10/01/2025 in Views from Echelon

As the demand for data in our daily lives grows exponentially, so does the need for data centres. Traditionally, these centres have been located in or near major cities, but the shift towards artificial intelligence (AI) and cloud computing technologies – and their associated computational and energy requirements – makes it inevitable that the next generation of data centres will be built increasingly in regional locations.

This will deliver multiple benefits, including support for national energy grids, easing urban power demands, facilitating renewable energy adoption, directing investment and creating jobs in economically less advantaged areas, and reducing operational costs which, ultimately, the consumer pays.

First, let’s look at the scale of the challenge. Research from Microsoft and LinkedIn earlier this year found that 75% of knowledge workers are using AI at work – with 46% of them starting to use it less than six months ago. Companies are investing heavily in AI tools and technologies to improve business.

However, AI is a lot more power hungry than standard internet services. A single AI prompt – such as asking a question to ChatGPT – can consume 10 or even 100 times more energy than a basic Google search. Training a large language model (LLM) like GPT-3 or a machine learning algorithm – which involves running billions of calculations, often over weeks or months – consumes energy comparable to hundreds of thousands of Google searches.

Supporting Renewables

We’re entering an age when the capacity of large-scale data centres will be counted not in megawatts but in gigawatts. This power has to come from somewhere and we all want it to be as clean and green as possible.

Regional locations often have better access to renewable energy sources such as wind and solar – and the guaranteed 24/7 demand of a large energy user like a data centre makes renewable energy projects more financially viable through corporate power purchase agreements (PPAs) and can accelerate their progress.

Many companies are striving for carbon neutrality, and integrating renewable energy into data centre operations is a key step. Co-locating campuses near wind or solar farms reduces the likelihood of electricity curtailment, transmission losses, and directly supporting the decarbonisation of energy grids.

Good for the Grid

Large data centre campuses operate at a scale that requires dedicated power infrastructure and situating them centres in regional areas means that energy demand is distributed more evenly across the national grid.

Urban grids are already under pressure from growing populations, electric vehicle (EV) adoption, and commercial demands, and this distribution reduces the strain on urban grids, especially during peak usage times, and enhances grid stability. Moreover, having data centres in diverse geographical ensures the development of grid infrastructure in those areas, and creates a more resilient national grid with greater capacity.

Jobs and investment

Data centres are the engine rooms of the digital age and are well-placed to bring the economic benefits of the AI revolution to regional locations. Construction, engineering, IT, operations, facility management – a large-scale data centre generates significant investment and employment wherever it is built. It can also boost a region’s appeal as a hub for technology innovation and encourage further economic development. Similarly partnerships with local communities can create opportunities for training and education.

The Cost Advantage

The global AI market is forecast to increase almost 350% over the next four years – from $184bn last year to $827bn in 2028. The rise of AI is reshaping the global data centre landscape to the extent that the new generation of hyper-scale facilities will seek lower-cost markets outside large metropolitan areas. This will be driven primarily by the cost of power, rather than land.

At this point – as the competing requirements of new technologies, national grids, renewables, decarbonisation, and digital economies converge – regionalisation will become not just a strategic choice but an inevitable reality.