Strategy

The Role of Energy Storage in Data Center Cost Reduction

Our increasingly digital world depends heavily on data centers, which consume approximately 2% of the total electricity in the United States. Data center electricity demand is expected to double by 2030, presenting energy management challenges. Effective energy storage for data centers is a key step in meeting the demand while maintaining operation efficiency and environmental stability.

Energy management in data centers isn’t just about reducing operational costs. It’s a multi-pronged challenge involving optimized resource allocation, minimized environmental impact, and uninterrupted service. Energy storage devices (ESDs) are a promising technology revolutionizing data center energy management. ESDs – particularly battery energy storage systems – have emerged as a powerful tool for cost reduction and energy optimization in data centers.

These systems allow data centers to store energy during off-peak hours and utilize it during periods of high demand, effectively “shaving” peak power consumption and reducing utility bills. Their potential extends beyond mere cost savings. They offer data centers the ability to participate in grid services, enhance operational resilience, and support sustainable initiatives.

ESDs position these facilities as key players in the broader energy ecosystem, making them capable of contributing to grid stability while optimizing their energy use.

How do data centers use energy storage devices?

Energy Storage Devices (ESDs) are systems designed to store electrical energy for later use. ESDs play a critical role in modern data center operations. These devices help manage power consumption, reduce costs, and enhance energy efficiency.

Six types of ESDs currently used in data center environments offer unique advantages to address specific energy management challenges.

  1. Lithium-Ion Batteries

    Lithium-ion batteries have emerged as the most prevalent type of ESD in data centers, thanks to their high energy density and fast charging capabilities. These batteries typically boast an impressive lifespan of 25 to 30 years, with energy augmentation around the 10-year mark. Their popularity stems from their reliability as a backup power source during outages and for managing peak power demands effectively.

  2. Flow Batteries

    Flow batteries are gaining traction in the data center industry because of their suitability for longer-duration storage. These innovative systems store energy in two chemicals dissolved in liquids, which are kept in separate tanks. This unique design allows for easy scalability and makes them ideal for applications requiring extended backup power or integration with renewable energy sources.

  3. Lead-Acid Batteries

    While less common in modern data centers, lead-acid batteries still find applications in some facilities. These batteries have been a staple in the industry for decades due to their reliability and cost-effectiveness. However, they are gradually being phased out in favor of more efficient alternatives like lithium-ion batteries.

  4. Solid-State Batteries

    Solid-state batteries represent an emerging technology in data center energy storage. These batteries offer greater energy density and enhanced safety by replacing liquid electrolytes with solid materials. As the technology matures, solid-state batteries are expected to play an increasingly important role in data center energy management.

  5. Thermal Storage Batteries

    Thermal storage systems utilize innovative heating and cooling methods to store and release energy. One notable application is ice storage for air conditioning, which allows data centers to shift their cooling loads to off-peak hours for significant energy cost savings and improved overall efficiency.

  6. Flywheels

    Flywheels are mechanical systems that store energy in rapidly spinning rotors. These devices excel at absorbing and releasing high power for short durations, making them ideal for maintaining power quality and bridging the gap during brief outages or while backup generators come online. The global flywheel energy storage market is projected to grow significantly, reaching $713.57 million by 2032.

Benefits of ESDs for peak power management and cost reduction

Energy storage devices offer more benefits than the ability to manage peak power and reduce energy costs. ESDs enable data centers to reduce their maximum power demand by providing additional energy during high-demand periods to potentially lower peak power budgets.

Some other advantages include:

  • Grid services participation. ESDs allow data centers to participate in electric utility programs, providing additional savings opportunities through frequency regulation and voltage support.
  • Renewable energy integration. ESDs make it easier to use renewable energy sources to contribute to sustainability goals and reduce carbon emissions.
  • Demand charge avoidance. ESDs manage time-of-use tariffs, potentially lowering energy costs through strategic energy consumption.
  • ESD solutions. Scalable to meet the growing energy demands of data centers and ensure future readiness.

An energy storage device is managing peak power to reduce energy costs as part of an energy storage strategy for a local data center.

What is the impact of ESDs on data center costs?

Using Energy Storage Devices (ESDs) in data centers has emerged as a game-changing strategy for cost reduction and energy management. As data centers continue to grow and use more energy—with some facilities requiring enough energy to power approximately 80,000 households—the need for efficient energy management solutions has become critical.

Data centers can reduce operational costs, and contribute to grid stability and sustainability efforts by leveraging ESDs.

Reduction in maximum power demand

ESDs enable data centers to reduce their maximum power demand through peak shaving significantly. By providing additional energy during high-demand periods, ESDs can help data centers lower their peak power consumption. This reduction not only eases the strain on the power grid but also translates to substantial cost savings for data center operators.

Potential for smaller power budgets

With the integration of ESDs, data centers can set smaller power budgets without compromising their operational capabilities. ESDs provide flexibility to manage power consumption more efficiently, allowing data centers to operate within lower power thresholds. This capability is particularly valuable as some utility providers are imposing power limitations on data centers to prevent excessive strain on grid infrastructures.

