Energy supply problems and planning hurdles are forcing global technology companies to rethink Ireland’s role as a data centre hub, just as demand soars for power-hungry artificial intelligence.
With its low taxes, temperate climate and fibre cable access to the US and Europe, Ireland was an EU pioneer of data centres, and they are a key part of its flourishing tech sector. But the country’s reputation has taken a hit.
“We have gone from leader to flounderer,” said Garry Connolly, founder of Host in Ireland, a digital infrastructure lobby group. “Now we’re not even on the list. It’s such an own goal.”
Government concern over the sector’s huge energy consumption and the electricity grid’s ability to supply all users has halted construction of data centres in the greater Dublin area since 2021, as Ireland seeks to meet legally binding climate targets. By 2032 they could account for 30 per cent of the country’s total electricity demand, forecasts grid operator EirGrid.
Amazon Web Services (AWS), the cloud subsidiary of online retail giant Amazon, said it “hopes” to expand in Ireland “if conditions allow”. But it is looking elsewhere, investing more than €40bn into new data centres in Germany, Spain and the UK.
Ireland also stands to miss out as tech companies begin to consider nuclear power for the long-term needs of generative AI, according to one tech executive. The country has banned nuclear development since 1999.
“The general message [from Irish policymakers] is that there will be no more data centres until the end of the decade,” said Peter Lantry, managing director for Ireland at Equinix, a US data centre operator.
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In recent decades, Ireland’s economy has thrived on investment from big multinationals, which contributed €52bn in gross value added between 2010 and 2018 and employs 140,000 people, according to the latest official figures. With data centre construction on hold at home, Irish companies are also exporting their knowhow, building data centres across Europe.
While green campaigners criticise data-centre users such as Microsoft, Meta and Google for their vast energy consumption, the companies’ corporation taxes have fuelled big government surpluses, so keeping them sweet is important.
An updated policy for large energy users, set to be published by energy regulator CRU in mid-October, aims to balance decarbonisation of the grid with the needs of a booming economy and will offer signals on Ireland’s future attraction as a data centre hub. It is expected to contain tough conditions for low-carbon development.
“The review . . . will decide whether members are going to be able to expand in Ireland to create jobs or focus on investing elsewhere,” said Michael McCarthy, director of Cloud Infrastructure Ireland, which represents the data centre interests of Google, Microsoft and AWS. “We simply cannot pause growth and resume when conditions allow.”
Ireland’s 82 data centres used 21 per cent of the country’s electricity in 2023 — more than all urban households and a fourfold rise in the past eight years. The proportion of power used by the country’s data centres is far higher than in other EU states.
Germany, Singapore, China and the Dutch city of Amsterdam have also imposed restrictions on new centres in an attempt to meet emissions reductions targets.
Ireland has failed to develop an offshore wind industry more than two decades after completing its first project. With insufficient green power to meet demand, environment minister Eamon Ryan says the country wants to facilitate data centres but that they must comply with emissions reduction commitments and not jeopardise energy supplies for other users.
According to the Sustainable Energy Authority of Ireland, 41 per cent of Ireland’s electricity supply came from renewables — mostly onshore wind — in 2023, up from almost 39 per cent in 2022.
Ireland’s cumbersome planning system is another hurdle: it allows appeals from people not directly affected by proposed schemes and often triggers years of legal wrangling that one corporate lawyer likened to navigating through “treacle”.
He knew of two tech clients planning to relocate abroad. “What we turned our nose up at here, other countries have rubbed their hands with glee and taken,” he said.
“Ireland has massively underinvested in infrastructure, especially energy and electricity,” said another lawyer, citing two more businesses considering locating data centres in the US or mainland Europe because they found Ireland’s energy and planning environment “too hostile”.
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Legislation to reform the system — including a streamlined objections process and swifter decisions — is awaiting final parliamentary approval.
Ireland is struggling to build critical infrastructure despite its bumper budgets, According to the Irish Times, Apple executives have warned the government that such problems could hamper the company’s growth plans near its European headquarters in Cork amid “aggressive” efforts from other countries to lure Irish-based multinationals away.
Apple has stressed it remains committed to Ireland and expected to open expanded facilities in Cork next year.
“We should be at the top [in Europe],” said Lantry, who also chairs Digital Infrastructure Ireland, a group of nine data centre operators and developers. “However, Madrid, Milan, Warsaw will all pass us fairly quickly and [so it will continue] if Ireland keeps blocking digital infrastructure growth.”
While energy-guzzling data centres have attracted criticism, the industry says it can help can help alleviate grid bottlenecks. In future, data centres would also be long-term customers for renewables, which would contribute more to Ireland’s economy than simply exporting green power, they say.
At a data centre in Blanchardstown, north-west Dublin, which Equinix has built and operates for a multinational he declined to name, Lantry pointed to an industry innovation: its own gas-fired plant.
Power from the back-up unit has allowed EirGrid to free up electricity for other users when demand has surged. The plant could also be configured to run on hydrogen in future, Lantry said.
Chris Kavanagh, an energy expert at consultancy Baringa, said: “[Data centre] companies are some of the biggest buyers of renewable energy. They can be supportive of . . . the twin transitions with decarbonisation and digitalisation.”
McCarthy said Ireland’s data centre operators had committed to taking 1,200MW of renewable energy, adding: “If the large energy users’ decision by the regulator kills off the data centre industry, that could seriously undermine the renewable energy industry.”
Data centre operators believe sufficient offshore wind will not be available until the mid-2030s. Meanwhile, Dublin’s city council is seeking to use data centres to help with energy sustainability.
Opposite a shopping centre in Tallaght, a south-west Dublin suburb, big black pipes run from an AWS data centre into a building next door.
Inside, machines hum as waste heat from the data centre is converted into warm water and piped to a district heating scheme serving a university and public buildings and set to be connected to 160 affordable flats under construction.
“We have data centres knocking on our doors every day — this is part of the solution to make [them] more sustainable,” said Donna Gartland, chief executive of Codema, Dublin’s non-profit energy agency which is pioneering the district heating programme.
But data centre operators say the current impasse must end. “We want a signal to the market . . . [from CRU] that Ireland is open to business,” said McCarthy. “It’s not too late.”
Data visualisation by Clara Murray
