- Rising prices and volatility in the energy markets could make hyperscalers take another look at renewables
- But analysts said long-standing challenges like interconnection queues and storage haven't gone away
- In the U.S., natural gas is more insulated from import issues hitting the oil industry
A fresh war in Iran has gas prices rising, presenting a potential problem for power hungry data centers. But will it be enough to force them back into the arms of renewable energy?
Sustainability was a huge focus for cloud giants in the past 10 to 15 years but seemingly took a back seat when it became apparent the compute demands of AI would require much, much more power. The focus in recent years has shifted to both natural gas as a short-term solution and nuclear power as a longer-term bet.
With fossil fuel prices now rising, it would make sense for data centers to eye renewables with renewed vigor. But will they?
“The most likely outcome is not a ‘back to all renewables’ kind of situation, but more of a diversified mix: more renewables and storage for cost and hedging, plus continued reliance on fossil and emerging nuclear for reliability and speed to market,” Gartner Director Analyst Autumn Stanish told Fierce.
She explained that while rising fossil-fuel prices and market volatility related to the war have strengthened the business case around renewables and battery storage, these factors haven’t removed some of the long-standing challenges around renewable use. The primary hurdles, Stanish said, are grid interconnection queues, transmission bottlenecks and a lack of multi-day power storage for renewable generation sources.
“Those hurdles won’t disappear just because gas becomes more expensive,” she said.
Hyperscalers have signed a handful of new renewable power purchase agreements (PPAs) in recent months spanning the globe. But in the U.S., the government has turned its attention away from wind and solar to instead focus on fossil fuels.
At the end of December, for instance, the U.S. Department of Interior announced it was pausing all leases for offshore wind projects under construction. A February report from the New York Times found more than 60 wind and solar projects faced delays due to permitting under the current administration.
“Renewables do offer advantages in terms of deployment timeline and carbon footprint. However, the current administration's focus on fossil fuels shows no signs of slowing down,” Dell’Oro Group Research Director Alex Cordovil told Fierce. “But in terms of actual data center power design, we expect natural gas to play a much larger role than renewables going forward.”