According to the International Energy Agency (IEA), the estimated global data centre electricity consumption in 2022 was 240–340 TWh, or around 1–1.3% of global final electricity demand. In the European Union (EU), data centre energy usage amounts to approximately 40-45 TWh, which translates to a slightly higher amount of 1.4–1.6% of total EU electricity consumption. By 2030, data centres are forecast to account for 3.2% of electricity demand within the EU, an 18.5% jump from 2018. This increase in consumption coincides with Europe advocating for a reduction in energy demand and the introduction of ‘clean energy’ targets, such as the EU aiming to be carbon-neutral by 2050.

Discussion around the energy sector, initially pinpointed by journalists and environmentalists as a topic that warranted attention in light of increasing environmental targets, has become more critical to central governments after the Russia/Ukraine conflict, triggering more consideration for energy-intensive industries. While this is a politically charged subject, data centre operators also have a huge interest in the narrative around energy availability, security and price. Especially since governments are increasingly scrutinising new data centre facilities. 

As energy stands as the backbone of data centre operations, the industry finds itself grappling with mounting pressure and constraints imposed on the electricity grid. This challenge presents an intricate dilemma since it is poised to persist in the foreseeable future. Despite energy efficiency improvements in the data centre realm, the anticipated surge in the sector means that energy demand is forecasted to grow exponentially, particularly fuelled by the escalating integration of AI. As a result, data centre operators increasingly need to consider new development locations carefully and seek cities where not only is a significant portion of energy produced domestically to ensure energy security, but the price of energy is also low.

With the price of energy reaching record levels in 2022, starting in the wake of the pandemic and aggravated by the Russia/Ukraine conflict, the vulnerability of some markets to price fluctuations can be significant. Producing enough energy domestically to meet total demand, or being ‘energy autonomous’, provides a higher level of security than markets that rely on imports. For data centre operators, using the most secure and efficient source of energy at a low and stable price helps ensure the viability of new projects. 

Rising restrictive regulations on new data centre builds 

With 40% of Europe’s power distribution grids over 40 years old increasingly constraining the growing demand, governments are increasingly forced to consider the impact of all new projects. This is notably the case for new data centre developments in locations with high energy demand, often resulting in permit delays or refusals. While this issue has the potential to affect most of Europe, the threat of development restriction is particularly high in the FLAPD markets (Frankfurt, London, Paris, Amsterdam, and Dublin), where strong population, business and industry density is already exerting pressure on the national grid. 

Savills energy benchmark analysis shows that the FLAPD markets nearly all place in the bottom half of the ranking owing largely to the power restrictions put in place by central governments. Thanks to large nuclear power plants in France enabling a high energy autonomy, Paris is the only exception to the trend. In Amsterdam, local authorities imposed temporary bans and new environmental legislation on new data centre facilities in 2019. Four years later, restrictions were reinforced with a new regulation prohibiting the construction of any new data centre unless they can prove their benefit to the city.

In Ireland, easy access to high-capacity subsea cables and the relatively low tax rate have positioned Ireland as a data centre hotspot. However, the decision made in 2021 to limit new connections to the grid has meant that data centre operators Vantage, EdgeConneX, and Equinix had permits for new developments rejected in 2023. In London, a proposal to build a hyperscale server farm and support ancillary buildings was denied by the government in November 2023 due to pressures on energy supply, despite the commitment to reusing heat waste in a nod to sustainability. In June 2022, Frankfurt’s municipal council passed legislation designating districts where data centres can be built to control the sudden rise in data centre clusters in the city. 

Renewable energy rising as the keystone 

In this energy-constrained environment, the use of renewable energy is increasingly becoming pertinent to the granting of permits for new developments. With an increasing focus on sustainability targets in Europe, data centres powered by renewable energy are also more likely to gain investment from corporations with strict environmental policies to adhere to.

In Europe, the average share of renewable energy as a percentage of total energy produced is now at 56% across the cities tracked, compared to 45% five years ago. While no country produces 100% renewable energy, Norway comes the closest at 98%, some way above the European average. Overall, both the Nordics and the Baltics produce the highest share of renewable energy, owing to the availability of hydro and wind power. These two regions’ ability to produce extremely vast amounts of renewable energy enables these markets to position themselves as best placed for ‘green’ data centre developments. Google recently announced that it is building a clean data centre in Skien, where it is expected to operate above 99% carbon-free energy when it opens in 2026, possibly due to Norway’s large pool of renewable energy. 

