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This article is part of our Digital Power Series focusing on the deep connection between power and the digital economy. Throughout the series, we explore the opportunities that data centres and crypto miners bring to the National Electricity Market (NEM), green financing available for crypto miners, important digital security considerations for energy asset holders, the ‘tokenisation’ of energy related projects and relevant ESG considerations when acquiring a digital assets business.
We previously explored the opportunities for Data Centres and Crypto Miners to access green financing options. Now we turn our attention to examples of green projects which may assist crypto mining and data centre industry participants take advantage of green financing arrangements.
‘Green’ Financing Refresher
Green financing can be structured for the debt capital or loan markets. Most commonly it structured as:
To illustrate how operators in the data storage industry can implement financing arrangements to their benefit, we provide examples we have seen in the market.
Examples of data centre operators having used green financing to fund their projects include:
Equinix’s recent €1.1 billion green bond issue is an example of this approach. Equinix will use the proceeds of these bonds to fund green energy projects to support their data centre footprint. The interest cost of these bonds was 2.215% lower than Equinix’s existing Euro-denominated notes, and Equinix were able to realise €11.1 million in savings by refinancing its existing credit line.
Construction of Energy Efficient Facilities
Data centre and crypto mining operators can consider using green finance to construct new ‘sustainable’ buildings which meet one or more verified third-party standards. Green financing could also be available for retrofitting existing facilities to meet such standards. There are many standards in the market to consider, including LEED, BREEAM and NABERS. Certification under the relevant standards assists substantially to meet the requirements of green financing arrangements.
Energy Efficient Operations
If the refurbishment or construction of an entire facility is too much, then operators can look to invest in systems that improve the energy and resource efficiency of buildings, subsystems and land. For example, green financing could be available for the installation of onsite renewable energy systems (such as solar panels or hydrogen power), energy storage systems or more energy efficient cooling systems.
Thinking outside the box
Making these energy intensive industries more sustainable will require data centre and crypto mining operators to take new approaches. Examples of innovative thinking in the market include:
In addition to the more usual ‘green’ power sources, there have been recent examples of crypto miners thinking differently when it comes to sourcing their energy, including Mawson’s bio waste Power Purchase Agreement in Byron, NSW. These projects would lend themselves to green financing options in a similar vein to those made by the data centre industry.
Another avenue of ‘green’ financing is sustainability linked loans – where pricing benefits are linked to a company meeting certain specific KPIs.
Examples of KPIs in the data centre industry include:
There have also been examples of KPIs linked to the energy efficiency of data centres referred to as ‘power usage effectiveness’ (PUE). PUE is the ratio of energy used by the data centre divided by the energy used for computing.
It is important to note that green finance KPIs can also fall outside the traditional ‘green’ space. For example, KPI’s such as diversity and inclusion and other social goals have also been used by data centre operators to access green financing operations.
The lack of standardisation of sustainability metrics makes it difficult to compare progress between operators. There is a push to standardise these metrics across multiple industries to assist with their adoption and progress sustainability. For example, Schneider Electric have recently proposed 23 key environmental sustainability metrics in 5 categories with respect to data centres.
There is a significant opportunity for crypto mining and data centre operators to:
With socially responsible investors and financiers growing in number and traditional investors increasingly looking to the sustainability of their investments, crypto mining and data centre should be exploring ways to be green.
At Hamilton Locke, we advise across the data centre and crypto mining project life cycle as well as the energy project life cycle. Our team assists in project development, grid connection, green financing, renewable energy purchases and the construction of projects, including the selling and operating of projects.