Consultant’s Insight: The cost of data centers

The growth of AI and cloud computing is fueling demand for more and more data centers. Consulting firm McKinsey estimates that U.S. data center demand will grow 10% annually until 2030. [caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] The United States had 5,375 data centers as of September 2023, more than any other country, according to data analytics platform Statista . But more are needed, especially as air cargo stakeholders lean into digitalization , specifically AI usage. E-commerce giant Amazon , for example, plans to spend more than $100 billion during the next decade on data centers — more than it intends to spend on its logistics network, according to a June 30 article in The Wall Street Journal . Along the same lines, logistics property management provider Prologis announced last year its investment of $7 billion to $8 billion during the next five years to construct customer data centers. During the fourth quarter of 2023 alone, Prologis invested more than $500 million in data center projects. “Our expertise is in logistics,” Prologis Chief Financial Officer Tim Arndt said at the recent Nareit's REITweek: 2024 Investor Conference in New York City. “Our expertise is in development and energy. So, there is a nice symmetry between those things where it makes sense for us to go ahead and convert these assets.” It costs more to develop data center facilities than warehouses, requiring strategic financial planning and the procurement of substantial energy resources. Power concerns Not only is the build cost high, but data centers also require more electricity; worldwide they consume 1% to 2% of overall power, according to Goldman Sachs Research , the analytics arm of the investment bank. Goldman Sachs Research estimates the overall increase in data center power consumption to be 3% to 4% by the end of this decade, and for consumption from AI to be about 200 terawatt-hours per year between 2023 and 2030. By 2028, AI could represent about 19% of data center power demand. For example, a single ChatGPT query requires 2.9 watt-hours of electricity, compared with 0.3 watt-hours for a Google search, according to the International Energy Agency . Consulting firm Rystad Energy says the expected demand from data centers and electric vehicles in the United States will be equal to the entire electricity demand of Turkey, the world's 18th-largest economy. As a result, data center carbon dioxide emissions may more than double between 2022 and 2030, according to Goldman Sachs Research. The increased emissions include the manufacturing and transport of the computer servers and chips necessary for AI . Water needs Water usage is also a growing concern as cooling systems for data centers consume water. As data processors become more efficient, they generate more heat, necessitating increased cooling resources. In 2022 alone, Google and Microsoft consumed 32 billion liters of water in their data centers, according to a Forbes article. Organizations and consultants around the world are urging the use of renewable energy to offset carbon emission concerns. And Microsoft, for one, is investing in wind and solar farms to balance its electricity use. While these efforts are a step in the right direction, companies still need to plan for a time when renewable sources such as wind and solar farms no longer produce adequate energy. The two biggest buzzwords in the air cargo industry right now are “AI” and “sustainability,” but they may be at odds with each other. Air cargo stakeholders must balance digitalization efforts requiring data centers with efforts to make the industry more sustainable.

Consultant’s Insight: The cost of data centers

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