Executive Summary
• The Irish transmission system operator (EirGrid) has identified security of supply issues due to anticipated data centre electricity demand.
• In response, the Irish energy (the CRU) is proposing to direct the system operators (ie, EirGrid and ESB) to prioritise data centre applications based on a number of criteria (including proposed location, ability to provide onsite generation and ability to reduce demand on request from EirGrid).
• The purpose of these criteria is to reduce security of supply risk by ensuring that future data centres minimise their burden on the electricity system.
Detailed Summary
EirGrid Concerns
EirGrid wrote to the CRU on 27 May 2021 identifying its concern with respect to anticipated levels of data centre electricity demand. Specifically, EirGrid noted the significant recent growth of data centre connection applications and the possibility that data centre electricity demand could account for as much as 25% - 33% of all electricity demand by 2030.
EirGrid considers that the anticipated increase in data centre electricity demand represents a security of supply issue and could negatively impact on Irish electricity customers.
CRU Response
Under Irish electricity legislation, the CRU is tasked with promoting the continuity and security of electricity supply and taking such measures as it considers necessary to protect security of supply.
As such, in response to EirGrid’s letter of 27 May 2021, the CRU issued a consultation paper (CRU/21/060) (the “Consultation Paper”) on 8 June 2021. The Consultation Paper contains a proposed direction to the system operators (ie, EirGrid and ESBN) regarding data centre connection policy.
The CRU notes the economic benefits of data centres but also the issues which data centres can cause with regard to electricity demand and security of supply and acknowledges the concerns raised by EirGrid in this regard.
Options to Mitigate Security of Supply Concerns
The Consultation Paper sets out three possible options to mitigate the security of supply concerns raised by EirGrid.
(1) Do nothing: The CRU does not consider this to be an acceptable option. The key reason being that if this approach is taken then demand will outstrip supply, leading to blackouts on the Irish electricity system.
(2) Moratorium on data centre connections: The CRU does not consider that ceasing to process data centre connection applications is appropriate because there are mechanisms which can be put in place to manage demand requirements.
(3) Connection measures: The CRU’s proposed solution is to direct the System Operators to prioritise data centre applications based on:
a. Location: Whether the proposed data centre located in a constrained or unconstrained region of the electricity system;
b. Onsite Dispatchable Generation / Storage: The ability of data centre applicants to bring onsite dispatchable generation (and/or storage) equal to or greater than their demand to support security of supply;
c. Flexible Demand (Onsite Generation): The ability of data centre applicants to provide flexibility in their demand by reducing consumption when requested to do so by EirGrid in times of system constraint through the use of dispatchable on-site generation (and/or storage) to support security of supply; and
d. Flexible Demand (Reduced Consumption): The ability of data centre applicants to provide flexibility in their demand by reducing consumption when requested to do so by EirGrid in times of system constraint to support security of supply.
The CRU notes that the ‘ranking’ of the above criteria has not yet been decided. However, the proposed direction at Appendix 1 does appear to suggest that location might be the most important factor.
Next Steps
Responses to the Consultation Paper should be submitted to electricityconnectionpolicy@cru.ie by Wednesday, 7 July 2021.
Following consultation, the CRU will issue a decision paper and a direction to the system operators. It is likely that EirGrid will then have to revise the Data Centre Connection Offer Process & Policy (DCCOPP) accordingly.
Commentary
It is clear that both EirGrid and the CRU have serious concerns with regard to the security of supply risks posed by the anticipated increase in data centre electricity demand. In particular, the Consultation Paper makes it clear that these risks and the issue of data centre electricity demand must be assessed in light of a number of key factors – namely, recent outages on the Irish grid, capacity market projects not being realised and of course Ireland’s ambitious target of having 70% of all electricity demand from renewables by 2030.
The Consultation Paper is likely to open up a wider policy debate around the economic benefit of data centres and how further data centre build-out can be reconciled with Ireland’s renewable targets.
If you have any questions on the Consultation Paper and how it might affect your business, please contact Garret Farrelly or Owen Collins.