Article Source: Strategy+Business
In Stockholm, heat recovered from data centers is captured and deployed to warm homes. Can other cities follow?
The COVID-19 pandemic has accelerated the already powerful trend of digitization. Since the beginning of 2020, an increasing array of activities have been driven online: work (virtual meetings), shopping (online groceries), and entertainment (streaming). These trends add up to more demand for the workhorses of the digital economy — especially data centers, the buildings that house computer, telecommunications, and storage systems. The global data center industry is expected to grow by US$284.44 billion between 2019 and 2023, representing a 17 percent compound annual growth rate (CAGR), according to a report by Technavio. PwC’s Global Entertainment & Media Outlook 2020–2024 projects data consumed will grow by 2,342 trillion megabytes, representing a 20.9 percent CAGR.
As the sector grows, so will the scrutiny from stakeholders demanding responsible and sustainable growth, because data centers are significant users of electricity and power. In 2018, data centers accounted for about 205 terawatt-hours of electricity usage — about 1 percent of global electricity output. That is the equivalent of the energy use of about 17 million U.S. households.
In recent years, data centers have made huge strides in energy efficiency. Although the amount of computing performed in data centers more than quintupled between 2010 and 2018, the volume of energy consumed rose only 6 percent. In part, data centers made this leap forward by shifting from old and inefficient data centers to newer facilities built by cloud-computing providers.
Although those gains are impressive, data centers still throw off a lot of emissions, and all those whirring machines (and the air conditioners that keep them cool) generate a lot of heat. As a result, data centers are becoming something of a challenge in city planning. There’s a desire to have more centers closer to population- and business-dense areas on the one hand, and a need to restrain emissions and tamp down electricity load growth on the other. Meanwhile, the heat generated by servers and the cooling equipment that enables them to run is wasted every single day.
As the construction of state-of-the-art and energy-friendly data centers has gained momentum around the world, the idea of reusing excess heat has been largely overlooked. But it shouldn’t be. Capturing and recirculating excess heat could make a vital contribution to smart and fossil fuel–free urbanization. It could transform data centers from a burden on the system and the environment to a benefit. That’s already happening in the Stockholm Data Parks (SPD), an initiative undertaken by the City of Stockholm, district heating and cooling provider Stockholm Exergi, power grid operator Ellevio, and dark fiber provider Stokab, which is offering greenfield sites for the construction of data centers.
By using pumps to capture and repurpose heat, SDP aims to supply 10 percent of Stockholm’s total heating demand. Three contracts have been signed in SDP Kista, an area west of Stockholm, with data centers that will provide a total capacity of 20 megawatts of heat. The first of those data centers will start delivering heat in the spring of 2021. This project serves as an example of how the circular economy can work. Companies using the data centers can improve their sustainability records while earning money from a by-product that otherwise would have gone to waste.
Stockholm, like many other areas in the Nordic region, already has a district heating system, which was built in the 1950s. A district heating system consists of several thousand kilometers of pipes that transport hot water underground and thus provide heat to buildings. The heat can be generated by power plants or other sources. “In the 1980s, we started recovering waste heat from Stockholm’s sewage water,” said Erik Rylander, who heads SDP at Exergi. That stream of waste heat already accounts for about 5 to 10 percent of Stockholm’s heating.
Any cost-effective heat recovery system has three basic requirements: (1) a heat source, (2) the infrastructure for transporting heat, and (3) customers interested in buying it (i.e., a market). SDP checks all three boxes. It was launched in 2017 and initially consisted of 220,000 square meters for data center investments, but is now considering expanding into an additional 400,000 square meters.
The heat source lies in the data centers. Heat pumps absorb thermal energy generated by the equipment and can bring the waste heat to a level of about 60 degrees Celsius (140 degrees Fahrenheit). As for infrastructure, the city has a pervasive 2,800 kilometer piping system that runs underground, moving hot water to buildings around Stockholm. “In each house, there’s a substation, a heat exchanger, and people [draw warm water] from that system and send it back cooler than it comes in,” Rylander explained. Exergi, an energy company, has the end users.
In 2017, Exergi began putting the pieces together. “What we had to do to make this work was recruiting the producers, i.e., data centers,” said Rylander. It was a matter of knocking on their doors and telling them that there was an opportunity to recover excess heat and turn it into heat for buildings — as well as to reduce cooling costs. Older data centers often cool their equipment by pumping air into the room through the floor, which is an inefficient method because it bathes the entire room in cool air, and only certain parts of the equipment require cooling. “Heat pumps and chillers are the same things: thermodynamic machines that move heat from one place to another,” said Tim Ashton, who is responsible for business development at Carrier Global, which supplies heat pumps to SDP. “The difference between the two is that with a chiller you throw heat away — you’re not using it. With a heat pump, you can do something with that excess heat.”
