Governments worldwide are upping regulations on the development of data centres amid concerns over energy usage and the potential repercussions on power infrastructure and national climate targets.
The Financial Times reports that nations including China, Singapore and Ireland have imposed restrictions on new data centres to align with more stringent environmental standards.
Ireland — recognised as a pivotal location for cloud computing firms due to its favourable tax regime and strategic access to global internet connections — is facing the most acute challenges.
The country's energy and water regulator's 2021 decision to restrict new data connections has led to the rejection of permits for new projects in Dublin by data centre operators Vantage, EdgeConneX and Equinix (NASDAQ:EQIX).
Germany and Loudoun County in Virginia, United States, have also adopted strategies to mitigate the environmental impact of data centres. These include limiting permits in residential zones and mandating contributions to renewable energy and waste heat reuse.
Exacerbating the situation are the burgeoning energy demands of artificial intelligence (AI) with the United States hosting a significant portion of the world's data centres.
AI encourages growth of renewables
Escalating power consumption from the rise of AI has led to increased scrutiny of tech giants Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) to engage more actively in renewable energy generation and improve efficiency. Investments in wind and solar energy are underway, and Microsoft is also exploring nuclear options to power its facilities.
Barclays (LON:BARC) analysts warn that the implications of rising internet usage on power grids are yet to be fully accounted for by governments, suggesting a trend towards global restrictions. This could impact the $220 billion data centre and cloud industry, which is anticipated to be worth $418 billion by the decade's end amid soaring data demands.