Data Centers, Free Energy Market, and ESG

New emerging technologies and services such as Artificial Intelligence and the crypto market, among others, are accelerating Data Centers’ energy demands. What is the Free Energy Market and how does it affect the ESG strategies of Data Center companies in Brazil?

The International Energy Agency’s (IEA) report ‘Renewables 2023’, released in January, predicts that the growth in demand for electricity could more than double by 2026. Reasons: expansion of data centers, cryptocurrencies and artificial intelligence. To give you an idea, in Ireland, for example, data centers will consume a third of the country’s electricity in the next two years. The document also reflects that these three factors together will consume a total of 460 TWh in 2022 – around 2% of the global electricity demand. Although all this progress translates into greater speed, security and data quality, the increase in demand is likely to create challenges for the electricity system worldwide. What’s more, over the next few years, demand is expected to reach between 620 TWh and 1050 TWh and global demand for electricity is expected to increase by 3.4% by 2026. The key point is that these needs could be met by the generation of renewable energy such as wind, solar and hydroelectric.

Data centers will be the fastest-growing structures in the world, and they need increasingly better energy efficient solutions to adequately support the pace of development and energy consumption that is required for the proper functioning of data storage and processing systems.

In the Brazilian market, the Free Energy Market plays a key role in data center sustainability strategies.

Data Centers and Free Energy Market

Free Energy Market

The history of the Free Energy Market in Brazil began in July 1995, when Law No. 9.074 – the New Electricity Sector Model Law – was published, allowing, for the first time in the country, some large consumers to hire electricity from independent producers and no longer, exclusively, from electricity distributors. The following year, the Ministry of Mines and Energy (MME) implemented the Brazilian Electricity Sector Restructuring Project (RE-SEB), following the example of countries such as Great Britain, Finland, Ukraine, and Portugal, which had already gone through the process of de-verticalization of the energy supply. The project separated the sector into three areas: generation, transmission and distribution, and created entities such as the National Electricity Agency (ANEEL), the National Electricity System Operator (NOS) and the Wholesale Energy Market (MAE).

In March 2004, Law No. 10,848 brought about the deregulation of the energy market, replacing the MAE with the Electricity Trading Chamber (CCEE). This same law divided the market into two electricity trading environments: the Free Contracting Environment (ACL), where the consumer chooses the electricity supplier and is free to negotiate this contract directly, and the Regulated Contracting Environment (ACR), where energy is purchased directly from the concessionaire and the price is regulated by the government. Almost twenty years later, until the beginning of this year, the free purchase of energy was aimed at demands above 1000 kW (kilowatts), equivalent to bills of more than R$150,000/month.

A new rule was sanctioned in January 2024, extending the benefit to industries and businesses that consume voltage above 2.3 kV – around R$8,000/month. These companies are now free to negotiate prices and sign direct deals with those who generate energy – the energy producers. These are plants that convert energy from various sources (renewable or not) into electricity. These agents can be public service generation concessionaires, independent electricity producers and self-producers. According to data from the Chamber of Electric Energy Commercialization (CCEE), in the five months since the new rule was enacted, the number of Brazilian consumers migrating to the free energy market has surpassed the total recorded in the previous year.  This is a trend that continues to grow.

The same Renewables 2023 report reinforces Brazil’s leadership in Latin America when it comes to expanding renewable energy. Estimates point to an increase of 165 gigawatts (gW) of renewable generation in the region between 2023 and 2028, with more than 65% of this total represented by Brazil. Solar energy leads the expansion, followed by wind energy.

The path to energy transition for data centers

Electricity is not the core activity of a Data Center, but it is one of its main cost components and must guarantee availability as close to 100% as possible. In this sense, it is essential to look for solutions that bring greater sustainability through the optimization of resources and the intelligent use of renewable sources. Energy efficiency not only reduces energy bills, but also allows companies to control their energy costs.

