Subscriber OnlyBusiness

EirGrid to provide national grid connection for proposed data centre in Wicklow

Deal comes amid tension in energy sector over regulatory constraints on data centres, which consume huge amounts of electricity

Data centres are an essential component of Ireland's multinational tech sector but also place a significant strain on the electricity grid. Photograph: iStock

Arthur Beesley
Fri Apr 19 2024 - 06:00

EirGrid has settled terms to provide a national grid connection to Echelon’s proposed data centre near Arklow, potentially prompting other promoters to ask why their projects can’t secure connections to the electricity system.

The deal, said to be near completion, marks a big step forward for Echelon’s €500 million data centre plan for the former Irish Fertiliser Industries (IFI) site near the Co Wicklow coastal town. The IFI plant closed in 2022.

But it comes amid tension in the energy sector over years-long regulatory constraints on new data centres, buildings that house highly energy-intensive computer systems for storing internet and business data.

The sector’s rapid growth was enough to add the same amount of electricity demand as would be needed for 140,000 new households in each of the four years before curbs were imposed in late 2021.

READ MORE

EirGrid is known to be unhappy with the lack of new power generation. This is also a matter of contention for large American tech groups that employ many thousands of workers in the State

With surging demand rising faster than Ireland’s ability to generate power, EirGrid stopped talks in 2022 with dozens of data centre promoters in a bid to ease pressure on the power network and maintain the security of supply.

[ Ryan and Coveney in heated row over data centres ]

There has been tension over the sector’s future between EirGrid and the Commission for Regulation of Utilities (CRU), the sectoral regulator, which imposed the curbs.

EirGrid is known to be unhappy with the lack of new power generation. This is also a matter of contention for large American tech groups that employ many thousands of workers in the State and use Ireland as a European business and data-storage hub.

But critics of EirGrid have argued that the State needs not only new generation but also new transmission capacity, the grid operator’s responsibility.

Echelon’s Dub20 plan for the Arklow site has been under way since 2019, described by the company as the “greenest large data-centre” project in Europe.

[ Data centres to consume one third of State's electricity by 2026 ]

The company has long argued the project should receive a grid connection because of its location outside the Dublin metropolitan area, where generation and grid constraints are at their highest.

The Echelon founder is businessman Niall Molloy, who is also managing director of Aldgate Developments, a property group with Dublin and London investments. Mr Molloy and co-investors own half the business, with US private investment firm Starwood Capital holding the other half.

The regulator’s policy requires EirGrid to consider whether proposed data centres are ‘within a constrained or unconstrained region’ of the power system.

After years of fruitless talks with EirGrid on a grid connection, Echelon is known to have been unhappy with the lack of progress.

[ Electricity prices must fall to keep multinationals investing here, IDA warns ]

Still, two people briefed on the negotiation said final agreement was close. Asked about the talks, Echelon said: “We wouldn’t comment.”

Asked whether EirGrid’s board had signed off on a grid connection for Echelon, EirGrid said: “For reasons of confidentiality EirGrid does not comment on individual customers. Any connections are made in line with CRU policy.”

The regulator’s policy requires EirGrid to consider whether proposed data centres are “within a constrained or unconstrained region” of the power system.

The promoter’s ability to install on-site electricity generation or storage to meet its own demand must also be considered.

Another factor is the promoter’s willingness to provide flexibility in power demand “by reducing consumption when requested to do so”.

Arthur Beesley

Arthur Beesley

Arthur Beesley is Current Affairs Editor of The Irish Times

LATEST STORIES