Navigating regulatory and operational challenges in the European data centre industry

Bird & Bird’s London office recently hosted panel discussions focusing on the future of data centres, addressing both industry and regulatory challenges and opportunities in Europe. The panel discussions were separated by a keynote speech given by Lex Coors, a global leader in sustainable data centre developments, who gave an insightful presentation on the evolution of data centres, the importance of clean energy, and the role of legislation in shaping industry practices.

Marco Nicolai, a construction partner from Bird & Bird's London office highlighted the growth of the data centre industry over the past years; the increased complexity; and public interest in the benefits and impact of data centres. He emphasised the need for collaboration and innovation among industry leaders to tackle challenges, particularly with the rapid uptake of AI, which is reshaping the landscape and driving demand for data centres powered by clean energy.

Panel 1: energy considerations in the data centre industry

The first panel included Aashna Puri, director of strategy and sustainability at CyrusOne, Sybille Weiler, Partner and an energy lawyer from Bird & Bird’s Paris office, Catriona Shearer, global head of consulting at JLL, and John Booth, a consultant at Carbon 3IT. The first panel focused on energy considerations in the data centre industry.  The panel discussed the impact of AI as a growth driver and the massive power requirements necessary to support the expansion of data centres. The panel discussion further included  the quantification of the demand for chips and energy, forecasting a rise in global energy consumption from 27 gigawatts in 2023 to 68 gigawatts by 2028. Discussions also included the need for changes in the design, construction and operation of data centres make this growth sustainable and the conflict between energy efficiency and the designed resiliency of data centres to avoid load failure. The panel emphasised the industry's responsibility to manage a balance between essential operations and efficient consumption, and the importance of moving towards sustainability if onerous regulatory intervention is to be avoided. Panel participants provided insights into the international regulatory landscape for data centres and discussed the European regulatory framework, including the Taxonomy Climate Delegated Act and the Energy Efficiency Directive, and the EU’s drive towards energy efficiency and sustainability.

Staffing challenges, including an ageing workforce and lack of trained personnel, were also discussed, affecting not only the operation of data centres but also compliance with environmental regulations. The reliability of power demand forecasts and their impact on transmission system operators were highlighted, underscoring the need for improved communication and planning between the data centre industry and grid capacity planners.

Panel 2: emerging trends, challenges and opportunities in data centre investment

The second panel included William Bellman from Colliers, Giovanni Della Pesca, managing director of Macquarie Capital and Conchita Sainz, a Partner from Bird & Bird’s Madrid office. The second panel explored emerging trends, challenges, and opportunities in data centre investments. The panel expressed optimism about the industry's ability to overcome challenges highlighting the intersection between energy and data centres. The conversation suggested that integrating renewable energy with data centre operations has not been fully explored, particularly from the operational side where reliable power availability is a necessity.

The discussion also focused on shifts in data centre investments driven by end-user demands and emerging technologies like AI. Investors are exploring Tier 2 and Tier 3 markets where renewable power availability is more favourable, particularly in Southern Europe.

The panel highlighted Spain as a promising market, with significant investments from major players. The Spanish government is expected to introduce new regulations to enhance legal security and infrastructure investment, addressing challenges such as connectivity and energy transmission. Panel participants noted the need for better public relations to highlight the benefits of data centres, and being good neighbours through  energy efficiency and community heat reuse.

Overall, the future of the data centre industry appears bright, with ample opportunities for growth and innovation despite challenges related to regulation, infrastructure, and market dynamics.

This article was written by Mita Rahman and Yasmine Barakat.