Can Data Centres Stabilise the Grid?

Introduction

The energy transition does not only require new and innovative ways to generate electricity, but also require innovative solutions to strengthen the electricity grid. In this article we explore how to strengthen the grid with batteries located within data centres, we look at the recent grid connection of a Microsoft data centre’s battery in Ireland and consider the potential application of this technology in Australia.

Case Study: Ireland

35% of Ireland’s electricity is generated by 400 wind farms. While amiable, this is placing increasing pressure on grid operators to balance supply and demand, and maintain grid stability.

The lithium-ion batteries at a Microsoft data centre in Dublin is providing an innovative solution to this conundrum.  While the batteries are typically used as a backup generator for the data centre in the event of an emergency, they have now been tested, certified and approved to connect to the grid, provide system strengthening services and provide access to stored renewable energy capacity.

The multiple benefits to using data centre batteries in this way include:

• Additional storage investment: As the investment costs for batteries are high, acceptable revenue projections for grid connected batteries can be difficult to achieve. Developing grid connected batteries with large industrial off-takers can however result in an:
  • increase of investment in the development of energy storage systems;
  • increase in the bankability of energy storage systems; and
  • acceleration of the development of energy storage systems that provide grid strengthening services.

• Decarbonisation of the Grid: Power grid operators have historically had to rely on fossil fuel-generators to maintain a store of excess power (a “spinning reserve”) that could be used to respond quickly to power supply shortages. If batteries are used to store excess power, this reduces the ‘spinning reserve’ requirement and the accompanying fossil fuels. Diminishing fossil fuel contributes to the decarbonisation of the power sector. Baringa, a leading energy advisory firm, suggests that up to two million metric tons of carbon emissions (a fifth of Ireland’s projected total emissions in 2025) can be avoided by making the switch to batteries.
• Uninterrupted Power Supply:  In its current role batteries ensure an uninterrupted power supply to the Microsoft data centre.  When this role is expanded to the grid, consumers will receive the same uninterrupted service without the associated high maintenance costs of maintaining a ‘spinning reserve’, and the need for renewable energy generators to adjust their dispatch due to grid fluctuations will be reduced.
• Potential for improvement: In the future, data centre operation may be supplemented further by liquid immersion cooling for servers and the use of hydrogen fuel cells for backup power generation.

Developments in Australia

In 2021, we wrote about the rise of batteries and dispatchable renewables. On 6 July 2022, the Australian Renewable Energy Agency (ARENA) invited 12 projects to submit applications for the $100 million Large Scale Battery Storage Round, which offers funding for grid scale battery energy storage projects capable of providing essential system services to the electricity grid. At the time ARENA stated that it is increasingly important to find new ways of delivering system services whilst preserving the stability of the grid.

On the data centre side, Quinbrook Infrastructure have recently unveiled plans for a $2.5 billion ‘Supernode’ data storage project in Brisbane. The project will be fuelled by renewable energy, and the incorporated 2,000 MW battery will help stabilise the grid in the surrounding area of Moreton Bay. To be constructed in four phases, the first phase of the Quinbrook project is expected to commence by the end of 2022 and reach completion by the end of June 2023.

Conclusion

The Irish project demonstrates how large electricity consumers can mobilise investment for battery development, which developments can double as grid stabilisers. Quinbrook Infrastructure’s ambitious ‘Supernode’ shows that funding is available for such projects in Australia and that there is profit to be made from such arrangements.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.