The hub of the digital economy is a datacenter, and demand for them is predicted to increase significantly, making them the main target for expansion and investment. However, as power costs rise and datacenter use rises, the cost of running datacenters is also increasing significantly. The consequences of datacenter power spending for technology providers and datacenter operators are examined in a recent paper by the International Data Corporation (IDC).
With electricity making up 46% of total expenditure for enterprise datacenters and 60% for service provider datacenters, electricity is by far the biggest recurring expense for datacenter operators. Additionally, as datacenters take on additional workloads, including tasks that need a lot of energy, like artificial intelligence, the amount of electricity consumed is rising quickly.
According to IDC, the surge in demand for AI workloads will cause datacenter capacity, energy consumption, and carbon emissions to rise significantly. Through 2027, AI datacenter capacity is expected to grow at a compound annual growth rate (CAGR) of 40.5%. Thus, it is anticipated that by 2027, the total energy consumption of datacenters for AI workloads would reach 146.2 terawatt hours (TWh) at a compound annual growth rate (CAGR) of 44.7%.
Overall, IDC predicts worldwide datacenter energy usage to more than double between 2023 and 2028 with a five-year CAGR of 19.5% and reaching 857 terawatt hours (TWh) in 2028.
In addition, the dynamics of supply and demand, environmental laws, geopolitical developments, and increased susceptibility to extreme weather events, which are partially caused by climate change, are driving up the cost of power. According to IDC, the patterns that have led to rising electricity costs over the previous five years are probably going to continue. The operational cost of datacenters will likely increase significantly due to rising usage and rising energy costs; however, the exact amount is unknown.
A datacenter with 1 MW of IT load in 2023, operating at 50% capacity and with a power use effectiveness (PUE) of 1.5, was the subject of scenario planning by IDC in order to better understand the effects of growing electricity costs on datacenter operations. The study used energy pricing and growth rates for the US, Germany, and Japan to examine three scenarios for the development of energy prices. The percentage increase in electricity spending is greater than 15% in each of the three scenarios, with growth rates typically exceeding 20%. The study also demonstrates that datacenter operators can save a significant amount of money with an extra 10% in energy efficiency.
“There are any number of options to increase datacenter efficiency, ranging from technological solutions like improved chip efficiency and liquid cooling to rethinking datacenter design and power distribution methods,” said Sean Graham, research director, Cloud to Edge Datacenter Trends at IDC. “But providing energy-efficient solutions is only part of the equation for meeting customer needs. Datacenter providers, including cloud and colocation services, should continue to prioritize investment in renewable energy sources. By investing in renewables, they are helping to increase overall supply while helping their customers meet their sustainability goals.”
Particularly, solar and wind power have the lowest levelized cost of electricity (LCOE), which measures the average net present cost of generating energy over a generator’s lifespan, and offer notable environmental benefits. Additionally, providers can lower construction costs and energy losses related to distribution by combining facilities at or close to the source of renewable energy generation. This improves overall efficiency and sustainability and increases resilience by addressing grid dependability issues.
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