New Irish data centre policy ‘narrow start’ to improve electricity connections

Richard Murphy, energy expert at Pinsent Masons, was commenting on the CRU’s proposed decision. The decision aims to provide clarity on electricity grid connection policy for data centre development, updating the existing policy. It comes amid the growing energy demands and environmental impacts associated with large-scale energy consumers, particularly data centres.

Murphy said: “The demand side situation in Ireland is complex, particularly with data centres taking up so much capacity compared to other European markets, so the CRU appears to be treading carefully as economic growth is paramount in Ireland. It is effectively a data centre policy, not a LEU policy, with the wider glidepath items for LEUs in terms of real time zero carbon operations signposted only for the future at this stage.”

The CRU’s proposed decision paper outlines a potential pathway for new data centre connections to the electricity grid. This pathway considers security of supply, network constraints, and the minimisation of impacts on national renewable energy targets and carbon emissions.

The electricity consumption by data centres surged from 5% of Ireland’s total demand in 2015 to 21% in 2023, driving 85% of overall electricity demand growth, according to the CRU. This is set to increase to around 30% by 2030.

The CRU’s aim is to identify measures to facilitate decarbonisation while supporting economic growth in sectors such as digital technologies, pharmaceuticals, and biotechnology. This is particularly important for data centres, which have become significant energy consumers and key players in Ireland’s economy.

The paper includes specific requirements about “proximate” generation and storage capacity of new data centres. New data centres will be required to provide dispatchable onsite or proximate generation and/or storage capacity, taking into account de-rating factors, that matches their maximum import capacity (MIC). This means that the generation or storage facilities should be located close to the data centre. Any proximate generation must participate in the Irish wholesale electricity market, known as the single electricity market (SEM). This requirement aims to contribute to the security of supply and meet the operational needs of the data centre.

The performance or availability of this proximate generation will be linked to the data centre. If performance falls below a certain threshold, the system operators will have the discretion to reduce the MIC of the data centre accordingly. Technologies used for onsite or proximate generation should be sufficiently ‘future proofed’ to facilitate low or zero emissions going forward. However, there is no explicit requirement for this generation to be from renewable sources as the CRU is of the view it does not currently have a mandate to impose any such requirements on data centres.

While this will likely be seen as a step in the right direction, Murphy described the update as “a narrow start”. He said: “Any proximate generation needs to be dispatchable and potentially flexible, so they are looking for data centres to underpin security of supply through having these units participate in the SEM markets to offset or net off against their demand. It is likely that some sites will have some renewables; some gas, including biofuels; and some storage. The whole concept of ‘proximate’ needs much greater clarity and legal definition, but hopefully this opens up some further business opportunities for energy parks and nearby CPPA structures being developed across Ireland.”

Plans for a series of new energy parks were previously set out by the CRU to address risks associated with data centre demand and the security of electricity supply in Ireland. Murphy said: “On a positive note, this decision paper should help investors move further forward with such plans, allowing for data centres to locate outside of Dublin and help unlock energy parks to get a grid connection if they meet the criteria laid out.”

Additionally, to ensure long term aims of net zero emissions are met, net zero duties need to be properly codified into legal frameworks. While the CRU states in the decision paper that it does not have a mandate to specify emissions limits on data centres, Murphy said: “Net zero duties must just not be on central governments, but all public actors involved in delivering the energy transition, including regulators and planning authorities, to ensure consistency of decision making in line with these longer term priorities. Otherwise, we will continue in a business-as-usual cycle of decision making which does not work for net zero ambitions”.

The consultation period for this proposed decision is open until 4 April. Businesses are urged to participate in the consultation to ensure their needs and any concerns are addressed, with the feedback to inform the final decision, expected to be published later this year.