Hyperscale data centres. Hyper-important to be Hyper-efficient

This post is issued by Osmosis (Holdings) Limited, a London based investment management group. For more information, please contact Lisa Harrison on 07716 912832 or [email protected]

By Jamie Padkin, Environmental Research Analyst

Listen to a song on Spotify, upload a photo to Instagram, or watch a YouTube video and you will be using a server housed in a data centre. With no visible smog clouds (as with traditional factories), you could be forgiven for not recognising the potential for environmental harm. But even digital clouds have a carbon lining. Massive energy usage and cooling requirements mean that even small efficiency gains can make a significant environmental impact.

“Some estimates suggest that data centres may account for about 1% of total energy use globally .”

As of 2020, Facebook report their data centres account for 97% of their total energy usage and some estimates suggest that data centres may be about 1% of total energy use globally[1]. Some of the largest companies in the world including Facebook, Amazon, Apple, Alphabet (Google) and Microsoft are among the most intensive users of data centres, especially in the case of the top three cloud providers – Amazon Web Services, Google Cloud Platform and Microsoft Azure. According to their 2020 Sustainability reports, the total electricity used by Facebook, Amazon, Apple, Microsoft and Alphabet (Netflix do not disclose their electricity usage) is equivalent to the energy used by 3.5 million UK households annually[2].

Improvements in Resource Efficiency

Between 2010 and 2018 we witnessed a 550% increase in the workload (typically expressed as ‘compute instances’) run in global data centres but only a 6% increase in energy use over the same time period1. Clearly there have been major changes in efficiency to facilitate this. Further analysis shows that during that time there was a shift in server use from 79% of compute instances occurring in small datacentres to 89% in large datacentres (including hyperscale)1.

Approximately 40% of servers are housed in ’small datacentres’[1]. These are comparatively inefficient in comparison to large ‘hyperscale’ data centres – in running its global operations Google uses only 23[2]. This is partly due to the economies of scale gained with larger setups but also down to the recent focus on improving their efficiencies.

Due to their massive resource use, as well as attention from the media and investors, efficiencies within large datacentres has been a high priority. A metric traditionally used by operators is the Power Usage Efficiency (PUE), namely the total energy to run the data centre (including the servers, the cooling systems etc) divided by the energy used for the computing. Companies are improving the PUE of their centres by removing everything they can from unnecessary flashing lights to screws and paint. Facebook, for example, report that the creation of their ‘vanity-free’ servers not only use less material but also allow greater surface areas for more efficient cooling. Facebook and Google boast an average PUE of 1.1, approaching a score of 1.0 which would indicate a perfectly efficient centre with all its energy being used to perform the core function.

Carbon is not the only Environmental Risk

Of the large technology companies analysed (Facebook, Amazon, Apple, Netflix, Google and Microsoft), all disclose their greenhouse gases emissions, however, the quality of their disclosures varies when looking at other metrics. Facebook does not disclose its waste production, while neither Amazon nor Netflix discloses its water usage or waste production. The production of e-waste is less material than the energy or water usage but not insignificant when you consider that Microsoft report that the average lifespan of a server in a datacentre is five years. The renewability profile of energy flowing into the data centres is also an important factor and all the above companies disclose the percentage of renewable energy mix. In 2020, Facebook, Apple, Alphabet, Netflix and Microsoft all used 100% renewable energy while Amazon only used 65%. It is worth noting that this is not directly comparable as, while some of this renewable energy may have been generated by the companies, a differing portion will likely have been purchased from the grid. Osmosis have engaged with the non-disclosing companies to try to understand their efficiency profile, the reasons for not disclosing and to encourage more granular and transparent reporting.

“Facebook does not disclose its waste production, while neither Amazon nor Netflix discloses its water usage or waste production.”

Intuitively, one might imagine that energy use for these warehouses full of wires would be the biggest environmental concern, but water use is often bigger. The operation of data centres produces a large amount of heat which requires some form of cooling. In some instances, the heat produced in data centres can be recycled. Facebook use some of this heat to warm nearby offices and administrative spaces. In Denmark, they are recycling the excess heat into district heating networks and can heat approximately 6,900 nearby homes[1].

Technology companies use a lot of water and Facebook report that 81% of their total water withdrawals are for data centres. Air conditioning is resource-intensive so instead direct evaporative technology is widely used, which is both more energy and water-efficient. This direct evaporation utilises the same idea as placing a damp towel on an object to cool it down: as the water evaporates, the object cools.

