Sustainable Data Center Market - Global Outlook & Forecast 2024-2029

MARKET INSIGHTS

The global sustainable data center market by investment was valued at USD 39.51 billion in 2023 and is expected to reach USD 85.44 billion in 2029, growing at a CAGR of 13.71% during the forecast period. APAC, Europe, and North America are leading the development of sustainable data centers. Data center operators and governments in these countries are advancing the use of renewable energy and other sustainable practices due to ongoing global warming and climate change issues. Furthermore, cloud data center providers, such as Google, Microsoft, Tencent, AWS, Alibaba, and Huawei, are fueling sustainable data center market expansion through sustainable investments and cutting-edge technologies. They are partnering with leading renewable energy providers to secure Power Purchase Agreements (PPAs) in the region.

Colocation and wholesale data center operators, including Ark Data Centres, EdgeConnex, Africa Data Centers, Khazna Data Centers, ST Engineering, SpaceDC, ST Telemedia Global Data Centers, STACK Infrastructure, Digital Edge, Digital Realty, and AirTrunk, are prioritizing the construction of data centers in APAC with a Power Usage Effectiveness (PUE) rating below 1.5. They achieve this using renewable energy, free cooling, and optimized IT infrastructure and support sustainable data center market growth.

In 2024, solar and wind energy dominated the market, with hydro, geothermal, and biomass following. Renewable energy companies are expanding their non-fossil fuel portfolios by investing in new projects and securing PPAs with data centers to enhance sustainability. Also, data centers across the globe are increasingly adopting geothermal energy in 2024, alongside solar, wind, and biomass sources. For example, in May 2024, Microsoft and G42 are investing USD 1 billion in a geothermal-powered data center in Kenya, with an initial 100 MW capacity, expected to expand to 1 GW.

KEY MARKET TRENDS

Innovations in Data Center Technologies

1. In the global region, data center leaders such as Vantage Data Centers, Kao Data, Khazna, Africa Data Centres, STT GDC, GDS, and Equinix are adopting HVO fuel for their generators to enhance sustainability. In 2024, GDS China and STT GDC transitioned to hydrotreated vegetable oil (HVO) and hydrogen fuel cells for backup power.
2. In January 2024, Honda and Mitsubishi revealed plans to pilot a small data center using hydrogen from Tokuyama Corporation's electrolysis plant. This hydrogen, a by-product of sodium hypochlorite and chlorine production, will power Honda's fuel-cell power station and Mitsubishi's data center. The project is set to run until March 31, 2026.
3. With a growing emphasis on sustainability, fuels such as HVO and fuel cells are entering the market at high costs and limited availability in certain regions. Therefore, data center operators are collaborating to boost sustainable fuel adoption, thereby supporting sustainable data center market growth. For example, Vantage partnered with the Data Center Coalition (DCC) to drive market support for HVO, especially in Northern Virginia, where HVO costs are nearly 95% higher than diesel.
4. In December 2023, Digital Edge trialed a new robot prototype named ‘Nora’ at its Narra 1 data center in Manila, Philippines. Nora autonomously navigates and assists visitors using facial recognition and voice commands, functioning for up to eight hours on a single charge.

