Tackling sustainability and the climate crisis

There is no denying that data centers will only increase in the years to come, and organizations want to ensure they can build data centers that can address sustainability and navigate the climate crisis.

By any measure, 2021 was a year of contrasts. Lockdowns were lifted but many organizations chose to remain remote to some degree. In fact, 2021 revealed even more than 2020, just how much the entire world relies on data centers to keep things running, whether working from the office or the home.

It was a rebound year from 2020, when infrastructure spending was stifled by 10 percent due to an industry-wide cash-flow shortage sparked by the pandemic. Yet, for data and the data center industry, the pandemic disruption was a major catalyst for accelerated digitization. Demand continued to grow, pushed in part by the pandemic workplace, prodded along by internet-enabled TVs and other smart devices, and nudged even further by the changing shape and size of digital information. And, most of the technology needed during the crisis was already in existence, supported by data center and telecoms infrastructure.

The crisis drove the rapid adoption of these technologies and sped developments, which were already underway. But what is most significant is that this change is likely to be irreversible. When you remove a catalyst, the reactions it caused do not reverse themselves. The increased reliance on data centers – and by extension the telecoms infrastructure which connects to them – is here to stay.

However, there are serious issues associated with this. A decades-long efficiency drive, which held data centers to steady demand levels while processing much more, has run out of headroom.

The economy and the society have gone full throttle on data, exactly at the time when there is a need to put the brakes on energy consumption, if we are to combat the climate crisis. There are no megabits without megawatts and as we demand and produce more and more data, energy consumption levels will rise.

Moving data around requires energy since all network elements involved depend on electricity to function. Today, data centers globally account for more than one percent of the world’s energy consumption. As the demand for electrical energy is set to soar, data center operators will face tough challenges in accessing scarce new energy production. The solution is to ramp up renewable-energy production, not only to meet new demand but to also displace current fossil-based production. So, it is not just the data center industry facing challenges. Energy network operators themselves will be stretched as they are asked to perform the magic trick of increasing supply, while simultaneously decommissioning fossil fuel plants.

Between all the stakeholders, the energy and data center landscape is now quite complex, requiring new policy and strategies. It would be naive to assume that India’s case is unique, it is perhaps just first to experience the confluences of trends.

As such, the challenge for data centers will no longer be one of efficiency, but one of sustainability. According to McKinsey, the APAC region is starting to act seriously concerning sustainability. Given the challenging tropical environment in large parts of APAC, the industry is coming together to share best practices, collaborate, and galvanize support for a positive impact on the environment. It is evident that sustainability is a crucial consideration in more ways than one. Customers want to buy from ethical, sustainable organizations, while the best talents are increasingly seeking out companies that care about the environment.

Going green is more than an industry buzz slogan. Microsoft has set an aggressive sustainability initiative with the ultimate aim of becoming carbon-negative by 2030. This will require a multi-faceted approach, examining everything from energy production to water usage. And while Microsoft is attempting to adopt a 100-percent reliability on renewable energy, that strategy simply cannot work without deep wells of energy storage on-site to hedge against fluctuations in wind and solar.

New metrics, new approaches to data center design and operations will fall under greater scrutiny, as will the energy consumed by the overall telecom infrastructure, which has an energy requirement many times that of the data center industry.

While some parts of the world have slid back into lockdowns and remote work environments, others have resumed normal operations in person and on campus. As data center providers race to keep up with the pace of change, in 2022 the operators and suppliers will actively pursue sustainable-energy strategies that utilize a digital solution that matches energy use with 100 percent renewable energy and ultimately operates on 24/7 sustainable energy.

Such hybrid distributed energy systems can provide both AC and DC power, which adds options to improve efficiencies and eventually allows data centers to operate carbon-free. Fuel cells, renewable assets, and long-duration energy-storage systems, including battery energy-storage systems (BESS) and lithium-ion batteries, all will play a vital role in providing sustainable, resilient, and reliable outcomes. Thermal systems that use zero water are in demand, and we will see refrigerants with high-global-warming potential (GWP) phased down in favor of low-GWP refrigerants.

With the metaverse expected to make headlines most of 2022, the need for real-time computing and decision-making becomes more critical. This real-time need is sensitive to latencies, and under the increasingly common hybrid working model employed by enterprises, public and private clouds, colocation, and edge computing, full-time manual management is impractical, if not impossible. Artificial Intelligence and machine learning will be critical to optimizing the performance of these networks.

However, it is important to note that the increase in AI will unavoidably increase computing and heat densities and, by extension, accelerate the adoption of liquid cooling. Among other challenges, lowering the barrier to entry places a premium on choosing the right vendors, platforms, and systems to trust.

