Data centers and this winter’s competition for energy resources

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Data centers in the US and Europe are facing soaring energy costs. They will have to compete against Bitcoin miners and other industries for increasingly scarce power in North America, Europe, and Asian markets. Data centers will also have to compete against residential customers, who are facing higher energy bills and potential blackouts in some US states this winter if supplies aren’t increased.

The higher costs and constraints come at a bad time for data centers. Server farms have already been built and expanded at record rates in 2020 and 2021, as cloud IT and cloud consumer services boom. And as the COVID-19 pandemiclockdowns boost the use of all types of online services. 

The rising energy costs and supply constraints facing data centers are further exacerbated by the high energy use from Bitcoin miners, who earlier this summer were banned from China as the government seeks to conserve power for critical industries.

The Japan Times reported that “… from aluminum smelters to textiles producers and soybean processing plants, factories are being ordered to curb activity or — in some instances — shut altogether. Almost half of China’s 23 provinces missed energy intensity targets set by Beijing.”

A few days ago, China made all crypto activity illegal to ensure it had covered all aspects of crypto power use. 

However, China did not eliminate the energy-intensive tasks of bitcoin mining but simply moved them to someone else’s power grid — such as Texas, where some of the crypto industry relocated because of lower energy costs. But Texas has a large population of low-income residents. Bitcoin miners and other industries have the money to pay premium prices, and that increases costs for everyone. 

If the power supply situation gets worse, US state and national regulators will be forced to triage power supplies and decide who is a priority.  

For example, will Facebook’s data centers deserve priority? Can the world survive with not as much social media, with a little less online access to quadrillions of friends and family photos? Should Netflix’s server farms have priority? Or TikTok’s? What about banking services, news media services, online gaming, education, and healthcare information? 

A massive digital economy needs the power to operate and thrive. Will it soon have to justify and compete for its place in the energy pipeline?

The simplest solution, for now, is to delay such a scenario and to do what China did first — remove the largest power hog and the one that makes the least contribution to daily life and the economy: crypto mining and its associated activities. Such a move would also remove upward pressure on energy prices from the wealthy crypto-industry, making It a very tempting move.

But if that doesn’t improve energy supplies, then every data center and business will have to justify its power use. Good luck with that.

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