Datacenter Developer Says Power Issues Holding Up New Builds

One of the UK's major commercial property developers says it would be pumping investment into new datacenters if it could just secure the energy supply needed for those facilities, reflecting a growing problem worldwide.

David Sleath, chief executive of Segro, said in an interview with The Times that he would be investing "hundreds of millions and more" in building new bit barns, but for the issues with getting the projects wired up to the national grid.

"The single biggest constraint is access to power," Sleath said. He claimed that this is a perennial problem, but one that is becoming a bigger issue now because it's holding up funding in critical sectors that the current government believes are important to "the UK success story."

In some cases, Segro's development teams face a wait of "a number of years" for local substations to be upgraded in order to increase grid capacity, Sleath said. The company, which is listed on the London Stock Exchange and Euronext Paris, has a current market capitalization of just over £11 billion ($14.2 billion).

This isn't a problem in the UK alone, as power shortages were listed as the top concern for datacenter companies across North America, Europe, Latin America and Asia-Pacific, in a report from global commercial real estate firm CBRE published in July.

It found there was increasing difficulty in securing datacenter capacity in all markets, thanks to construction delays and power challenges. These have forced some local governments to take steps such as simplifying permitting and integrating more renewable energy into the grid in an attempt to address power constraints.

In the US, a recent report from management consultants Bain & Company warned that utility companies have been caught out by the surge in demand from datacenter expansion, as they have previously faced flat or shrinking consumption. Energy use could outstrip supply in just a couple of years unless the companies can quickly turn around and boost capacity.

Much of this datacenter boom is being attributed to the current interest in developing and training AI models, of course, along with an expansion of cloud services through which the hyperscale companies aim to deliver AI services to the market.

The UK government recently recognized the importance of datacenters to the modern digital economy by designating them as critical national infrastructure (CNI), putting these sites on the same footing as water, power grid and emergency services systems.

As The Register reported at the time, a side effect of this new policy is that these facilities are no longer subject to the same planning restrictions as before, so more of them are likely to get the go-ahead as developers will often be able to override local objections to additional infrastructure being built in a particular area.

Just by chance, Britain's Department for Science, Innovation & Technology (DSIT) confirmed this month that four US tech firms have committed to the UK as a place to invest in their data facilities, saying the move would ensure the country has the necessary infrastructure to train and deploy the next generation of AI technologies.

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• Google Cloud burst by 12-hour power outage in German region
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But investment could easily be diverted elsewhere if those datacenters face a lengthy delay to get connected to the power network.

According to The Times, the UK National Grid said it was "committed to connecting viable projects to the grid as quickly as possible," while a government spokesperson told them it was working with energy market regulator Ofgem to reform the outdated connections process and speed up delivery of new infrastructure, including substations.

Not everyone would be pleased by datacenter expansion, in any case. It has been claimed that they do not bring much benefit such as jobs to the local area, and they are also likely increasing greenhouse gas emissions.

A recent report claimed that the industry is set to emit 2.5 billion tonnes of emissions worldwide between now and the end of the decade, three times more than if generative AI had not been developed. ®