Data center infrastructure and energy gentrification

Panel: 2. Policy innovations to ensure, scale and sustain action

Authors:
Frans Libertson, Lund University, Sweden
Julia Velkova, Linköping University, Sweden
Jenny Palm, Lund University, Sweden

Abstract

Which societal functions should be prioritized when the electricity grid reaches its maximum capacity? This highly relevant question, for sustainable urban development in general and for future energy policy in particular, has in recent years become an issue of debate in the southern regions of Sweden.

Due it its very favorable conditions, Sweden has become a hot spot for building data centers, and the country has attracted a vast array of tech companies. Concurrently, certain regions in Sweden have during recent years experienced a lack of grid capacity, which in combination with the arrival of data centers and energy-intense digital infrastructure have obstructed the operations of both domestic industries and public transport.

In the fall of 2019, the Swedish municipality of Staffanstorp announced that it had been selected by Microsoft as the site for its third data center in the country. Described by the town’s mayor as the largest corporate project in the history of Staffanstorp, it carried the promise of making Microsoft into one of the largest employers in the municipality while also contributing to local development. This decision was made behind closed doors by local officials without any opposition, against the backdrop of the regional electricity-supply deficit. Concurrently, a number of projects and industries in the same region have been negatively affected by the energy shortfall. An industrial firm that recycles plastic was compelled to rethink its expansion plans, as the regional DSO could not guarantee the electricity supply. Similarly, a local company that manufactures ventilation systems is now looking to expand elsewhere for the same reason. Likewise, a commercial bakery was unable to expand its production due to the DSO’s inability to guarantee the electricity supply.

Another example is the harbor of Ystad, a major maritime node in Southern Sweden, which has warned that the capacity deficit will significantly impede its operations as it will be unable to cater to the electricity demand of docking ships during peak hours. Other transport infrastructure in the region is also exposed. The regional DSO has raised concerns about how prevailing supply conditions will also impact the electrification of two new train tracks in the region.

By introducing the term energy gentrification, we reflect upon the negotiations that arise from grid capacity limitations in relation to introducing energy-intense digital industries in local communities. Energy gentrification may occur when energy intense industries establish new facilities which affect the energy supply in the region to the extent that the operation of local businesses is significantly impeded or entirely liquidated. In its most extreme form, energy gentrification can also affect the energy supply of the communities located in the vicinity.

The perspective of energy gentrification highlights the significance of recognizing that data centers and other energy-intense industries do not only constitute opportunities. Policy makers must realize that these facilities also constitute obstacles that can put enormous strain on the grid, which may engender further consequences for local communities and regional businesses.

We believe that current policies avoid ethical inquires by relying on market mechanisms only. Instead, there must be a societal dialogue about which functions of the society that ought to have priority should the electricity supply be limited. Having an assessment agency which assesses the nature of the energy users before granting them access to the grid could be a step in the right direction.

This agency should also be as inclusive as possible to ensure that all interests are being represented and avoid unequal power relations. From a short-term perspective, the strain on the grid could to some extent be relieved if data centers were mandated by law to have capacity to be at least partly self-sufficient in terms of their energy requirements.

Watch presentation