Availability will remain the top priority, even at the edge, but lower latency is a rising need to support healthy buildings, smart cities, distributed energy resources, and 5G. Edge computing is expected to take over some of the workloads that have been spinning around in public and private clouds in the coming year. 5G networks worldwide will have the capability to do local breakout of data traffic to and from edge data centers and new types of applications and services will also find their way to the edge.

An edge data center is, from an overview perspective, just compute and networking capabilities, located geographically closer to the end user. Edge data centers can be used to host applications and services in the same way public or private central clouds can. Also, the data centers themselves can be made energy-efficient in many ways, including utilization of excess heat and even through sustainable local power harvesting, using solar panels and small windmills.

Energy-efficient edge data centers, reachable from mobile devices over 5G networks, will in all probability start popping up, at an increasing rate, in 2022. As a result, energy will also be saved in electricity and data-distribution networks around the globe since part of the data traffic and electricity will be transferred locally only.

Manufacturers, energy companies, electric vehicles, consumers, among many others, are driving the increased demand for edge computing. In contrast to hyperscale data centers, providers will need to become smaller and more decentralized to serve the edge market.

Some companies, such as Dell, are taking this to the extreme, with the advent of micro-modular data centers (MMDCs). These are small, portable, fully self-contained data centers, designed to serve the needs of one customer at a time. They often include their own cooling, power, and backup hardware, making them a turnkey solution to a company’s data center needs. Like any solution, MMDCs occupy a sweet spot of cost-effectiveness for their use-case, but technologies like these are bringing the edge ever closer.

2022 will see increased investment in the edge to support this new normal (remote work, increased reliance on e-commerce and telehealth, video streaming) and the continuing rollout of 5G.

According to the Tech Research Asia report commissioned by Schneider Electric on edge and cloud computing, IT professionals in the Asia-Pacific have started to embrace the hybrid IT approach. 28 percent of the IT leaders across APAC are leveraging edge computing across multiple sites, with an additional 38 percent more adopters coming up in the next 24 months. More than 50 percent of IT deployments will be local by 2023 – at the edge, in other words.

The sectors that have adopted the edge are diverse and range from essential services, such as healthcare to education. The financial services industry (FSI) is another vertical that has turned to edge computing, with 63 percent of organizations in the FSI sector having adopted it, compared to 22 percent of respondents that said they will move every workload to the cloud.

The case for edge deployments becomes even more compelling when one considers new applications on the horizon, such as autonomous vehicles and smart factories. Many of these applications will generate terabytes of data, which makes them less than ideal for the cloud. On the other hand, the edge is perfect for data-intensive tasks, such as data processing and cutting-edge AI systems.

Market dynamics. Worldwide, in the first quarter of 2021, among the 20 hyperscale companies, Amazon has been by far the biggest spender, followed by Microsoft, Google, Facebook, Apple, Alibaba, and Tencent, with a combined total of USD 38 billion on data center CapEx, representing a 31-percent increase year-over-year. “The hyperscale companies are once again breaking all records for their level of spending, driven by the continued aggressive growth of cloud and digital services in both enterprise and consumer markets,” said John Dinsdale, chief analyst, Synergy Research Group in June 2021.

The global data center CapEx is forecast to grow 17 percent in 2022, with CapEx for each of the top-4 cloud service providers – Amazon, Google, Meta, and Microsoft – predicted to exceed USD 20 billion during the year.

“The top-10 cloud service providers are planning to launch new data centers in more than 30 regions in 2022, and will increase their investments on new server architectures and network upgrades. The hyperscalers will also increase spending on AI infrastructure, enabling enterprises to deploy applications with enhanced intelligence and automation, and lay the foundation for the metaverse. We also anticipate the supply chain constraints to start easing next year, resulting in tailwind growth for both the cloud and the Enterprise markets,” commented Baron Fung, research director at Dell’Oro Group.

There is little debate on whenever the future of the enterprise will be public cloud or the data center, as companies are betting on both. Businesses and vendors of all shapes and sizes are transforming their IT environments and products for the multi-cloud and hybrid-cloud world, which is a mix of data center or on-premise solutions alongside multiple cloud offerings.

Gartner predicts that data center systems spending in 2022 will hit USD 207 billion, representing a 5.8-percent increase year-over-year. This year, data center systems spending is projected to be USD 196 billion, which would represent a nearly 10-percent increase compared to 2020.

The data center systems market saw little impact from the Covid-19 pandemic as companies invested in a mix of new infrastructure, like servers and hyperconverged infrastructure as well as hybrid cloud offerings. Experts say where customers place applications and workloads – either in the cloud or in the data center – depends on each specific app or workload, rather than a one-stop-shop for everything.

