Google data centre energy use backdown highlights storage need

• Google has been forced to sign deals with two utilities stipulating it will reduce data centre power demand when instructed
• Utilities are struggling to meet the power needs of data centres and have previously landed in hot water for trying to pass increased costs on to customers
• The extra burden being put on the grid by data centres highlights the need for the more rapid deployment of energy storage

The data centre industry’s desperate need for more energy storage capacity was highlighted this week when it was announced that Google had been forced to sign agreements with two US utilities companies stipulating that the tech giant would reduce its AI data centre power consumption during periods of surging demand on the grid. In a nutshell, the deals with Indiana Michigan Power (I&M) and Tennessee Valley Authority (TVA) mean that Google will reduce the power demand of its data centres when either utility tells them to do so.

How do these agreements work? When Google in instructed by a utility to reduce its data centre power demand, the tech company sends out an alert to its “global computing planning system”, which activates an algorithm that generates hour-by-hour instructions for the data centres to limit non-urgent compute tasks for the duration of the grid event, and allows them to be rescheduled after the grid event has passed. On some of these occasions, if feasible, some of these non-urgent tasks will be rerouted to a data centre on a different power grid. Non-urgent tasks, according to Google, include the processing of a YouTube video, for example.

Utilities struggling to meet power needs of all customers

Google agreed to sign the deals with I&M and TVA amid concerns that rapidly growing data centre power demand would not enable the utilities to meet the power needs of all its customers. Google claims that reducing the power demand of some of its data centres – and in some case rerouting tasks to other data centres – when the grid is at risk of malfunctioning due to being overburdened, will not impact the performance of Google services like Search, Maps, YouTube, Google Cloud, and Workspace (which includes Gmail, Docs and Sheets).

In many ways, technology behemoths like Google, along with utility companies, are feeling their way with regards to managing massive data centre power demand. As the data centre industry grows exponentially – according to the World Economic Forum, the global data centre industry is currently worth $242.72 billion, but is projected to more than double in size, to over $584 billion, by 2032 – so tech companies and utilities have to adapt their strategies for coping with the attendant surge in power needs. In some respects, the latest deals Google has signed with I&M and TVA are a recognition that previous agreements aimed at mitigating the effects of massive data centre power demand have been ineffective. Last year, if we take the example of I&M, the utility filed a joint settlement with Google, Amazon Web Services (AWS), Microsoft, the Indiana Office of Utility Consumer Counselor (OUCC), the Data Center Coalition (DCC), and the Citizens Action Coalition (CAC) requiring new large load customers, including data centres, to make long-term financial commitments “proportional to their size to ensure the costs to serve these customers are reasonably recovered from the customer, and not passed on to existing customers”. The deal was struck because, in order to serve the increased power demand from data centres, I&M was required to invest in additional generation, as well as new transmission facilities to meet customer needs and “maintain a safe and reliable grid for all customers”. But clearly this deal did not sufficiently address the issue, hence the deal I&M announced with Google this week.

Utility blocked from passing additional costs on to customers

The backdrop to the latest deal with Google is I&M’s escalating costs for supplying power to data centres, and crucially, concern about the utility trying to pass on these increased costs to customers. This is an issue that has landed I&M in hot water in the past – last year an attempt by the utility to pass on more than $1.3 billion in costs to customers as part of a cost recovery plan was blocked by the Michigan Court of Appeals after the plan was deemed “unreasonable”. The costs included sums paid to an affiliate power generator, Ohio Valley Electric Corporation (OVEC), to produce power for I&M.

With tech giants like Google being forced by utilities to scale back data centre energy consumption and utilities facing legal challenges for passing increased energy costs on to consumers, it’s clear that the need for more energy storage capacity to bolster the grid in the data centre era has never been more acute. With data centres having to curtail operations at periods of surging power demand, there is a ready-made solution to this problem in the form of energy storage, which would allow data centres to have much-needed energy supplies on standby.