Energy dynamics: the Nordics’ advantage

Thanks to their extensive green energy infrastructure, the Nordic countries lead our ranking in energy production. The total energy production (TEP) per capita in Europe currently stands at 6 MWh. While only seven markets surpass this average, Norway (28 MWh), Sweden (16 MWh), and Finland (14 MWh) significantly exceed it. 

Although markets with high energy output may seem self-sufficient, their sustainability depends on consumption rates. In response to the looming threat of severe blackouts in 2022, measures were taken to curb energy usage, resulting in a notable decline. Across the EU, primary energy consumption dropped by 6.4% compared to 2019, with per capita usage standing at 40,195 kWh in 2022. Yet, disparities in energy consumption are evident among nations, with Norway, Luxembourg, Sweden, Finland, and Belgium emerging as the most voracious consumers. 

Amid energy shortages, markets have pivoted towards bolstering internal energy production, prioritising domestic output. From 2019 to 2023, 58% of markets reduced their reliance on external energy imports. In 2019, merely 25% of markets were fully self-sufficient, producing ample energy to meet demand without imports. By 2022, this figure rose to 33%. Last year eight markets - Sweden (121%), Norway (113%), Czech Republic (112%), France (111%), Switzerland (109%), Romania (106%), the Netherlands and Spain (105%) - generate surplus energy. These energy-autonomous regions benefit from greater energy security compared to their counterparts, who are heavily dependent on imports and face potential risks of energy cost fluctuations. 

The cost of energy & price fluctuations 

In the wake of their 2022 peak, energy prices started a downward trajectory last year. On average across Europe, they decreased by 21% between H1 2023 and H2 2023. Nonetheless, they persist at a level 51% higher than pre-crisis levels, with certain nations still experiencing hikes or yet to observe an inflexion in pricing, including Poland, the Netherlands, Ireland, Belgium and the UK. 

Given the energy-intensive nature of data centres, the cost and volatility of energy prices greatly influence the strategic considerations involved in selecting new data centre locations, as they heavily impact operational expenses. The countries with the most competitive energy prices for industrial consumers with high voltage connections in Europe are Norway, Sweden, France, Portugal, and Greece, all boasting rates below €0.10 per kWh. 

Rising cities & alternatives 

Due to growing concerns about power grid reliability, investors and operators are increasingly exploring markets beyond the FLAPD regions, where power restrictions can jeopardise new development projects. Our analysis highlights Nordic cities as a leading option because of their abundant supply of affordable green energy. Switzerland, France, and certain cities in Germany and Belgium also present viable alternatives. Yet, we expect the power grid to become a widespread concern across European countries in the short term. 

In this evolving landscape, data centre operators are increasingly prioritising the integration of renewable energy sources, a trend that has become a significant factor in the approval process for new developments. In regions where green energy is scarce or the power grid is constrained, some operators are considering the construction of their own on-site renewable energy infrastructure, such as solar panel farms. This approach not only enhances energy independence but also provides greater security against central grid vulnerabilities, reducing risks during power outages or grid failures and ensuring uninterrupted operations. However, it’s important to note that this option is typically feasible only for hyperscale data centres due to the substantial capital investment required. 

Savills energy benchmark ranking 

To establish where in Europe energy constraints are likely to have the least impact on new data centre development, Savills conducted a benchmark which ranks 46 European cities based on five metrics that assess energy availability, security, sustainability, cost, assumed consumption, as well as constraints on new data centre developments to identify optimal opportunities for expanding new data centre facilities. The various indicators have been ranked and weighted across the 46 cities.

The results of the benchmark do not determine the exclusive attractiveness of a given city to prospective data centre developers; it purely provides a macro guide to incorporate as part of their specific strategy. 

Cities with limited power restrictions by central governments performed better in the ranking, as did markets with a high energy production per capita and a large share of renewable energy. These indicators, along with the cost of energy and energy autonomy, make up the final ranking. 

Overall, medium-size cities lead the benchmark and regional cities rank higher than their capital, where less demand for energy works in favour of new data centre developments. 

_{Read the articles within Spotlight: European Data Centres below.}