Cost-savings analysis for single-user vs. multi-user data centers

The impact of ESDs on cost savings can vary depending on the type of data center. For single-user facilities, cost savings are typically calculated based on Total Cost of Ownership (TCO) per server. Even a modest 1% reduction in TCO per server can generate significant savings. For instance, in a 10MW data center, this 1% reduction translates to approximately $27,000 in savings.

Colocation (multi-user) data centers often measure savings in terms of peak power budget reduction. While the percentage of savings might appear smaller compared to single-user centers, the absolute value can still add up to impressive savings. A 1% cost saving for a 10MW colocation data center could amount to around $3,700 per month.

What are some strategies for implementing ESDs?

As data centers grapple with rising energy costs and increasing power demands, Energy Storage Devices (ESDs) have emerged as a crucial tool for optimizing power management and reducing operational expenses. Implementing ESDs effectively requires careful consideration of placement strategies and usage optimization techniques.

Several key approaches to ESD implementation are recommended, including focusing on the trade-offs between centralized and distributed placement, as well as methods for optimizing ESD usage to maximize their lifespan and effectiveness.

Centralized vs. distributed ESD placement

The choice between centralized and distributed ESD placement can significantly impact the efficiency and reliability of a data center’s power management system.

Centralized ESD systems involve placing large-scale energy storage units at a single location within the data center. Doing so simplifies management and maintenance, lowers initial installation costs, and simplifies adding comprehensive monitoring and control systems.

There are some disadvantages to centralized ESDs. They create a single point of failure risk, may require more extensive power distribution infrastructure, and are less flexible for scaling.

Distributed systems involve placing smaller ESD units throughout the data center, often at the rack or row level. The benefits include enhanced redundancy and fault tolerance, flexibility in scaling and expansion, and reduced power distribution losses.

The downsides are higher initial costs for multiple units, more complex management and maintenance requirements, and potential space constraints at the rack level.

Considerations for different facility types

The choice between centralized and distributed ESD placement often depends on the specific characteristics of the data center.

Large, single-tenant data centers may benefit from a centralized approach due to economies of scale. Colocation facilities may prefer distributed systems to offer tenants more granular control over their power management. Edge data centers or smaller facilities will likely find distributed systems more suitable for their modular growth patterns.

ESD usage optimization

Optimizing ESD usage is crucial for maximizing the benefits of energy storage while minimizing operational costs and environmental impact.

Proper optimization of ESD usage extends the lifespan of batteries, reducing replacement frequency costs. It improves overall system efficiency and enhances a data center’s ability to participate in grid services and demand response programs.

Optimization strategies include:

  • Implementing smart charging and discharging cycles
  • Balancing the load across multiple ESD units
  • Integrating ESDs with renewable energy sources for improved sustainability

Algorithms for controlling ESD usage

Advanced algorithms play an important role in ESD performance optimization. Data centers can maximize the benefits of ESDs by carefully considering placement strategies and implementing sophisticated usage optimization techniques that include:

  • Peak shaving algorithms that predict and manage power demand peaks, using ESDs to supplement grid power during high-demand periods.
  • State of charge management algorithms that maintain optimal battery charge levels to balance performance and longevity.
  • Predictive maintenance algorithms to forecast when ESDs might require maintenance or replacement, minimizing downtime.

What are some emerging ESD technologies?

As data centers evolve and face increasing energy demands, emerging Energy Storage Device (ESD) technologies play a major role in enhancing efficiency, reducing costs, and promoting sustainability. These innovative solutions address the growing challenges of power management and environmental impact in modern data centers. 

Two promising ESD technologies gaining traction in the industry are ice-based cooling systems and underground thermal energy storage.

Ice-based cooling systems

Ice-based cooling systems represent a significant advancement in data center thermal management. These systems leverage the latent heat of fusion in ice to provide efficient cooling during peak demand periods. Data centers can shift a substantial portion of their daily electricity consumption by generating and storing ice during off-peak hours when electricity rates are lower.

This load shifting not only reduces energy costs but also alleviates strain on the power grid during peak hours. The system works by melting the stored ice to cool the data center when electricity demand and prices are at their highest, typically during the afternoon.

An underground thermal system for energy storage management for data centers

Underground thermal energy storage

Underground Thermal Energy Storage, particularly Cold UTES, is emerging as a promising technology for long-duration energy storage in data centers. This system utilizes natural underground sites to store cold energy seasonally, offering a sustainable approach to cooling management.

Cold UTES systems have impressive long-duration energy storage capabilities. They can efficiently store thermal energy from various sources, including winter ambient air and waste heat from industrial processes, for extended periods. This stored energy can then be used for space cooling, ventilation air precooling, and process cooling during demand periods.

Cold UTES systems can provide a stable and efficient cooling source that operates independently of daily grid fluctuations. This reduces the data center’s reliance on grid power and contributes to overall energy cost savings.

