply chains rely heavily on importing. In Lagos, Nigeria, for example, the cost of building a data centre is comparatively high at $US12.0 per watt, as a result of significant import expenses for labour and materials.
Even within more established markets, the battle for resources is hot. With almost 80% of respondents to Turner & Townsend’s DCCI survey reporting delays to manufacturing or delivery of equipment, clients must build a solid understanding of global capacity and risks in the early planning stages of a project.
Making the most of data and digital tools can help by providing developers with clear visibility of project performance, capabilities and risks across the wider supply chain.
Worldwide AI-focused chip shortages are just one reminder that the data centre supply chain is a seller’s market and strengthening supplier relationships is key.
Clients also need to focus on balancing risk and reward in a more appropriate way. This can help mitigate the impact of supply chain instability and insolvency, and position them as a customer of choice.
The role data plays in our society means that navigating the current challenges is not just about being able to capitalise on commercial opportunities; it is crucial to supporting public and private life, from driving economic growth and productivity to powering scientific and medical research.
The sector must work together – across the supply chain and with policymakers and governments – to innovate and build the technology and skills required for the next phase of growth.
