Data centre power demand outstripping renewables supply, warns Acciona director

AI data centres are piling on power demand quicker than renewables developers can add capacity due to grid constraints, said the commercial chief of Acciona Energía, who also explained why he thinks wind and solar can come out on top against nuclear.

Europe is currently grappling with record-breaking periods of negative power prices, with over 1,000 hours recorded in EU countries from January to August this year, triple the rate seen in 2022.

That is largely due to wind and solar farms being built quicker than new grid infrastructure needed to send power where it is needed, along with a lack of energy storage capacity to save power for when it is needed.

Whether the renewables sector can keep up with data centre demand is therefore to an extent “in the hands of the authorities” that manage grids and the permitting of new wind and solar projects, said Montes.

Montes said this has created a situation where there is an “imbalance between the appetite from the data centre developers and what the renewables industry can deliver.”

Buyers getting pickier, but vanilla remains on the menu

The demands that offtakers are placing on renewables developers are also changing as companies strive to hit decarbonisation goals.

Offtakers are becoming “more discerning” in what they want from renewables developers and deals they enter will become “more sophisticated” in the future, said Montes.

In particular, there is heightened interest in a new generation of 24/7 Power Purchase Agreements (PPAs), under which developers supply zero carbon electricity matched hourly to the demand of offtakers.

This is as opposed to more conventional PPAs where offtakers buy a certain amount of green power annually but not matched to their demand at a given moment, meaning they still rely on other power sources including fossil fuels.

The Climate Group last month launched a “24/7 Carbon-Free Coalition” of corporates including Google to help speed the move towards matching electricity demands with carbon-free power every hour, sourced from the same grid.

But Montes stressed there are still many companies yet to sign their first PPA, meaning that there is still “huge appetite for more plain vanilla deals.” For a while at least, “all flavours” of PPA will remain on the menu.

Appetite for 24/7 PPAs yet to be determined

Supplying 24/7 green power is not cheap and the PPAs for buyers will not be either.

For developers to fulfil such contracts they need to be “diversified in technology and in geography,” said Montes. “That carries a cost,” so there is a “testing process for the appetite” from offtakers for such deals.

On Acciona’s Iberian home turf in Spain and Portugal where it has a diversified mix of hydro, wind, solar and biomass assets, Montes said his company is “very well positioned” to meet such demands.

Acciona is now working on building more flexibility into its assets through hybridisation of wind and solar, as well as adding in energy storage solutions such as batteries to help flatten power supply and make it more dependable, said Montes.

Designing renewables projects that can deliver dependable and affordable power is “complex,” he said. It won’t be as simple as building a single wind farm with a huge energy storage facility next to it – “I don't think that's how it's going to work.”

‘Nuclear making lots of noise, but remains expensive’

The increasing interest in new advanced clean energy technologies from tech giants, most notably nuclear, could pose a threat to wind and solar developers who could see their market share squeezed by new technologies.

There has been “lots of noise” in the market regarding nuclear, said Montes, who said offtakers may be turning to this in some circumstances when they need complete certainty regarding power supply.

“If you do the math for some of the deals, they are paying a very high price for that baseload. A very high price.”

That can top $100 per megawatt hour, said Montes. Indeed, Microsoft may be paying $110-$115 per megawatt hour in a recent 20-year-long fixed price PPA to restart the Three Mile Island nuclear power facility in the US, according to US investment bank Jefferies.

“If that's the price at which these companies are ready to contract,” then Montes said there is “a lot of room” for renewables developers to design projects that can provide 24/7 power by adding batteries and hybridisation technologies.

“There's room for us to find solutions.”