JAKARTA Along with the increasing demand for energy due to the explosion of artificial intelligence (AI), a number of old coal and gas-fueled power plants in Europe will get a new, more modern future.
Giant tech companies such as Microsoft and Amazon are starting to target these locations to be used as data centers, because they have direct access to the electricity grid and water conditioning facilities that are already available.
Big utility companies such as Engie from France, RWE from Germany, and Enel from Italy see this opportunity as a way to reduce the huge cost of closing old plants, while creating new revenue streams by establishing long-term electricity supply contracts with data center operators.
According to Bobby Total, Energy Vice President at Microsoft, the site of this old plant has all the important infrastructure, including water systems and heat recovery facilities. Lindsay McQuade, Director of Energy EMEA at Amazon, said the licensing process at an old location could also run faster as many infrastructures already exist.
For utility companies, this scheme is not just a matter of renting out vacant land. According to Simon Stanton of RWE, this is an opportunity to establish long-term business relationships that reduce risks and help finance infrastructure investment in the future.
153 Plants Will Close Before 2038
Most of the remaining 153 coal and lignite power plants in the European Union and the UK are scheduled to close before 2038 as part of a climate target, following 190 plants that have been shut down since 2005, according to NGO Beyond Fossil Fuels data.
Data centers can be an attractive source of income for utility companies, as they can negotiate long-term electricity supply contracts that support future renewable energy development.
Tech companies are said to be willing to pay premiums of up to 20 euros per megawatt-hour for low-carbon electricity, according to Gregory LeBourg of the French OVH data center operator. With the demand for data center electricity that could reach hundreds of megawatts to more than one gigawatt, this long-term contract value could reach hundreds of millions or even billions of euros.
Several companies such as Engie even plan to build an energy park that connects data centers with new renewable energy facilities. Engie himself wants to double the capacity of renewable energy and its batteries by 2030.
They have identified 40 locations globally suitable for data centers, including former coal and gas plants, such as the former Washingtonwood plant in Australia which was closed in 2017.
Apart from Ennie, companies such as EDP from Portugal, EDF from France, and Enel from Italy are also marketing their old power plant locations to be used as data centers.
Electric Access Speed
The main advantage for technology companies is speed. In Europe, waiting times for power grid connections could reach more than a decade. On the other hand, old plants offer faster access to power grids and water conditioning systems.
Data from the Synergy Research Group shows that the capacity of data centers in Europe is far behind compared to the United States and Asia, mostly due to slow licensing and connection to the power grid.
According to Tom Glover of property company JLL, they are working on several conversion projects, including a data center with a capacity of 2.5 GW at a former coal plant in Germany as well as four other locations in the UK for large technology clients.
Another example, the British relations company is looking for partners to develop part of a former coal plant site in Yorkshire, which is now partially converted into a biomass plant. The location still has unused water conditioning equipment.
The EDF has also selected developers for two locations at gas plants in central and eastern France.
Sam Total from the S&P Global Commodity Insights concluded that technology companies are willing to pay more for projects that can run faster as competition in the industry is very tight.
“The phrase we continue to hear is speed to power speed to get electric power,” he said.
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