Government Push Toward Sustainability

1. The European Union (EU) has introduced a new regulation as part of its European Green Deal, aiming for climate neutrality by 2050. This regulation requires data centers with an IT power demand of at least 500 kW to report key performance indicators, including energy use and renewable energy sources, to improve efficiency and reduce fossil fuel dependence, thereby supporting the EU's environmental goals.
2. Due to severe droughts, governments are delaying or redesigning projects with sustainable materials such as green concrete and air-based cooling systems. In Latin America, Google paused its Chilean data center project after a court asked them to revise their application, considering climate change and water concerns, specifically the strained Santiago aquifer. Google has since updated its design to incorporate air cooling and is working closely with local authorities.
3. Governments worldwide are joining forces to enhance the adoption of renewable energy. Notably, in 2024, India and the United States initiated a USD 1 billion partnership to strengthen India's clean energy supply chain, supported by the International Bank for Reconstruction and Development (IBRD). This initiative aims to boost the production of essential green technologies, such as solar panels and wind turbines and will collaborate with African countries that are interested in clean energy.
4. In 2023, China's Ministry of Finance, Ecology and Environment, and Industry and Information Technology introduced a Green Data Center standard, effective July 1, 2023. The standard mandates specific criteria for equipment and services, including a PUE of under 1.4 from June 2023 and under 1.3 from 2025, and requires a water-to-power consumption ratio of less than 2.5 L/kWh.
5. In November 2023, Singapore's Minister of State for Trade and Industry unveiled the Sustainable Tropical Data Centre Testbed (STDCT), a cutting-edge facility designed for tropical climates. Hosted by the National University of Singapore, this testbed marks a significant milestone in advancing data center technology and supports Singapore's green technology goals under the RIE 2025 plan.

SEGMENTATION INSIGHTS

Electrical Infrastructure

1. The landscape of electrical and power infrastructure is undergoing significant changes and transformations from traditional uses. The market is now more focused on enhancing reliability and boosting efficiency.
2. Compass Data Centers and Foster Fuels agreed together to produce Hydrogenated Vegetable Oil (HVO) based biodiesel for Compass Data Centers’ generators.
3. In May 2024, Stulz Oceania acquired Fusion Energy Group’s UPS and CRAC service division. It has also created a new subsidiary, Stulz Oceania (Power), to handle the distribution and servicing of UPS systems.
4. In May 2024, Stulz Oceania acquired Fusion Energy Group’s UPS and CRAC service division. It has also created a new subsidiary, Stulz Oceania (Power), to handle the distribution and servicing of UPS systems.
5. Google has partnered with Fervo Energy to develop a geothermal power project to add clean energy to the Nevada power grid.
6. Rolls-Royce announced its plan to offer small nuclear reactors for US-based cloud operators such as AWS, Google, and Microsoft.
7. AWS will use HVO across all its European data centers. It has already replaced diesel with HVO in Ireland.
8. Microsoft partnered with Eaton, which will fit all of Microsoft’s data centers with grid-interactive UPS.
9. Companies are also considering using liquid metal batteries, sodium-ion batteries, and Nickel-Zinc batteries, which are in the introductory stage and may be revolutionary soon for the data center market.

Mechanical Infrastructure

1. Increased deployment of AI and machine learning (ML) workloads will lead to an increase in liquid immersion and direct-to-chip cooling in the US. It will help companies in bringing down their PUW to 1.4 or below.
2. The Copenhagen data center of Digital Realty employs a free cooling system that integrates cold aisle containment and adiabatic cooling techniques.
3. NTT DATA Berlin 2 data center facility is equipped with N+1 redundancy of water-based cooling systems supported by free cooling and has cold-aisle containment.
4. US food company Cargill announced plant-based immersion cooling for its data centers.
5. In January 2024, Danfoss is partnering with Google to supply cooling and heat reuse systems for Google's data centers. In addition, Google will provide AI solutions to enhance customer experience, streamline internal processes, and improve overall productivity for the multinational engineering group.
6. Companies have also adopted free cooling, zero-water cooling, and other methods to reduce their carbon footprint, thereby supporting the sustainable data center market.
7. Innovative cooling techniques, such as underwater and floating data centers, bring more efficiency to data center cooling.

General Construction

1. Hyperscale operators such as AWS, Microsoft, Meta, Apple, and Google are taking the lead in using sustainable materials for data center construction in the sustainable data center market.
2. Companies in their data center construction are introducing technologies such as green concrete, modular data centers, and more and support sustainable data center market growth.
3. AWS and American Rock Products collaborated to develop sustainable concrete for a concrete mix for its data centers.
4. In 2023, Nepalese telecom provider Ncell’s new data center in Lalitpur was constructed with a prefabricated containerized design that can withstand earthquakes of up to magnitude nine on the Richter scale.
5. District heating is prevalent in Europe, majorly in Nordic countries, followed by Western Europe, where data center firms transfer heat generated from data centers to nearby offices, residential places, swimming pools, and others.
6. In September 2023, Microsoft was trying out eco-friendly concrete blends at its data center location in Quincy, Washington. The company is experimenting with concrete recipes that use ingredients such as microalgae, fly ash, and slag to reduce the amount of carbon dioxide emissions associated with concrete by 50%.

