Energy and ESG (environmental, social, and governance) investments are becoming more prevalent in consideration of data center investment. As technology continues to advance, along with the growth of data centers and other facilities that consume significant amounts of electricity, the energy grid is increasingly strained. The rising energy cost has become a big investment issue for data center owners and managers.
Energy use and consumption are typically reported in terms of their carbon emissions, environmental impact, and financial impacts on companies. Data center managers have begun to pursue energy efficiency measures to cut costs, including implementing technologies that increase the amount of energy generated from renewable sources. Data center owners also have a growing awareness of the economic impact on their businesses of environmental factors such as sustainability and climate change.
Energy and ESG Correlation
Data center owners and operators have started considering environmental, Social, and Governance (ESG) factors in investment decisions. These factors are increasingly important in determining whether or not to invest in a particular project and how much should be invested in it. ESG issues tend to be less quantifiable than energy considerations, so some industry analysts recommend using more tangible metrics such as energy efficiency and carbon emissions as indicators for how much attention to consider ESG factors.
Energy and environmental stewardship are no longer niche concerns in the data center industry. In 2018, both issues were increasingly crucial to investment dollars and corporate reputation. Many institutional investors are considering energy usage as a criterion for investment decisions. For example, the University of California aims to have 100% of its energy come from renewable sources by 2025.
The concept of sustainability is complex; it’s essentially an evaluation of whether a company follows practices that align with current environmental concerns and regulations while considering environmental impacts over an extended period. Sustainability efforts within data centers include reducing carbon emissions and contributing to renewable energy generation’s endless efficiency.
As a result, many companies have started to incorporate environmental issues into their business plans. A recent study showed that approximately one-fifth of large companies consider sustainability to be a “very significant” or “significant” factor in selecting an energy provider.
Among the most important factors considered were whether the provider purchases renewable energy and uses renewable energy sources in its operations—and according to some experts, this trend will only continue to grow.
A survey conducted by GreenBiz found that nearly two-thirds of executives believe that their company’s supply chain will have specific sustainability goals within five years.
Why focus on Energy and ESG as significant factors in data center investment?
The first reason is because of the high cost of electricity. In the United States, it is reported that more than 70 percent of the total cost of running a data center is energy cost. The number could be higher in China because the labor cost is much lower than in the United States. This is why many data centers are moving to developing nations, where electricity costs are still low compared to those in developed countries.
Energy costs are one of the highest costs in any data center. Data centers must manage energy intelligently to avoid unnecessarily high utility bills, which can significantly cut profits. They can do this through various means – through an intelligent power distribution panel, power supply unit, and cooling system.
The second reason for focusing on data center energy management is that it has been proven that data centers with effective energy management perform better. The reason is simple: if a data center uses less electricity, it means more power will be available for its critical computing equipment. This means faster and more reliable computing power.
The other significant cost of a data center is its operation. Computer systems require excellent protection from outside intruders and the internal equipment itself. The operation of a data center must be protected by physical security, fire safety, and environmental controls (HVAC).
To stay competitive in the cloud computing arena, companies need to be aware of their carbon footprint and how they can mitigate it with renewable energy sources or carbon offsets.
Low-carbon emissions will influence the data center market.
Due to the rapid growth of cloud computing services and the need for companies to process and store big data, the demand for data centers has increased dramatically worldwide. In developed countries with a higher level of emission control in power generation, the high cost of electricity has made it challenging to develop new data centers. Although many enterprises are willing to invest in new equipment, they are more inclined to choose lower-cost providers based on low energy prices.
The risks to consider
To fully understand the risks associated with energy usage and carbon emissions related to a decision to invest in a particular data center space or building design, data center operators must evaluate relevant energy benchmarks and geographic locations (in terms of climate).
The risks to consider:
- Rising electricity rates.
- Carbon footprint.
- Reduced hardware life span.
- Lack of redundancy.
- Potential for increased downtime
Data centers are expensive to build and maintain: they require high-level security, high-quality design with redundancy in mind, and a general level of control over all aspects of the data center’s operation. These factors contribute to their high cost to run.
Organizations like Facebook, Google, and Apple have stated their desire to run data centers on 100 percent renewable energy by 2027. Although the adoption rate for these initiatives varies depending on the organization, it is becoming more apparent that investment in sustainable energy sources is a growing trend in large and small data center operations.
IT leaders must consider energy and ESG factors when planning new data centers.
The EPA recently announced that it would consider energy consumption and greenhouse gas emissions when determining which facilities will be subject to its proposed regulations on air pollution. This means companies need to carefully consider their power sources and how they will provide cooling to their servers.
Data center owners understand the need to be environmentally friendly, but they should also take into consideration the reputation they have with their customers. If a company has a reputation for being green, it can help increase loyalty among its customers who care about those things.
IT leaders must consider energy and ESG factors in their data center planning. There are ways to consider energy efficiency in your data center planning. For instance, you can power your data center with renewable energy sources or make it as efficient as possible. You can also choose to invest in an ESG index fund or a company’s stock only if it has a strong ESG score.
To measure data center energy efficiency, you need to know how much energy you’re using and then compare this number with how much energy your servers need. The first step can be doing an overall audit of your servers. You will want to know what amount of wattage each item uses and what kind of environment that item is used in.
The next step is installing a monitoring system on your equipment. You will be able to track each device’s real-time usage and see if any problems or issues need immediate attention. You also need to look at your cooling system, see what kind of power it’s using, and make sure it’s as efficient as possible.
Growing demand for the green data center.
The green data center is one of the most critical elements of a business’s commitment to environmental stewardship. According to recent studies, more than half of all companies worldwide are committed to managing their energy use more efficiently. With energy prices at record highs, it’s no surprise that companies are looking for ways to cut costs and minimize their carbon footprint.
The green data center has become increasingly popular for businesses seeking to reduce their environmental impact. As companies have become more aware of the threats facing our planet and its resources, they’ve started focusing on ways to reduce their consumption and waste output.
The green data center is one way many businesses manage their environmental impact—by reducing greenhouse gas emissions, installing clean power sources like wind and solar, and adopting responsible policies that encourage sustainability among employees and customers.
The demand for green data centers is proliferating, with a CAGR of 19.40% from 2021 to 2022. This growth is primarily driven by the increased awareness of the potential environmental benefits and cost savings that green data centers offer.
This demand ensures that green products and services will play an integral role in greening the data center industry.
Keeping your data center at its peak efficiency is about more than just reducing operating costs. It’s also about ensuring the longevity of your IT infrastructure investments. Investing in energy-efficient infrastructure now can also help save on maintenance and replacement costs by reducing factors that can lead to costly failures—such as downtime, hardware damage, and even avoidable data loss.
Green data centers are on the rise. The green data center is a data center that is designed with the environment in mind and strives to reduce its overall impact on the environment through energy-efficient equipment and sustainable practices. The green data center is not focused on just one aspect of the environment, such as recycling. Instead, it considers all aspects of its operations and how it affects the environment.
Read More: Data Center Investors Should Look For Its Efficiency