AI revolution to transform Europe's outdated power plants

Microsoft and Amazon are looking to convert some of Europe's old coal and gas-fired power plants into data centres with ready access to electricity and water.

Engie in France, RWE in Germany, and Enel in Italy are all looking to capitalize on the surge of AI-driven energy demands by converting their old power plants into data centres, and securing lucrative power supply agreements with their operators.

The data center option is a great way for utilities to offset the high costs associated with shutting down old power plants and potentially fund future renewable development.

These sites are seen by tech companies as a way to quickly secure power grid connections, and water cooling systems, which are two major bottlenecks for the AI industry.

Bobby Hollis is Microsoft's vice president of energy.

Lindsay McQuade is the EMEA Energy Director at Amazon. She said that she expects data centre permits to be granted faster on old sites where infrastructure has already been installed.

He said utilities could either lease land or build the centres and run them themselves. This would secure long-term power agreements with tech companies.

Simon Stanton said that the deals are more than a simple sale of land, as they offer opportunities for stable and high-margin revenues.

Stanton explained that it was the relationship you build over time, your business relationship with each other that enabled you to reduce the risk and underwrite the infrastructure investments.

According to data provided by the NGO Beyond Fossil Fuels which promotes coal-fired power station closures, most of Britain and EU's 153 coal and lignite plants will close in 2038. This is to meet climate goals.

NEW REVENUE STREAMS

Data centre deals are often attractive to utilities. They can negotiate long-term contracts for power supply in order to support future renewable development.

Gregory LeBourg is the environmental program director for French data centre operator OVH. He said that tech firms pay premiums up to 20 Euro per megawatt-hour of low-carbon energy.

The power requirements of data centres can range from a few hundred megawatts up to one gigawatt. The annual "green premium" - an extra price for low-carbon energy - could translate into a contract that is worth hundreds of millions of euros or even billions, according to calculations.

Sources in the industry said that a long-term solution is to build an “energy park” and connect it to a new development of renewable energy, while relying on grid power for emergencies. However, this concept is relatively new.

Engie plans to double the amount of renewable energy installed by 2030, from 46 GW. Sebastien Arbola who heads the data centre division of the group said that they have identified 40 sites worldwide that they are marketing to data center developers. These include coal and gas facilities that could be converted.

Hazelwood Coal Plant in Australia was closed in 2017. He refused to reveal details about other sites and said they were mostly in Europe.

Enel, EDF and Portugal's EDP are all marketing their old coal and gas sites to develop new data centres.

Michael Kruse is the managing partner of Arthur D. Little.

He said utilities are creating new types of businesses and new revenue streams.

'SPEED TO THE POWER'

Speed is the appeal of tech companies.

Grid connection delays can last over a decade in Europe, but repurposed power plants could offer faster access to water and electricity.

Hollis, a Microsoft employee, said: "You have the chance to move quicker."

Synergy research group data showed that the capacity of data centres in Europe was much lower than those in Asia and America due to slower permits and longer grid connection times.

Data centre operators have the option to purchase renewable energy directly from utilities under long-term contracts, or from the power markets.

Tom Glover of JLL, who works in data centre transactions, revealed that the real estate firm is currently working on several conversions. These include a 2.5 GW Data Centre at an old German coal plant, and four sites across Britain for a large tech client.

Security is a reason why developers don't often divulge more details about their data centres, including the clients.

Drax, a British company, is looking for a partner who can help develop parts of unused coal mines in Yorkshire that have been partially converted into biomass. Richard Gwilliam said that it offers access to unused cooling water equipment.

Drax offers a "behind the meter" deal, whereby the power plant provides direct power to data centres and can draw from the grid as needed.

EDF also selected developers for two gas power plant sites in central and east France.

Sam Huntington is the director of research for S&P Global Commodity Insights. He said that tech companies will pay more to get projects up and running faster in order to compete for market share.

He said, "We hear the phrase'speed to power' over and over."

(source: Reuters)