The State of Renewable Energy for Data Centers

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Solar Energy

Solar energy accounted for 2.3% of U.S. energy consumption in 2020, according to the EIA. The good news is that the cost of solar panels has come down dramatically, from about $11 per watt generated in 2000 to $2.25 in 2020, according to Paradise Energy Solutions. Tax credits can reduce this cost even further. Declines are unlikely to continue at that rate, however, because nearly two-thirds of the cost of solar panels is installation. A panel of specialists convened by Bloomberg forecast that the cost of solar panels will decline another 34% by 2030. The EIA expects solar energy to account for 5% of all electricity generation in 2022, rising to 20% by 2050.

Utilities have begun to make significant investments in this area. Dominion Energy, for example, plans to add 15.9 GW of solar generation capacity over the next 15 years along with 2.7 GW of energy storage. Whereas more than two-thirds of solar electricity was generated by small-scale installations in the U.S. in 2011, the electric power sector is expected to generate 78% of supply in 2050, according to the EIA.

The advantage of solar energy for data centers is that the marginal cost of operation beyond the initial capital and installation is very low. However, there are many disadvantages. It takes a lot of solar cells to power even a small data center, and the cost of installation and real estate may not be worth the return.

A bigger problem is that solar cells only work when the sun is shining. This makes them a more attractive option for the southwest U.S. than for more temperate and snowier climes. Even then, a 24-hour operation would need to make significant investments in batteries, a technology that has developed more slowly.

Data center operators can increase their use of solar energy through the use of renewable energy credits and power purchase agreements, which are discussed below. However, as a standalone power source, solar cells are unlikely to be cost-effective until battery technology makes on-site storage practical. Hopes are high, though; data center operators surveyed by Vertiv in 2019 predicted that 13% of data center power would come from solar sources by 2025.

Wind

Wind generated 8.4% of electricity consumed in the U.S. in 2020 and it is on a steep growth curve thanks to its multiple advantages over other alternative energy and even carbon-based fuel sources. Its levelized costs of just over $30 per megawatt-hour for newly built projects make it cheaper than even conventional energy sources. Capacity grew at record rates in 2020 as nearly $25 billion was invested in 16.8 gigawatts of capacity. Ten states now derive more than 20% of electricity from wind.

The technology is moving ahead quickly; average capacity levels grew 40% over the last five years due largely to the use of larger turbines. At the same time, the total costs of wind projects fell about 40%. As a result, the average price of wind-powered electricity has dropped to around $20 per megawatt- hour in the interior “wind belt” of the country.

The abundance of wind, particularly in offshore settings, makes it one of the most promising alternative energy sources. A 2011 study by the National Renewable Energy Laboratory estimated that the U.S. has the potential to generate 37 petawatt- hours of electricity from wind, which is nine times the current total U.S. electricity consumption. The Global Wind Energy Council estimated that wind energy could satisfy 20% of the global demand for electricity by 2030.

Continuing price declines could make dedicated wind power viable for larger data centers within a few years.

The negatives are similar to those of solar energy. The source is intermittent, meaning that large battery farms would be required to provide stable power to a data center. For aesthetic and safety reasons, wind turbines are also usually sited away from populated areas, meaning that large investments in transmission lines must be made. Utilities are quite bullish on the technology, however, and plan to increasingly incorporate wind power into their existing grids. Respondents to the Vertiv survey expected that 8% of their power requirements could be met by wind by 2025. Watch this space, because continuing price declines could make dedicated wind power viable for larger data centers within a few years.

Geothermal Energy

Geothermal energy accounted for just .4% of U.S. energy consumption in 2020 but it has great promise. Derived from hot water one or two miles below the earth’s surface, the technology has many advantages. It’s renewable, consistent, and relatively compact. It’s available nearly anywhere. It’s considered the cheapest form of renewable energy and geothermal wells can even be used as heat sinks for cooling purposes.

Geothermal plants use about 11% as much land per gigawatt-hour as coal or solar and about one-third as much as wind farms. They emit one-sixth of the carbon dioxide produced by a natural gas power plant and 97% less than a coal power plant.

The supply of geothermal energy is practically unlimited and little of it has been tapped. The U.S. Department of Energy estimates that only about .7% of geothermal electricity resources have been accessed so far. It is the least-used form of renewable energy, comprising only 3.8 gigawatts of output in 2016 and growing at 2% a year. However, usage is projected to nearly triple to nearly 50,000 gigawatts in 2050.

While operating costs are low, the initial investment to build a power plant is higher than other sources and approaches that of coal-fired power plants.

There are also environmental concerns:

• The process of drilling and operating wells can consume large amounts of water and impact local water tables.
• The possibility of contaminants seeping into groundwater.
• Geothermal energy has been linked to earthquakes.

Geothermal energy is the wild card of renewable alternatives and bears watching. An important development was Google’s announcement last year that it will begin using geothermal energy to power its Nevada data centers, the first hyperscale cloud operator to do so. For most data center operators, the best strategy is to let the hyperscalers navigate the twists and turns of the promising technology but not bake it into their plans just yet

Download the entire paper, “Getting to Green: Paving a Sensible Path to Sustainable Data Centers,” courtesy of Kohler, to learn more. In the next article, we’ll look at the final two types of renewable energy listed by the U.S. Energy Information Association (EIA), as well as options for storage solutions that can reduce the need for diesel-powered generators. Catch up on the previous article here.