The new legal mechanisms to enable access to the generation, production and distribution of renewable energy, through direct contracts with these agents, open up a very optimistic way of balancing this equation: more development, less impact. Yes, Data Centers can be key points for reducing environmental impacts, since they play an important role in the transition of commercial consumers to cleaner energy sources.

We know that discussions about the Free Energy Market continue to advance in Brazil. However, the freedom to negotiate, choose suppliers and customize contracts has the potential to result in more competitive prices for consumers. This is a path that many companies and consumers are just starting out on, and one that requires specific knowledge and monitoring of purchasing processes and cost management.

If it took thirty years to move towards a more open, accessible and competitive market for more sustainable electricity, and we will have a much shorter time to solve the challenges of energy efficiency in data centers, which could serve as an example for other sectors.

Cirion and the Free Energy Market

Cirion in Brazil has been contracting energy directly through the Free Energy Market for several years, always favoring renewable energy producers. Experience has shown us that attention to the sustainability of the operation is an important differentiator when serving large companies, especially in more demanding and regulated markets and segments, as well as bringing positive financial results to the operation and medium- and long-term benefits to the society in which we all live.

Author:

Rodrigo Oliveira
Business Director – Data Center, Cloud & Security
Cirion, Brazil

With more than 30 years of experience in the Data Center and Telecommunications segments, Rodrigo brings Cirion’s clients the guidance they need to take advantage of technology to expand their businesses. He has worked for several multinationals in Brazil and helped the building of Diveo’s operation in the country. He was also president of the UOL Diveo unit in Colombia, where he sold the subsidiary to Riverwood/Synapsis. He was also in charge of Matrix Datacenter.

In an increasingly interconnected world, artificial intelligence will be a driver of transformation for the data center industry in Latin America

Artificial intelligence (AI) stands as a powerful force redefining the way we interact with technology, and Latin America is part of that revolution. In this context, the data center industry, the backbone of digital infrastructure, is at an inflection point, where the implementation of AI promises to redefine its operations and efficiency.

Data Centers are critical to driving the rapid adoption of digitalization, including artificial intelligence. However, it is important to consider the industry’s environmental impact and energy consumption. According to the International Energy Agency (IEA) report, improvements in energy efficiency have helped control the growth in energy demand from data centers and data transmission networks, which currently demand about 1-1.5% of overall electricity use.

One of the prominent applications of artificial intelligence in data centers is its ability to improve energy efficiency: implementing AI algorithms for real-time monitoring and adjustment can significantly reduce energy consumption, improving sustainability and reducing operating costs.

Gartner predicts that by 2025, 50% of data center operators will adopt artificial intelligence, bots,  and machine learning to improve energy and operational efficiency^[1].

On the other hand, automation is another area where artificial intelligence is starting to make its mark in data centers. In fact, AI can be used to automate capacity planning, supported by historical data on resource demand. AI can also be applied to identify and anticipate errors and system failures, while enabling self-healing mechanisms or processes. This would not only contribute to reducing the risk of human error, improving the reliability and safety of operations.^[2]

The implementation of AI in infrastructure management enables faster and more accurate decision-making, optimizing resource allocation and ensuring optimal performance at all times. This is especially important in an environment where the demand for data storage and processing capacity is experiencing exponential growth.

These are some of the reasons why we say that artificial intelligence is advancing in shaping a more efficient and sustainable future for data centers in Latin America and the world. The statistics underscore the need for proactive adoption of AI to drive energy efficiency, automation, and innovation in data management. And because technology today requires scale and flexibility, having business partners that enable organizations to embrace this transformation in an agile and simple way will be better positioned to meet future challenges and capitalize on emerging opportunities in an increasingly competitive market, whatever industry we look at.