In cooler climates, Amazon direct cool air from outside into the data centre, negating the need for water altogether. Google is currently using industrial canal water in Belgium and Microsoft, through Project Naick, has demonstrated the feasibility of underwater datacentres. During this project the servers failed at 1/8 of the rate of the land-based control group[2]. The large amount of water used by data centres exposes the data centre operators to physical transitional risks as temperatures increase and water availability decreases. This risk is explicitly acknowledged by Amazon in their 2020 sustainability report.

The other major use of water in data centres is maintaining humidity, too much or too little of which can lead to unwanted, and costly, server downtime. Companies are looking to make improvements to this; as an example, Facebook’s data centre normally runs at 18oC to 30 oC in a relative humidity of 20 to 80 percent. A trial reducing the humidity to 13% provided valuable water savings of more than 40%.

Efficiencies in Storage

Improving code efficiency is another area where companies can make valuable improvements to their data centres.  In 2016, Facebook built and open-sourced an approach that enabled a doubling of the compression of the existing data storage solution. This reduced the number of storage servers needed by half, leading to huge reductions in the energy, water and the eventual waste produced by these centres. Clearly hardware is important but streamlined code is also a significant method of increasing efficiency. Increasing the storage efficiency can lead to huge jumps forward in resource efficiency.  Inroads are currently being made into DNA-based storage, which is attractive primarily due to its huge data storage capacity: up to 1 exabyte of data (1 billion GB) per cubic inch. Based on Microsoft’s lifecycle analysis, the implementation of DNA-based storage could reduce greenhouse gas emissions, energy usage and water consumption by more than 60% each.

Continual monitoring of data centre efficiency and energy, water and waste disclosures of technology companies is important. Not least due to the significant rise in their popularity in recent years and their status as a climate friendly investment option. Maintaining and improving the efficiency of data centres needs to remain a priority but it is encouraging to see the progress that has already been made.



Important Information

This document was prepared and issued by Osmosis Investment Research Solutions Limited (“OIRS”). OIRS is an affiliate of Osmosis Investment Management US LLC (regulated in the US by the SEC) and Osmosis Investment Management UK Limited (regulated in the UK by the FCA). OIRS and these affiliated companies are wholly owned by Osmosis (Holdings) Limited (“Osmosis”), a UK based financial services group. Osmosis has been operating its Model of Resource Efficiency since 2011.

The examples of specific investments described herein should not be considered a recommendation to buy or sell any specific securities. There can be no assurance that such investments will be purchased in a client’s portfolio. It should not be assumed that any of the investments identified in these case studies will be profitable in the future. Whilst the information contained herein is believed to be accurate, no representation or warranty, express or implied, is or will be made, and no responsibility or liability is or will be accepted by Osmosis, or by any of its officers, employees, or agents, in relation to the accuracy or completeness of this document or of any information contained within it.

All data points relating to the companies mentioned in this report have been sourced from the most recent and publicly available corporate sustainability reports.

Any views expressed are those of Osmosis only and should not be construed as investment advice or in any way recommending a specific security.

Osmosis Investment Research Solutions Limited (CRN 09935396)

Registered Office: 36-38 Botolph Lane, London EC3R 8DE

[1] https://tech.fb.com/odense-data-center-2/

[2] https://natick.research.microsoft.com/


[1] https://escholarship.org/uc/item/8dh8j3kq

[2] https://www.google.com/about/datacenters/locations/


[1] Masanet, E., Shehabi, N., Lei, N., Smith, S., Koomey, J. (2020), “Recalibrating global data center energy-use estimates” DOI: 10.1126/science.aba3758, Science 367 (6481), 984-986.

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1016822/UK_Energy_in_Brief_2021.pdf

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Important Information

This document was prepared and issued by Osmosis Investment Research Solutions Limited (“OIRS”). OIRS is an affiliate of Osmosis Investment Management US LLC (regulated in the US by the SEC) and Osmosis Investment Management UK Limited (regulated in the UK by the FCA). OIRS and these affiliated companies are wholly owned by Osmosis (Holdings) Limited (“Osmosis”), a UK based financial services group. Osmosis has been operating its Model of Resource Efficiency since 2011.

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