The data center market in India is among the fastest-growing markets in the APAC region. The need for data center infrastructure is growing exponentially, as digital technologies, 5G rollout, IoT-linked devices, cloud adoption, and data localization, as well as data consumption and generation by half a billion digital users, are reaching unprecedented levels.

The Indian data center sector is projected by JLL to need ₹27,750 crore over the next three years to meet the industry requirement for six million sq ft of development. CRISIL pegs a 25- to 30-percent compound annual growth rate, and the data center market to reach ₹37,500 crore by 2025.

In 2020, the data center industry in India consumed 102 MW of power, surpassing even the key markets of Europe and the US. And as the data center landscape continues to evolve, the industry is expected to grow exponentially to reach 1007 MW by 2023 from its existing capacity of 499 MW. The data center capacity rose 92 percent in the first half of 2021.

The telcos have a strong presence in the market and offer colocation and cloud-based services. Nxtra by Airtel currently runs 10 core and 120 edge data centers, or smaller data-processing facilities, across India. The company plans to source 50 percent of the power requirements of its data centers through renewable sources, and it recently commissioned solar power plants in the state of Uttar Pradesh and Maharashtra with more in the pipeline. Carlyle last year bought a 25-percent stake, with Nxtra owning 75 percent. Oracle is its cloud services partner.

Nxtra plans to invest ₹5000 crore by 2025 to further scale up its network. This includes new data center parks in key metro cities and data centers across 80 Indian cities. The investment will triple Nxtra’s installed capacity to over 400 MW.

Reliance Jio is planning to build a ₹7000-crore, 20-acre data center campus in Uttar Pradesh. The company is planning a 200MW, six-building campus that will be powered by Jio’s own renewable-energy plant. The center will consist of six interconnected buildings offering 30,000 racks capacity and 200MW of power.

In June 2021, Jio operationalized an initial 10 MW capacity of Jio-Azure cloud data centers in two cities, Jamnagar and Nagpur. Jio is now onboarding the initial group of pilot customers and plans to expand the data center capacity and service offerings to a growing number of SMEs and start-ups over the coming quarters. A partnership with Microsoft promises to bring cloud technology and infrastructure to millions of micro-, small-, and medium-sized businesses in India, while establishing cloud data centers to cater to their needs.

Having forged an alliance with Microsoft in 2019, this year the telco partnered with Google to boost its enterprise and consumer offerings as it plans to launch 5G services.

Vodafone Idea has one data center in Navi Mumbai.

Major cloud service providers including Microsoft, AWS, Google, Alibaba, Oracle, and IBM are developing hyperscale data centers across India. In July 2021, Microsoft committed to invest in a ₹15,000-crore data center campus in Hyderabad. This project will be executed in collaboration with Brookfield Infrastructure. Having entered the Indian data center market in 2015, it has three operational cloud regions in Mumbai, Chennai, and Pune.

Amazon announced its first data center in the Asia-Pacific region of India in Mumbai in 2016. Four years later, Amazon in 2020, announced the second AWS cloud region with an investment of ₹20,760 crore in Hyderabad. The project is scheduled for launch in 2022.

Google unveiled its second cloud region in Delhi in July 2021. A region is defined as consisting of three geographically distinct Google data centers. Its first, a Mumbai region was opened in 2017.

New market entrants are forging partnerships and offering efficient solutions at a reduced cost. These include STT, NTT, Brookefield-Digital Realty, Iron Mountain, Web Werks, EdgeConneX, Adani, Yondr, Everstone, CapitaLand, GDC, REIT Equinix, two clusters in Bengaluru at Electronic City and Whitefield, a collective 55-acre new builds in the NCR, Chennai getting investments from Yotta Infrastructure, CtrlS, Princeton Digital, STT, NxtGen and Ascendas India Trust; and with Pune, Hyderabad, Kolkatta in the fray, the total planned investment is pegged at ₹78,750 crore. The government data center projects, allocated through a tender process are also in the pipeline.

Leading infrastructure providers including Dell, IBM, Cisco, HPE, and Huawei are offering hyperconverged infrastructure platforms that combine hardware, virtualization, and management tools.

The Indian government is considering a National Data Center policy, which would offer class facilities as infrastructure. It is targeting an investment of ₹3 lakh crore in the next five years with its vision to make India a global data center hub. MeitY has introduced a ₹12,000-crore incentive scheme, which plans to provide up to 4 percent of capital investment, along with real estate support and faster clearances, to attract companies.

Given the country’s rich network connectivity, cost advantage, availability of skilled labor, low climate risk, and strong data protection laws, India is well-positioned to serve as a regional data center hub in Asia, and is likely to attract significant data investments.