Germany: Challenges for Data Center Operators
Federal Ministry for Economic Affairs and Climate Action presents draft bill for an Energy Efficiency Act
On 18 October 2022, the Federal Ministry for Economic Affairs and Climate Action (BMWK) presented a draft bill for an Energy Efficiency Act (Draft Bill). This is already being voted on by the individual federal ministries. The Draft Bill provides for considerable efficiency requirements for data centres in Sections 23 et seq. This applies in particular to data centres that start operations from 1 January 2025. Our experts for energy law and data centres, Dr Markus Böhme, LL.M., Dr Carsten Schulz and Dr Sabine Kaben, now summarise the key aspects of the Draft Bill and consider the requirements for data centre operators.
Question: What is the background to the Draft Bill?
Answer: The Coalition Agreement of the governing parties of November 2021 stipulates that data centres in Germany are to be operated in a climate-neutral manner by 2027. Publicly operated data centres are to introduce environmental management according to EMAS (Eco Management and Audit Scheme) by 2025, according to the Coalition Agreement. In addition, energy consumption in Germany is to be reduced by 45 percent by 2045 and Germany is to achieve greenhouse gas neutrality.
Due to the rapidly growing demand for computing power and storage capacities, it can be assumed that in the case of a continuous data centre boom, the already high electricity demand will double by 2030 - to up to 35 billion kWh/a. By way of comparison, this corresponds to the annual energy demand of around 9.3 million households. The new Energy Efficiency Act is intended to pave the way towards achieving this goal. In this respect, whilst not just data centres are addressed by the Draft Bill of the new Energy Efficiency Act, they are explicitly targeted against the background of the high and further increasing demand for energy.
Question: What concrete requirements does the Draft Bill for an Energy Efficiency Act envisage for data centres?
Answer: The Draft Bill provides for considerable efficiency requirements for data centres in Sections 23 et seq. For example, data centres are to cover 50 per cent of their energy needs with unsubsidised electricity from renewable energy sources from January 2024. From January 2025, 100 percent green electricity is to be used (see section 23 (6) Draft Bill). Data centres that commence operation from 1 January 2025 should be able to demonstrate a PUE value (Power Usage Effectiveness value) of at least 1.3 and a utilisation rate of at least 30 percent (data centres that commence operation from 1 January 2027 of 40 percent) or more (see Section 23 (1) Draft Bill). From 2024, the BMWK stipulates a minimum cooling air intake temperature of 27 degrees for new data centres with air cooling. From 1 January 2028, this temperature requirement will apply in principle to all data centres.
Lower temperatures are to be permitted only if they are achieved without the use of a refrigeration system (see Section 23 (3) and (4) Draft Bill).
Furthermore, data centre operators must operate an energy or environmental management system (see Section 24 (1) Draft Bill). For data centres with a nominal connected load of 1 megawatt or more and for data centres owned by or operated for public bodies with a nominal connected load of 100 kilowatts or more, there is an obligation to validate or certify the energy or environmental management system from 1 January 2025 (see Section 24 (3) Draft Bill). Efficiency indicators are also to be publicly accessible. Accordingly, the Draft Bill provides for the establishment of a corresponding register (see Section 26 Draft Bill).
Operators of data centres are also to be obliged to publish information on waste heat, in particular on the amount of heat available, the temperature in degrees Celsius and the prices for the provision of waste heat (see Section 27 Draft Bill). New data centres will be obliged to use waste heat.
Question: What are the reactions to the Draft Bill?
Answer: Among data centre operators, other industry members and also the digital association Bitkom, the Draft Bill has led to very heated discussions, as the requirements for data centres would be massively tightened if implemented. In particular, it is feared that the planned requirements for energy efficiency simply cannot be met by many data centres. The industry points out that not enough electricity from renewable sources will be available by 2025 to meet the legal requirements. In addition, other customers would miss out on this electricity if data centres had to buy a disproportionate amount of green electricity, which would ultimately drive up prices. Against this background, the industry association sees the position of data centres as being massively burdened in international competition if the law were to come into force in this form. In addition, the planned requirements would counteract the goals formulated by the German government in its digital strategy.
The possible obligation to use waste heat for “new” data centres has also been met with criticism. In particular, the fact that up to now there has been no obligation to purchase such heat from municipal utilities/heat network operators and no willingness on the part of the data centre operators to make it available in principle.
The Alliance for Strengthening Digital Infrastructures in Germany, founded under the umbrella of eco - Verband der Internetwirtschaft e.V., also warns against “unrealistic” obligations for data centre operators. The Draft Bill has not been thought through to the end. First, a market for waste heat consumers must be created. In particular, municipal energy supply companies should be obliged to purchase it. In addition, there needs to be much better access to the heat grids and feed-in possibilities. (Link).
Question: What happens next?
Answer: Both the Ministry of Finance and the Ministry of Construction have vetoed the BMWK’s Draft Bill of the Energy Efficiency Act. A cabinet decision originally planned for the end of October was accordingly dropped from the cabinet schedule. The latest word from government circles was that an agreement might not be reached until the end of the year. It is not yet foreseeable whether and to what extent the planned regulations concerning data centres will remain in their current form. Regardless of the exact form of the provisions of the Energy Efficiency Act concerning data centres, it is clear that the energy and environmental requirements for data centres will certainly become stricter.