How Germany’s $66 billion data centres shape history at home and abroad

The world’s fourth-largest economy, Germany, has over the centuries shaped history at home and abroad. As the new digital age takes over, Germany has built one of the most robust markets for investment. But how much is in it for data centres? João Marques Lima finds out.

The reunification of Germany has been one of the greatest accomplishments of democracy in modern times, a contrast to some of the events we have experienced in the past years and months.

When the Brandenburg Gate officially opened on December 22, 1989, it marked not only the fall of Communism in Europe but also the beginning of a new era for Germany. One of unity and more equality for both citizens and their economy. It wouldn’t, however, be until November 1991 that the full extent of the wall would be completely torn down – with exception to a few historical points along its route still standing today.

Within those two years of ‘transition’, Germany’s economy improved as people and goods could freely cross in and out of West Berlin and East Berlin, and beyond that, West and East Germany were no longer kept apart (the Reunification was officialised on October 3, 1990).

Its influence became more prevalent and could be felt throughout Europe and the world. Having been a founding member of the European Union in 1957 – known as the European Economic Community then -, Germany was, for nearly 40 years, also at the centre of the Cold War between the US and the Soviet Union as Western Germany joined the NATO forces and Eastern Germany, the Soviet Union.

With Germany reunified in 1990, the Cold War over in 1991, and the wall down by the end of that year, the path was cleared for Germany to rebuild and settle its status as an economic powerhouse, which today, with a population of almost 83 million people, is the world’s 4th largest at nearly $4tr, according to the International Monetary Fund. Of that, around 8% is generated by the nation’s digital economy.

Despite being almost 100 years late to the 4th Industrial Revolution in the 19th century, the end of the 20th century transformed Germany forever, and the country is today one of the most advanced technologically at the consumer, enterprise and manufacturing levels.

Digital Economy

A boom in digital services and adoption in the 2000s has led Germany to one of the highest internet penetration rates in the world at 86.8% in 2019, according to Internet World Stats.

The Federal Government has since the beginning of the century made it clear that cloud would be an important part of Germany’s economy, especially within the manufacturing industries. Germany was in 2019 the fourth-highest spender on cloud computing technologies, with $9.5bn invested, according to IDC. In first is the US at $124.6bn, followed by China ($10.5bn) and the UK ($10bn).

According to BSA’s latest Global Cloud Computing Scorecard published in 2018, Germany ranks first in the world in terms of preparedness to support the growth of cloud computing, followed by Japan in second, the USA in third, the UK in fourth and Australia in fifth with Singapore, Canada and France coming up next.

Commissioned by Digital Realty and delivered by 451 Research, the analyst house predicts that over the coming two years, German companies will increase their emphasis on cloud transformation as they seek new services. 28% of German companies already use hybrid cloud, 20% are evaluating it, and 29% plan to introduce hybrid cloud in the coming 12-24 months. Furthermore, 36% will adopt private-cloud-based IaaS and 36% public cloud (AWS, Google, Azure and now also on Alibaba’s Germany region).

All German households have internet speeds of at least 50Mbps. Elsewhere, the French government, for example, expects all households to have at least 30Mbps by 2022, while Spain plans for the same by the end of 2020, while Asian countries such as Singapore, Japan and South Korea offer some of the world’s best internets, according to the Software Alliance.

Additionally, Germany is Europe’s largest telecom market and has a mobile phone penetration of 130% with nearly 110 million devices in use.
With more consumption, data centres have become over the past decade a pillar to daily life, with Germany being one of the world’s largest colocation markets.

$66BN in Data Centre Investment

Being a data centre market in one of the world’s strongest economies brings with it a heavy investment. Statista estimates that $52.4bn have been poured into data centre projects in Germany just for the period between 2015 to 2019. The think tank forecasts data centre investment to reach $13.3bn in 2020. Figures that are substantiated by DLA Piper’s European Data Centre Investment Outlook Report, which says that Germany is likely to see the biggest investment growth in the next two years compared to other European countries.

In its survey, 92% of debt providers and 72% of equity provides said that will offer the most bankable investment opportunities for data centre projects over 2020 and 2021. Notably, 48% of equity investors also expect the UK to see some of the biggest investment growth. Meanwhile, 48% of debt providers think Ireland will see the greatest growth, despite few describing it as offering the most bankable opportunities.

Frankfurt is, in fact, Europe’s third-largest data centre market and is part of the FLAP group of cities that includes Frankfurt as well as London, Amsterdam and Paris. Interestingly, Frankfurt alone has more data centre facilities than most other EU countries combined.

Beyond Frankfurt, Berlin, Munich, Hamburg and Dusseldorf are four other destinations attracting data centre construction to serve Germany’s largest cities and the regions where they sit.

According to Cloudscene, Germany is home to 426 data centres, of which Frankfurt accounts to 106, followed by Munich (49), Hamburg (40), Berlin (30), Dusseldorf (25), Stuttgart (24), Nuremberg and others. An additional 76 facilities are deemed as “regional” and spread all over the country.

The two largest providers are Equinix and Digital Realty/Interxion, with Colt Technology Services, euNetwork, GTT Communications, CenturyLink, Deutsche Telekom and Cogent Communications also englobing a substantial part of the nation’s data centre portfolio.

DE-CIX, Megaport and NL-ix are just two of the 20 network fabric operators in the country.

A Question of Power?

When it comes to energy, Germany has one of the highest ratios of renewable energy production in Europe and in the world. According to the AG Energiebilanzen e.V. (AGEB), an energy working group established in 1971 in Essen by seven associations from the German energy industry and three institutes active in the field of energy research, Germany produced in 2019 242.6 TWh of power using renewable sources. A further 363 TWh were generated using other sources including lignite, natural gas, nuclear, hard coal, oil and others.

Renewables account for 40.1% of the country’s energy production, with wind onshore producing 16.8% of energy, followed by solar power (7.7%), biomass (7.4%), wind offshore (4.1%), hydropower (3.1%) and others.

The renewables share in gross power consumption has tripled from 2007 to 2019. Nevertheless, Germany still lags on the share of electricity from renewable sources in gross electricity consumption, as only around 40% of the country’s energy consumption is deemed renewable energy. Countries such as Norway, Albania, Sweden, Denmark, Latvia, Montenegro, Portugal, Croatia and Romania, are all ahead in terms of renewable energy consumption.

For data centres, Germany offers enough electricity production to keep the lights on and take advantage of renewable energy. Cloudscene says that data centre consumers enjoy a range of PUE scores between 1.12 and 1.50.

The average PUE for German data centres is 1.34. German colocation facilities provide over 438.51 MW of power and have a range of rack power options from 0.90 kW to 25.00 kW.

―Data Economy