The opportunity to sign up wasn’t pitched as a matter of philanthropy or a means of increasing companies’ reputation for sustainability. “The philosophy behind Stockholm Data Parks is that it should be a good business case for all parties involved,” Rylander said.
Some participating firms prioritize the ROI aspect, and others are willing to accept lower returns for the sake of generating a positive sustainability result. Either way, the intent is that the proposition be market driven and not rely on subsidies. “As soon as you’re dependent on subsidies, you also become dependent on politicians and elections every four years,” Rylander said.
An open marketplace model
To ensure that the system works on an economic basis, Stockholm Exergi came up with a unique design. The company’s business model for buying data centers’ excess heat relies on what it calls open district heating, a unique offering that lets data centers, supermarkets, and other businesses that generate excess heat sell into an open marketplace.
Think of it as a sort of stock market for heat. There are many factors to consider when determining that price. Not all plants in Exergi’s system run on the same kind of fuel, so the cost of heat will vary. The price can also fluctuate when, for example, a plant is taken out of operation for maintenance, or in response to changing temperatures or levels of demand. Depending on the price, suppliers can determine whether they want to deliver. The price of the most expensive heat produced at a specific moment is the spot price. The hourly spot price for the following day is published at 4:00 p.m., and then data center operators can log in and decide whether to deliver heat or not.
Combining renewables with heat pumps and district heating offers a super-efficient, emissions-free way of circulating energy in cities. In Europe, other cities are starting to take note of the particular potential inherent in data centers as compared with other buildings.
Stockholm Exergi found that data centers are a much more efficient heat source than, say, office buildings or malls. “Data centers run 8,760 hours, a full year, so they are permanently generating some form of heat,” said Ashton of Carrier. By contrast, a shopping center or office typically runs only 2,700 hours per year and has a usage profile with peaks and valleys throughout any 24-hour period. (Malls tend to be closed at night, for example, and office buildings use less energy on the weekends.) Because they run so consistently, data centers provide a source of heat that is relatively constant throughout the day and the year — like a baseload power plant, which supplies a continuous amount of electricity.
In Amsterdam, which currently hosts 30 percent of Europe’s data centers, policymakers are looking at heat recovery as a way to smoothly integrate data centers into the urban environment, which fits the city’s sustainability agenda. In an interview in July 2019 with Computer Weekly, Stijn Grove, managing director at the Dutch Data Center Association, argued that “for the data centers and network operators, energy suppliers, and regional governments, it is time to use residual heat and contribute to the energy transition.”
Amsterdam has already replaced household heating systems in 10,000 public housing units with district heating systems. Erik Rylander has spoken with Amsterdam policymakers on several occasions about his experience in Stockholm.
As with any other innovation in power delivery, the prospect of capturing heat from data centers faces several obstacles. First, data centers have to be located near high-density population areas, so they have ready customers for their heat. There are technological challenges, too. For instance, most businesses will need to alter their process equipment to allow for the heat to be tapped off, and many will regard that as a risk.
In some areas, incumbents aren’t willing to disrupt their own business model. “If you look at the U.K., for example, gas networks are dominant,” Ashton said. “Then you need to ask yourself whether these dominant gas companies will allow us to take over with heat pumps. And of course, they have lobby groups influencing decision making in the political realm. And politics can either hold back or accelerate the mass adoption of heat recovery, or any kind of resource or technology, for that matter.”
Infrastructure is another major issue. The project in Stockholm worked only because of the extensive existing district heating system into which the data centers could feed their heat. In London, Ashton said, getting pipes to supply local heating with heat pumps means needing to dig 20 or 30 meters underground to avoid existing infrastructure, such as the subway.
Finally, the economics have to work. When looking at investments, most businesses seek a return on their investment — either in the form of improved revenues or in cost savings — in three years. Given current circumstances, experts say, it could take up to nine years to recover investments made in heat pumps. The payback time — and cost — drops dramatically when heat recovery is designed into new construction from the outset.
Ericsson, a Swedish multinational networking and telecommunications company headquartered in Stockholm, operates data centers inside SDP. Anders Forsman, a technical expert at Ericsson, is pleased with the company’s participation in the heat recovery plan. “During the design phase, there were initial discussions regarding heat recovery, since Stockholm has a highly developed district heating network. [The attraction] was a combination of increased sustainability and lower operational costs,” Forsman said. The site was designed and developed with heat recovery in mind. “It’s a win-win situation regarding both finance and [corporate social responsibility],” Forsman added. “We have moved toward circular energy usage, and at the same time, we have lowered our energy consumption and decreased the wear of our cooling plant.”
Although heat recovery in data centers might not make sense in all parts of the world — especially those with a warm climate — there are plenty of countries with a growing number of data centers, including the U.S., where the renewable energy heat is largely going to waste. If city planners play their cards right and invest early in the right district heating, not only will they be able to profit from a currently undervalued energy source, they will also make data centers more circular and efficient.