^[1] EY and Gartner, 2022. https://www.ey.com/en_in/technology/how-ai-and-automation-make-data-centers-greener-and-more-sustainable

^[2] Venture Beat, 2023. https://venturebeat.com/data-infrastructure/ai-and-ml-the-new-frontier-for-data-center-innovation-and-optimization/

Author:
Nelson Fonseca
President, Data Centers
Cirion Technologies

The digital age brought an unprecedented opportunity to drive new business models on the internet, adapted to new consumer habits and customers’ needs. However, albeit creating significant opportunities for business growth, it also places unprecedented pressure on IT departments, which must align infrastructure with business dynamics while  optimizing resources intelligently to offer organizations the service levels they need.

As a result, IT departments face the challenge of adjusting their processes, technologies, and capabilities quickly and effectively to meet new business demands. Under these circumstances, cloud computing has emerged as an essential resource for driving corporate innovation and transformation; this type of infrastructure offers the agility, flexibility and control needed to improve the delivery of applications and services, and to have a positive impact on business strategy.

According to a Harvard Corporate Review study, 70% of the organizations have already adopted some type of cloud service and 74% indicate that cloud computing has provided a competitive advantage for their organizations.  This information provides insight into the overall benefits optained by a company in a cloud infrastructure, after deploying its own applications.

Cloud infrastructure, a company’s backbone

Faced with demands for improved agility, flexibility, and to protect IT resources, cloud infrastructure has become a cornerstone for an organization’s operations and growth. The adoption of a cloud infrastructure became an essential strategy for competitiveness and long-term success, therefore companies that decide to adopt this technology will be planting their leadership in the market.

But what exactly is cloud infrastructure and why are companies turning to it?  Cloud infrastructure, commonly known as cloud computing, is a model that allows companies to access and use computer resources via the Internet, without the need to own or manage physical servers or other hardware components.  These resources include processing capacity, secure data storage, connectivity, software and various services, all hosted in remote data centers and managed intelligently and securely by cloud service providers.

In the digital age, IT is at the heart of any company and the way we manage and use technology determines our ability to innovate, compete, and grow.  In this context, the adoption of cloud computing services represents the backbone of corporate innovation and transformation, an essential tool for both IT and the business in general.

Good reasons to use a cloud computing infrastructure

Underscoring the advantages of cloud computing is not only about highlighting the benefits offered by a technology; it’s also about considering its importance as an enabler of corporate innovation and transformation.  There are several important reasons why the adoption of this type of infrastructure is growing in companies.

• Agility and flexibility. One of the most obvious advantages of cloud computing is its ability to provide agility and flexibility in managing workloads, allowing IT organizations to quickly adapt to their changing business demands without having to deploy additional physical IT structure. This is essential if companies wish to innovate and adapt quickly to arising opportunities.
• Minimum latency and maximum performance. Cloud computing enables minimum latency, meaning applications can be executed faster and more efficiently. With a well-designed cloud-based IT architecture, companies can ensure that their services are delivered with the lowest latency possible, which is essential in high-performance applications and in scenarios where every millisecond counts.
• Cost reduction. Cloud computing also helps eliminate significant capital expenditures on purchasing and maintaining physical servers and other IT equipment. Additionally, companies can pay for their resources in a pay-per-use model, reducing operational costs.
• Operational efficiency. Cloud infrastructure management can be outsourced to service providers. This translates into a more efficient development environment, where IT teams can focus on creating innovative solutions rather than worrying about the underlying infrastructure.
• Innovation and speed. The cloud accelerates the development and deployment cycles of applications, encouraging companies to innovate faster, significantly increasing their time to market.
• Security and business continuity. Cloud service providers invest in security measures and offer backup and disaster recovery solutions.  This ensures the availability of data and applications even after contingencies, which is essential for business continuity in companies with mission critical operations.

A strategic adoption of the cloud is essential to remain competitive and relevant in today’s corporate landscape.  It is the path to the agility, efficiency, and responsiveness that companies need to succeed in today’s world.

Companies must stop viewing cloud computing only as a technology and begin viewing it as an indispensable ally for driving innovation and digital transformation.  IT organizations and business executives who adopt this technology will be better positioned to face the challenges of a dynamic market.