Data centre development has become a significant industry in Ireland over the last decade. In this article, we look at the main challenges faced by the industry and the ways in which these challenges are being addressed.
The Future of Data Centres in Ireland
Industry Challenges and Changes to Come
1. What are the challenges I might face when trying to a develop data centre in Ireland?
- Power Supply: The greatest challenge facing data centre developers in Ireland is accessing power. Dublin established itself as a global data centre hub through a 10-to-15-year period of rapid data centre development. However, a lack of investment in the national electricity grid during this time, means that industry demand currently far outstrips power supply. In 2021, the Commission for Regulation of Utilities (CRU) slowed the rate of data centre development by publishing a formal Direction, introducing strict criteria for connecting data centres to the grid. We are now seeing change in this area as, earlier this year, the CRU issued its Large Energy Users Connection Policy - Proposed Decision (LEU Policy). This is aimed at addressing the competing demands of power supply and development by introducing new criteria for data centres seeking a demand connection. Chief among these is a requirement to provide dispatchable onsite or ‘proximate’ generation and / or storage capacity which matches a user’s Maximum Import Capacity (MIC). A final decision on the LEU Policy is awaited. Grid access is arguably less challenging outside the Greater Dublin area, but other challenges, such as access to telecoms and water infrastructure, are more pronounced in these areas.
- Planning Process: The planning process can be slow moving and Ireland's planning system has been criticised for allowing significant opportunities for objections and judicial review of decisions. The combination of these factors has hampered the built environment sector in recent years, including the data centre industry, adding significant delays and increased costs for developers. Developers should however see an improved planning system once Ireland's new Planning and Development Act 2024 (2024 Act) is fully commenced. The 2024 Act will establish mandatory timelines for decision making, which should speed up the process, as well as introducing a 'sufficient interest' test for judicial review applicants, which should lower the impact of objections on the planning process.
- Latency: While Ireland’s location is advantageous for connecting Europe and North America, latency issues can arise depending on the data centre’s location within Ireland. Proximity to key infrastructure, such as subsea cables and connectivity hubs, is essential to minimise latency and ensure optimal performance. In Ireland, much of this infrastructure is located on the east coast. As a result, developers can now face intense competition for suitable land on the east coast.
2. How is Ireland addressing the challenges of power supply and the planning process?
With the power supply challenge, the approach the CRU takes on its LEU Policy will be vital in setting parameters for further data centre development in Ireland. Fundamentally, however, the power supply challenge requires investment in grid infrastructure. Prioritising funding for grid upgrades would alleviate constraints and allow more data centres to connect to the national grid. This is a critical point in time for the industry in Ireland, and grid upgrades need to be rapidly implemented if Ireland is going to remain a destination of choice for developers. The emergence of AI has accelerated the pace of data centre development globally, and the industry will increasingly look elsewhere if Ireland cannot deliver power supply.
The planning/consenting process will be made quicker through the introduction of mandatory timelines for approving planning applications under the 2024 Act. Other changes that would improve the planning process in Ireland are:
Consolidation of approvals: Currently, developers generally have to apply to local authorities for planning permission in the first instance. With over 30 separate local authorities, a range of different decisions have been made on planning applications relating to data centres, which has created a degree of uncertainty for developers and investors. A nationwide framework for assessing data centre applications would streamline the process and allow for more consistency in decisions by different local authorities.
Zoning for data centre development: Designating specific zones for data centre development, with pre-approved planning frameworks, could significantly reduce approval timelines. These zones could be strategically located near renewable energy sources and connectivity hubs to address both power and latency concerns.
Fast Track for Sustainability: A fast-track planning process for projects meeting certain criteria, such as those with a strong focus on sustainability, could further incentivise development.
3. What other changes could be made to help the data centre industry grow and stay competitive in Ireland?
The key changes needed to grow the data centre industry are addressing power supply and the speed of the consenting process. However, developers should also be keenly aware of the following areas:
- Private Wires: Allowing data centres to source power directly from renewable projects via private connections would enhance their sustainability and reduce reliance on the national grid. This would not only help to address power supply challenges but also align with Ireland’s renewable energy targets, making the industry more resilient and sustainable. In addition, this could result in more demand for renewable energy and therefore be a boost for renewable energy developers. The Irish Government launched a consultation on private wires in 2023 and a policy decision from that consultation is expected imminently.
- Financial Incentives: Financial incentives, such as grants or tax breaks for developers, could attract further investment and encourage innovation. These incentives could be linked to sustainability criteria, rewarding projects that integrate renewable energy or adopt energy-efficient designs. This would not only promote growth but also ensure the industry remains competitive on an international scale.
- Regional Development: Encouraging more data centre development outside the Greater Dublin Area, through incentives or dedicated zoning, could create jobs, stimulate local economies, and reduce pressure on Dublin’s infrastructure. To date, data centres have been heavily concentrated in Dublin, which has led to strain on the national grid. This approach would also improve latency by distributing connectivity hubs across the country.
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