How can data centers integrate ESDs with renewable energy sources?

Data centers can effectively integrate Energy Storage Devices (ESDs) with renewable energy sources to enhance sustainability and reduce operational costs. This approach combines the benefits of clean energy generation with efficient power management.

Combining ESDs with on-site solar or wind power

Data centers can leverage their large footprints to install on-site renewable energy sources, particularly solar panels and wind turbines. For example, Iron Mountain built a 7.2-megawatt solar energy array on the roof of its data center in Edison, New Jersey.

By pairing these renewable sources with ESDs, data centers can:

  • Store excess energy generated during peak production periods
  • Use stored energy during low production times or at night
  • Smooth out power supply fluctuations inherent to renewable sources

The WindCORES concept demonstrates an innovative approach, placing data center equipment directly inside wind turbine towers. This setup can provide 85-92% of the power needed from the host turbine, significantly reducing carbon emissions.

The role of renewable energy certificates

While on-site renewable generation is ideal, Renewable Energy Certificates (RECs) play a complementary role in a comprehensive energy strategy. RECs allow data centers to invest in renewable energy production even when on-site generation isn’t feasible.

They can serve as a transitional tool while developing more direct renewable energy solutions. Bundled with RECs, tied to specific new renewable projects, offer a more tangible link between investment and green energy output.

However, RECs should be part of a broader strategy rather than the sole focus. Data center operators are increasingly moving towards Power Purchase Agreements (PPAs) for more direct investment in renewable energy creation.

What are some ESD implementation considerations?

When considering the implementation of Energy Storage Devices (ESDs) in data centers, facility managers must carefully evaluate various factors to ensure optimal deployment and return on investment. Two critical areas of consideration are cost-benefit analysis and operational challenges.

A thorough cost-benefit analysis is essential to justify the implementation of ESDs in data centers. This analysis should consider both the initial investment and long-term savings potential. The initial investment for ESD systems can be substantial, often ranging from $380 to $1,100 per kWh of storage capacity. However, this upfront cost must be weighed against potential long-term savings:

  • Energy Cost Reduction. ESDs can lead to significant savings on energy bills by enabling peak shaving and load shifting.
  • Demand Charge Avoidance. By reducing peak power demand, ESDs can help avoid costly demand charges from utilities.
  • Grid Service Revenues. Some data centers can generate additional revenue by participating in grid services markets using their ESD systems.

Factors affecting ROI for different data center types

The return on investment (ROI) for ESD systems can vary significantly based on facility type. Hyperscale data centers often see faster ROI due to economies of scale and the ability to negotiate better energy rates. Colocation facilities are influenced by the ability to pass on energy savings to tenants or use ESDs as a competitive advantage.

Lastly, edge data centers have higher costs compared with facility size. However, ESDs can provide critical reliability benefits in areas with less stable grid infrastructure.

Factors influencing ROI across the board include:

  • Local electricity rates and rate structures
  • Availability of incentives or rebates for ESD implementation
  • Facility power usage patterns and peak demand profiles

Data center staff members engage in training on how energy storage works.

ESD operational challenges

Implementing ESDs introduces new operational considerations that data center managers must address to ensure successful integration and ongoing performance. The most important component is meeting training requirements for facility staff. Proper training includes safety protocols and procedures, system operations, and integration with existing systems.

Ongoing training and certification programs may be necessary to keep staff up to date with evolving ESD technologies and best practices.

ESD systems maintenance consideration

Regular maintenance is essential for ensuring the longevity and efficiency of ESD systems. Scheduled inspections should include visual and technical checks to identify potential issues early. Continuous monitoring of ESD performance metrics helps optimize operations and predict maintenance needs.

For battery-based systems, a clear plan for cell or module replacement is critical because performance degrades over time. Lastly, many ESD systems require specific environmental conditions for optimal performance and lifespan.

Data center operators should factor in these ongoing maintenance requirements when calculating the total cost of ownership for ESD systems.

Don’t overlook energy storage in data center cost reduction strategies

Don’t overlook energy storage as part of your data center’s cost-reduction strategy. ESDs provide numerous benefits, including a significant reduction in peak power demand to lower energy costs.

The implementation of ESDs, whether through lithium-ion batteries, flow batteries, or emerging technologies like solid-state batteries and thermal storage systems, can lead to substantial long-term savings. These savings are particularly impactful when considering the scale of modern data centers, where even a 1% reduction in TCO per server can translate to tens of thousands of dollars in monthly savings.

However, realizing these benefits requires careful planning, thorough cost-benefit analysis, and consideration of operational challenges. The choice between centralized and distributed ESD placement, optimization of usage patterns, and integration with existing infrastructure all play crucial roles in maximizing the value of ESD implementation.

Not sure how to sort through all the options to find the best fit? An energy procurement specialist can help make sense of all the potential solutions. Schedule a no-obligation consultation today to explore the possibilities.

Tags: energy efficiency energy management energy procurement energy storage data center

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