GEOGRAPHICAL ANALYSIS

1. The Nordic region offers an ideal environment for green data centers, utilizing renewable energy and minimizing reliance on water-based cooling systems, thereby supporting the sustainable data center market. In Western Europe, Frankfurt, London, Amsterdam, Paris, and Dublin (FLAPD) markets are increasingly implementing sustainable practices, such as using HVO fuel cells and natural gas to replace diesel, aiming to lower their PUE to under 1.5.
2. In Latin America, countries such as Brazil, Mexico, Chile, Colombia, Argentina, Paraguay, and Uruguay are increasingly turning to renewable energy for their power needs. Despite facing challenges in sustainability compared to North America, APAC, and Europe, Latin American data centers are embracing sustainable initiatives and advanced technologies in 2023 and 2024 and supporting Latin America sustainable data center market growth. For example, Hive Digital Technologies, a Canadian firm, plans to establish a hydroelectric-powered crypto-mining data center in Paraguay, utilizing clean energy from the Itaipu hydroelectric dam for its upcoming 100 MW operation.
3. The APAC sustainable data center market is witnessing growth during the forecast period, countries such as China, Australia, Japan, India, South Korea, Singapore, Malaysia, and Indonesia are at the forefront of adopting renewable energy to satisfy increasing energy demands. As APAC emerges as a hub for AI, many data centers are prioritizing sustainability, with countries such as Singapore and Taiwan facing challenges such as power supply issues. To enhance energy efficiency, data centers are implementing initiatives such as solar roofs and fuel cell technologies. For example, in 2024, CyrusOne initiated construction on its first data center in Japan, which will include a dedicated substation and rooftop photovoltaic (PV) cells.
4. In the Middle East and Africa (MEA), sustainability efforts lag due to insufficient infrastructure in Africa and a lack of renewable energy sources in countries such as the UAE and Saudi Arabia. However, in 2023 and 2024, data centers are taking significant steps toward sustainability, such as Africa Data Centers utilizing renewable energy from Distributed Power Africa and Khazna Data Centers partnering with Masdar, which has secured a solar generation license from Abu Dhabi's Department of Energy for a 7 MWp capacity to power the Khazna Abu Dhabi 6 facility.

VENDOR LANDSCAPE

Large Colocation and Hyperscale Data Center Operators Drive Sustainable Data Center Market Growth

1. Cloud data center tech giants such as Google, Microsoft, Oracle, IBM, Tencent, Meta, and AWS are leading the charge in renewable energy across APAC and various sectors, especially government sectors. For instance, in 2024, AWS constructed a secure sustainable data center for the Australian government, which has pledged USD 850 million over ten years for security and green sustainability.
2. Major colocation and hyperscale data center operators such as Ark Data Centers, CyrusOne, Khanza, Equinix, Singtel, STT GDC, NTT Data Centers, and Digital Realty are actively reducing their carbon footprints by investing in renewable energy. New players such as Datagrid, Datacom New Zealand, DataVolt, and Bitera Data Center are also contributing significantly to the global sustainable data center market. In 2024, these firms are channeling millions into PPAs for renewable energy, enhancing their commitment to sustainability.
3. Key renewable energy players in APAC include Engie, ACCIONA Energia, Adani Green Energy, Distributed Power Africa, OX2, European Energy, Elera Renovavies, Emerge, AGL Energy, and ReNew Power Ventures. In 2024, new entrants such as Metlen Energy & Metals (Mytilineos), ScottishPower, Mercury NZ, and Shizen Energy are partnering in the sustainable data center market with leading data centers to enhance sustainability.