Steven Hardman, CEO at Conrad Energy, explains why data centres should look to on-site or near-site energy generation to ease the energy burden.
Investing in on-site or near-site energy generation, otherwise known as ‘behind the meter’ energy, offers several benefits for energy-intensive businesses such as data centres. In fact, it is sites like data centres, which rely heavily on high energy usage to operate, that have the most to gain from on-site and near-site energy generation, because the overall performance, and indeed the profit margins, of these facilities are more vulnerable than most to fluctuations in energy prices.
A key advantage of behind the meter energy is the long-term cost savings. The initial investment cost isn’t insignificant, but it is overshadowed by the lower costs of energy generated on- or near-site compared with the cost of relying exclusively on grid energy.
With the market still prone to volatility, behind the meter energy also offers greater resilience and certainty on energy costs. Further gains can be made by selling surplus energy back to the grid, and by potential tax reliefs on offer for businesses investing in renewable energy. As technology improves and renewable energy systems become more affordable, the return on investment will only grow.
Weighing the benefits
Businesses may choose to consider fully funded on-site generation plans available from some energy companies. These eliminate CAPEX costs, with the energy provider assuming responsibility for funding the build and maintaining the project. In return, the property owner signs a Power Purchase Agreement (PPA) buying the energy produced over the long-term at a pre-agreed rate – saving money and providing price stability.
Another valuable benefit of on-site energy generation is independence and self-sufficiency. Using renewable energy generated by solar panels or wind turbines minimises dependence on third-party energy providers – protecting businesses from spiking utility prices and a fluctuating national grid supply. This, in turn, brings consistency of operating costs, bolstering financial resilience.
Businesses can also optimise energy consumption and reduce costs. By generating electricity on-site and exploiting energy management systems, when and how energy is used can be managed more effectively, reducing peak demand charges and maximising energy efficiency.
Generating energy on-site also provides data centres with greater flexibility and self-sufficiency in keeping track of their energy needs. By utilising renewable energy sources alongside energy storage systems, companies can save surplus energy generated during periods of low demand. This independence of operation creates an important security buffer and increases the reliability of operations.
Behind the meter energy also supports sustainability and net zero targets, an increasingly important concern. Using clean, renewable energy sources minimises a company’s environmental impact and can also boost their reputation as responsible corporate citizens.
Decreasing dependence on the local grid
The grid is an essential part of our energy infrastructure, but it is not invulnerable. From cyber threats to equipment malfunctions or extreme weather events, the grid can be disrupted with potentially wide-ranging consequences. As a result of this, minimising dependence on the local grid is not only a convenient move, but a strategic necessity to guarantee business resilience and autonomy.
On- or near-site solutions provide security for businesses, providing them with the means to combat the risks of grid outages and supply chain disruption. A decentralised strategy also improves the wider stability and reliability of our energy infrastructure, minimising the chance of wide-reaching blackouts and reducing the financial implications of energy-related disruptions.
Lessening reliance on the grid can also ease the strain on infrastructure and help reduce the need for expensive upgrades and developments. With demand for electricity ever increasing, the current grid infrastructure is being stretched to its limits especially in urban centres and areas undergoing rapid population growth. By investing in behind the meter energy solutions, businesses can alleviate this burden on the grid and help create a more stable and sustainable energy ecosystem.
Setting up behind the meter energy generation
To tackle their carbon footprints, data centres typically buy PPA agreements for renewable energy – with only a few choosing to generate their own on-site power using renewables (or gas). But both approaches can be used by data centres and incorporated into a wide range of business models.
Different businesses will of course have different concerns regarding, for instance, carbon footprints, budgets, and space capacity. Accordingly, there is no single blanket solution for implementing on-site energy generation – with strategies varying across sites and industries. This adaptability means individual data centres should be able to design a path of action that is tailored to their needs.
That said, there are some elements of best practice that will apply across the board. Firstly, businesses should consult an energy expert to assess their energy requirements and consumption habits, and in turn to draw up an appropriate on-site energy generation strategy. Factors such as geography, available space, energy needs, and financial constraints will all affect the choice of renewable energy technologies, for example solar photovoltaic (PV) systems, wind turbines, fuel cells or combined heat and power (CHP) systems.
Another important factor is the many budgetary implications of energy investments – for instance initial CAPEX costs, ongoing maintenance fees, and potential savings and revenue sources. A thorough financial analysis, including ROI calculations and cash flow predictions, will help companies make substantiated decisions and secure funding for their energy projects. Using energy companies which offer fully funded installations is one way to minimise CAPEX outlay whilst enabling businesses to reap the wider benefits of on- or near-site energy generation.
Finally, it is vital to consider the local regulatory landscape and policies in a given region. With councils increasingly conscious of net zero targets, it is important to look at what support is available for companies investing in renewable energy generation and storage – as this can provide vital help in implementing on- and off-site generation.
Behind the meter energy offers several significant rewards for businesses, ranging from minimising dependence on the local grid to providing a means to unleash hidden value from energy assets, in addition to stabilising and adding certainty to energy usage and planning. If businesses curate an effective solution bespoke to their requirements and criteria, they will improve their self-sufficiency, green credentials, and position in the market against an increasingly unpredictable backdrop.
