The economic incentives in the data industry drive it to grab as much scale as it can, as quickly as it can.
The British Government is planning to “strip back” planning regulations in a new AI Bill that would create the automatic approval of giant data centres across the country, according to reports.
This would be a disaster in waiting for our energy security, a threat to our water resources, and a severe challenge to any ambitions we still hold for decarbonisation.
News of the planned changes came in the same week that both the IMF and the Bank of England warned of the dangers of an "AI bubble".
Incentives
The government is keen to tell us about how these new data centres will drive growth. But the reality is, any benefits from their operation for productivity growth will be minimal, and largely gobbled up by their US-based owners, not local economies.
They will create very few jobs. And the economics of the industry are such that in a few short years, these colossal investments will have depreciated far below their original construction cost.
Data centres are the backbone of the internet, processing the extraordinary volumes of information, from emails to cat videos, that make up the modern world wide web.
After years of comparatively modest growth, the arrival of 'artificial intelligence', crucially dependent on the analysis and processing of vast quantities of data, has turbocharged their use. 'Hyperscale' data centres are the very largest, consisting of 5,000 or more servers.
The companies investing in AI see size and scale as their key to commercial success, allowing more and more processing to be done. The economic incentives in the industry drive it to grab as much scale as it can, as quickly as it can.
Hyperscale
More processing requires more electricity, which accounts for part of a data centre’s resource demand. But as anyone who has used a PC laptop will know, when computer chips operate, they generate heat – and computer chips don’t work when they get too hot.
The result is that more than half of the power used in a typical modern data centre is used for its cooling system.
This has an additional problem. The fastest, most efficient cooling systems available run on water. But because the data centres are so big and because the chips get so hot, their demands for cooling system water are immense.
The figures are mindblowing: a hyperscale data centre today could require the same amount of electricity as a town of 50,000 people, and require a similar amount of water. Data centres may already be consuming 10bn litres of drinking water in the UK.
Parts of the country, like Buckinghamshire, that are already suffering from strained water supply, are the worst places to locate a new hyperscale data centre.
The economic incentives in the data industry drive it to grab as much scale as it can, as quickly as it can.
Strain
However, incredibly, there is as yet no national level guidance on planning for water use by data centres – and the operators themselves have been unwilling to give detailed information.
The industry likes to talk up its use of air-cooling, or to indicate how much of its water is actually recycled. But air-cooling and water recycling create their own additional energy demands. So, a system that uses less water will typically end up using far more energy.
This is becoming a pressing political problem in the US. In parts of Virginia, which today hosts over one-third of the world’s known hyperscale data centres, electricity prices have soared 267 per cent since 2020, driven upwards by the energy demands of the state’s data centres.
Last year, the state narrowly avoided the world’s first "byte blackout" when 20 data centres came offline, creating a surge of mismatched demand and supply in the system that threatened supplies to thousands of households.
It is likely to only be a matter of time before an older energy grid breaks under the new demands. Britain’s grid is one of those older systems under most strain.
Gobbling
The Trump administration recognises this problem, and is solving it in its own inimitable fashion.
Donald Trump hosted the Pennsylvania Energy and Innovation Summit in August, where chief executives from US Big Tech wined and dined with chief executives from US Big Oil – or, nowadays, Big Gas and Big Coal, both of which are being pushed as quick, easy solutions to energy demand from new data centres.
AI chipmaker Nvidia’s CEO has already warned the UK government that new gas generation will be needed here. However, the government’s own Committee on Climate Change does not, as yet, produce forecasts for the impact of data centres on the UK’s carbon budget.
All of this might be justifiable if the economic benefits were clear. They aren’t.
A US-owned data centre might impose significant costs on local residents, gobbling up available water and straining electricity systems.
Regulation
But the profits flow back to its owners. And they create very few jobs. A data centre is, by its nature, a massive stack of computer systems and very few employees are needed for it to run.
BlackRock’s huge £10bn data centre campus in Blyth, Northumbria, is expected to create just 400 full-time jobs - that’s an investment of £25m for each job created. You’re building the energy-guzzling equivalent of 50,000 homes for the jobs-creating equivalent of a high street office block.
And it’s an office block that will rapidly crumble. The chips become obsolete in a few years and need replacing. The building they’re in lasts a little longer.
The rapid expansion increasingly looks like a classic speculative bubble. What’s needed is tighter regulation, and clearer guidance on the construction and operation of significant data centres. What we are getting is the exact opposite.
This Author
James Meadway is a senior director at Opportunity Green, an NGO working to unlock the opportunities from tackling climate change using law, economics, and policy.
