Data centers need new power solutions to avoid costly outages
Data centre outages are often triggered by power and backup failures, notably uninterruptible power supply systems, as well as cooling, network, and IT system failures, resulting in financial losses that may not be covered by traditional property and business interruption policies due to lack of physical damage.
The broker Howden published a new report titled Insuring the data centre supercycle to highlight this issue. The research shows that growing demand for AI infrastructure is exposing underinvestment in grid networks required to move power to where surging demand sits. This drives a capital expenditure boom in the utility sector and accelerates a shift toward alternative power sources for data centres, bringing new operational and financial risks.
Current trends suggest the sector will need to rely heavily on behind-the-meter power generation to meet demand. To maintain their share of grid capacity, data centres would need to source up to 58% of their power from behind-the-meter sources by 2030. This is unlikely to be achievable given the constraints on alternative generation capacity and grid integration.
Building their own power sources is becoming standard practice for the largest facilities. Hyperscale data centres are increasingly constructing behind-the-meter generation to mitigate the impact of long lead times for new grid connections. This approach allows operators to bypass bottlenecks in the wider electrical network and secure the reliability needed for continuous operations.
The financial stakes for these facilities are substantial. Across the data centres tracked by Howden, annual revenues approach $400m at the top end. This implies a potential cost of $800m to $2.4bn in lost revenue alone for the largest, most power-constrained builds.
Cost of downtime
Grid connection times are not the only power consideration. Howden’s research highlights the significant financial consequences of data centre outages. Half of facilities have reported an impactful incident over the past three years. Each outage costs an estimated $500,000 to $1m, implying global annual losses of approximately $2bn.
Deborah Duss, global head of advisory and client solutions at Howden, noted that location is increasingly critical for these facilities. A data centre, its power source, and the grid infrastructure connecting the two cannot be considered in isolation. They are three interdependent parts of the same ecosystem and ultimately three key drivers of project success.
