Data center power demand nears 20% a year; procurement is the risk

Data center operators without a firm grip on power procurement risk “power costs that quickly spin out of control,” Dustin Scarpa, co-founder of Transparent Energy, wrote in an Oct. 26 Data Center Dynamics column.

Global data center power demand is set to grow nearly 20% a year, according to McKinsey figures Scarpa cites. It would account for 14% of US power demand by 2050. He splits the industry's power problem into getting connected and then running the asset: data centers are often sited in remote areas with little or no power access, and facilities in established hubs such as Santa Clara can face “years on the shelf awaiting grid connectivity.”

For allocators and lenders underwriting data center campuses, Scarpa's pricing factors determine whether a tenant can lock a fixed price and what it pays for certainty. Those are the same variables a lender or equity holder already models, so power contracts belong in the downside case next to construction risk.

Scarpa calls it a common misconception that a large, steady, around-the-clock load will automatically draw a supplier's best price. Suppliers weigh load shape, location, credit, collateral, contract term, start-date certainty and expected usage, not just scale. A fixed-price, all-in deal gives an operator budget certainty by transferring market risks to the supplier. The supplier prices that risk into what it charges, so a campus that can commit to an energization date buys certainty on better terms than one still guessing at its start.