Report: AI Drives Global Data Centre Power Demands
The data centre industry continues to boom, with global surges in AI and machine learning fuelling this dramatic growth. However, such progress is at risk by power constraints and equipment delays.
According to the annual Data Centre Cost Index by Turner & Townsend, 92% of those surveyed say that power availability is more important than the location of new schemes. Likewise, 80% report delays to manufacturing or delivery of critical equipment as industry capacity struggles to keep pace with demand.
The survey also reveals the top drivers for increased data centre investment are extra capacity and technological upgrades to keep pace with rising AI demands. It finds Tokyo remains the most expensive data centre market for a second year in a row, as labour shortages continue.
“Despite rising costs, the data centre market remains optimistic, with 80% of respondents believing it to be ‘recession proof.”
The impact of AI on data centres
AI requires larger and more complex data centres to manage technological demands. However, this means that these data centres are more power-hungry, which means that supply chain and national power grids are struggling to keep up.
Turner & Townsend has analysed the current average cost per watt to build data centres across 50 global markets, using responses from industry leaders to identify trends across the entire industry.
- 92% of those surveyed see AI as the technology that will have the most significant impact on data centre operations in the next 3-5 years
- 80% report delays to manufacturing or delivery of critical equipment as industry capacity struggles to keep up with demand
Significantly, the firm finds that many markets, including Auckland, Vienna, São Paulo, Singapore, Queretaro and Cape Town, have cost inflation above 20% - which is driven by low supply chain capacity.
“The digital revolution and interest in how AI can support our professional and personal lives is booming, helping the data centre market remain one of the hottest areas of the global economy,” comments Lisa Duignan, Data Centres Sector Lead, Europe, at Turner & Townsend.
“Data centres are increasingly seen by governments as critical national infrastructure, and there is clearly a huge opportunity for clients – but growing challenges, not least power supply and labour shortages, need to be managed.”
Why Tokyo costs are so much higher
The top of the cost index shows how costs are being impacted by constraints in high-performing markets, where demand is exceeding available power, the supply of skills and materials.
Significantly, Tokyo, at US$14.3 per watt, is the most expensive market for the second year in a row – with labour shortages and new limits to working overtime continuing to put strain on delivery.
The Japanese data centre market has been rapidly expanding, with facilities in Tokyo alone expected to double over the next several years. This will make the city the second-largest data centre hub in Asia after Beijing.
Whilst the country boasts very strong infrastructure, Turner & Townsend continually suggest that increased demand and limited contractor capacity has led to significant cost increases.
Meanwhile, Singapore is now the world’s most power-constrained data centre market and has risen into 2nd place in the rankings, at $US13.8 per watt, from 5th position last year. These are followed by long-standing hotspots like Zurich (US$13.3 per watt), Silicon Valley (US$12.8 per watt) and New Jersey (US$12.4 per watt) – which appear consistently in the top five of the index.
These mature markets known for industrial innovation and technology can be expected to see further growth as the AI and machine learning revolution continues.
- New markets in the study include: Lagos, Helsinki, Lisbon, Cardiff and Bordeaux, reflecting varied data centre investments
- Costs driven by the need to import labour and materials
- Scandinavian market pipeline remains strong, with colder climates and access to renewables counteracting net zero challenges - yet competition will rise
- Skills shortages remain an issue in Australia and New Zealand markets
According to Turner & Townsend, a high dependency on international supply chains and imported talent inevitably leads to higher costs. This includes Oslo, Copenhagen and Stockholm, in addition to the UK, which could become a more important market on account of it being classified as critical national infrastructure by the UK government.
Skilled labour essential to growth plans
On account of the AI revolution, many data centre clients are exploring new locations. To mitigate risks of new markets and to avoid rising costs, the Turner & Townsend report suggests that clients should centralise delivery to help better assess global market pressures.
“Traditional data centres ideally need to be near the location of digital demand they serve, but there is more geographic freedom for AI data centres where latency is less of a concern,” Lisa Duignan, Data Centre Cost Index Lead, explains.
“However, while those locations may have access to less constrained power grids and avoid existing supply chain bottlenecks, this comes with programme challenges and risks associated with testing new supply chains for the first time.”
She adds: “To make sure projects are sufficiently resourced and unlikely to encounter delays, skilled labour should be central to clients’ project plans. International expertise can still be drawn on while local talent is built up, and this is best coordinated through centralised global or regional delivery of data centre programmes.”
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