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Q&A: How sustainable is Ireland as a data centre hub?

As Amazon is granted planning permission to build three data centres in Dublin, where should State policy go from here?

Why are there so many data centres in Ireland?

While there is no official register tracking the number of data centres in Ireland, analysis by consulting company Bitpower has put the figure at 82 as of June 2023. A 2019 report by Host in Ireland noted that Dublin is Europe’s largest data hosting cluster, accounting for a quarter of the entire European market.

Paul Deane, senior research fellow at MaREI, the Science Foundation Ireland research centre for energy, climate, and marine at University College Cork (UCC), says this isn’t an accident.

“We have an active industrial policy here in Ireland, that has welcomed and encouraged data centre owners to come here to Ireland for the last five to seven years, and it’s been very successful,” he said.

Selling points for Ireland as a data centre base include a skilled English-speaking workforce, mild weather which helps keep servers cool, plenty of fibre optic cables passing by our coastline, and welcoming economic and tax terms, said Mr Deane.

Who benefits from data centres?

The Government said last year data centres play an “indispensable role” in our economy.

It noted that they support the online facilities and platforms most people use every day, as well as more broadly supporting the big technology companies based here. They are “responsible for very substantial economic value through payroll taxes, exports, corporation taxes and other expenditures”, it said.

The tech sector overall employs 140,000 people, 6 per cent of total national employment.

According to IDA Ireland, companies that operate data centres in Ireland, from the biggest firms to smaller co-location providers, account for some 16,000 direct employees, extending to 27,000 when contractor numbers are factored in.

Other obvious winners amid the increasing number of Ireland’s data centres are owners, investors and developers.

A report by global law firm DLA Piper last year surveyed 100 senior executives on the outlook for the data centre investment market. A third said they expected investment in data centre infrastructure in Europe to jump more than 50 per cent in the two years to 2024, while three-quarters of senior executives predicted the overall value of their such investments in Europe would increase by at least 30 per cent by 2024.

Dublin headquartered data centre builder Winthrop Technologies, whose clients include Amazon and Google, saw pretax profits increase by almost sixfold to €86.17 million this year.

What about energy and emissions?

Central Statistics Office figures from June showed that data centres accounted for 18 per cent of total energy consumption in 2022, the same as all urban households.

EirGrid has estimated that data centres could account for as much as 29 per cent of all electricity consumed in the Republic by 2028.

Meanwhile, the State’s climate action plan aims to meet 80 per cent of electricity demand from renewable sources, as well as reduce greenhouse gas emissions by 42 per cent, by 2030.

Mr Deane said that these climate targets place a “huge constraint” on any increase to electricity demand.

What could happen next?

In the Government’s data centre enterprise strategy statement, it said that it is seeking to enable the “twin transitions” of digitalisation and decarbonisation, that “can and must be complementary”.

Mr Deane said that there is “no clear evidence that we can do both. Our analysis in UCC would point to the fact that it’s not possible to meet that growth in electricity demand, and to meet our greenhouse gas pollution reduction targets at the same time.”

He added that in weighing one against the other within Ireland’s emission reduction timelines, “something has to give”.

Ellen O'Regan

Ellen O’Regan

Ellen O’Regan is a contributor to The Irish Times