Joe Coletti 00:04
Welcome to Powering Sustainable Ideas, a new podcast series from RBC Capital Markets, where we interview the leaders and companies powering the sustainable future. In this episode, you'll hear a conversation that took place at RBCs Global Energy Transition Conference in London this past June
The dramatic growth of AI and data centers is creating a surging demand for power. But with this huge opportunity comes a host of logistical challenges, not least getting that power to where it’s needed. In this discussion, Alex Thomas, Managing Director, Investment Banking, was joined by some of the key players in this buzzing market: Natalie Adomait, Managing Partner, Renewables & Transition at Brookfield Asset Management, Ash Hein, Group Strategy and M&A Director at Drax Group, Dame Dawn Childs, Chief Executive Officer, Pure Data Centres Group, and Neil Cresswell, Vice Chairman, Virtus Data Centres.
Now, let’s dive into the conversation.
Alex Thomas 00:58
I think what we really want to touch on here is the intersection between data centers as a source of demand and how we're going to meet that demand as a society. Perhaps Ash, if I can start with you.
Ash Hein 01:08
Happy to, Alex, thank you. Yes, I guess our perspective. Certainly electricity demand is going to increase, but today, that's sort of the pathway for decarbonization – is expecting that to happen anyway, but data center growth will certainly be a very key, key part of it. Today, data centers make up about 4% of the electricity demand, but by 2040 under Aurora’s AI expansion scenario, it'll be 16%, so it's gonna be very significant growth. And so for Drax, we're very excited by that growth. We're doing a lot with data centers. We're looking at, How do we think about colocating a data center at Drax power station in Yorkshire? What data centers are looking for is powered land and water. And we have 2.6 gigawatts of 100% renewable base load power. We have chilled water. We can provide we have hundreds of acres of land. So we're working a lot with data center developers – How might you bring that project to fruition? And with the addition of carbon capture and storage, we could create the world's first gigawatt scale carbon negative data center, which would be fantastic for the UK, but it does need a lot of people to work together.
Alex Thomas 02:02
Yeah, great. And I guess from an operator perspective, perhaps Dawn, if you'd comment in terms of how you see that, and I think particularly the theme around where the generation is and where the data centers are located, because historically, they've been located in quite specific and traditional hubs, and that's continued to draw in demand. But obviously some of the power of generation is elsewhere.
Dawn Childs 02:20
Thank you. And so previously, there was sort of a well-trodden model of putting data centers where the fiber was. So the sort of the follow-the-fiber model creating the availability zones that the hyperscalers had, and expanding out from there, normally driven by where the traditional, the user has been. So in London, you know, banking data centers and expansions from there. So that follow-the-fiber model. Now it's the follow-the-power model, and particularly for AI data centers. So these larger, bigger scale campuses that people are talking about, and that has been seen, particularly in the US, for sure. And of course, there is demand for AI, but you would have seen a slight softening from some of the hyperscalers in recent months, where they were just sort of taking a little bit of a pause and a thought around the, Okay, so do we really need all of these significant hyperscale data centers, and what need to be? Should we be following the power? So there has been a little bit of a change. That hasn't, though, seen a softening of demand in the traditional locations for the expansion. So at the moment, both are true. Yes, you need the large language models, potentially because they don't need the low latency that some of the other use cases do. They can be positioned where the power is, and that helps to develop out the capacity more swiftly, because clearly there's a time requirement here. It's the race for AI. So the faster you can build the capacity to house those large language models, the better. But I do think there will be another transition to be had once you've got all of the large language models, once we've figured out actually what sovereign AI means.
Alex Thomas 03:45
Natalie, love to get your perspective. Obviously, Brookfield is a huge investor in both digital infrastructure itself and power and energy. How do you see the next few years playing out, and what are the risks and opportunities?
Natalie Adomait 03:54
Brookfield Asset Management, we are invested in digital infrastructure. So we've got data center operators across all of the major continents that we're investing on the infrastructure side now, and this is a very large core of our strategy on the infra piece. About 10 years ago, I would say most of our business was feeding in renewables and signing up into government tender auctions or getting feed in tariffs to bring on those kind of incremental renewable assets, one at a time. Where we saw a huge change was about five years ago, and it's really exponential now, is that our business is really based on serving corporate demand, and technology is by far the number one off-taker across our corporate demand book today. Just to put a fine number on it, 90% of the PPAs we signed within Brookfield renewable last year was with corporates, not with governments. So this has been a total step change in our business, and technology really is the driver for where a lot of that change is coming from. There's huge opportunities here. I mean, the obvious one is we need to build a lot of power. We need to triple the current installed renewable base. And if you don't bring that net incremental power to the market, data center capacity just can't be built out. One of the opportunities we're seeing is to really start providing more complex and structured PPA solutions for a lot of our off-take partners to feed in how we merge asset classes. This could be building out battery storage, combining it with solar and wind. This can be looking at our hydro portfolio in North America and seeing how we can leverage some of that hydro capacity to provide some more shaping solutions. So we see lots of opportunities to feed in and to play. But we're also now starting to see a lot of applications and use cases within our business that are actually enhancing the profitability of a lot of a lot of our portfolio companies, and we're just at the early stages, but we saw 50% increase in use case adoption just within our PortCos over the last year. And I think we're just on the beginning.
Alex Thomas 05:49
One of the things we see from the advisory perspective is how much is there duplication of demand signals. Is, for example, when Microsoft says, I'd like some capacity here, and I'd like it going out to multiple parties, how much duplication is in the system.
Neil Cresswell 06:00
Yeah, in terms of reshaping our strategy, it's very much linked to what our customers want, and they're not quite sure yet, so they're kind of hedging their bets a bit. Virtus’s core business is we've spent the last 15 years growing to be a UK company, but growing to be the biggest data center provider in the London market. In the London market is the second biggest market in the world, outside North Virginia. So we have 250 megawatt, 17 data centers in and around London full of cloud. So we kind of caught that wave of cloud. And as Dawn was saying, our strategy is probably twofold at the moment, more of the same, because that's what we're hearing that customers want, at the moment, they want for, maybe not for the large language model training applications, which are going to go to wherever the cheapest power is, whether that's the Nordics or the US or Kazakhstan, you know, who knows, but it's kind of coming down to, you've probably may have heard the phrase of, you know, tokens, as in AI tokens per dollar, per watt, or per watt, per dollar. And if it's $10 that's great. If it's $100 that's not so great. But the AI inference that Dawn was talking about, at the moment, customers are looking at that as a kind of hybrid model with cloud. So they want a data center which is relatively low latency, 100, 150 kilometers away from existing AZs or availability zones, which can handle both cloud and both AI inference or small machine learning, because they're not quite sure which is going to take off when, and it's a timing issue. We'd love to build data centers where there's cheap and green power. It's not so much a transition problem, but a transmission problem. The computing power, to a certain extent, needs to be where the users are, and the users are in and around large metros.
Dawn Childs 07:50
But I do think that there's a potential transitionary piece where we better utilize the transmission that there is, and we create some disaggregated models, and, you know, perhaps some grid services that data center companies can play into, if we can think a little bit harder around the, how we govern the transmission and the grid so, at the moment that the software used and the primacy over the power to enable them to move the power around is old. It's challenging, and the curtailment costs for turning off the wind and all the fantastic generation that we have that's renewable are astronomical. If we could think a little bit harder about how to unlock that software conundrum. Make the controls far more svelte, we could reduce the curtailment costs. We could start using some of the generation assets we have where we already need them.
Neil Cresswell 08:35
In the first days of relational databases, the programs were designed beautifully, but they ran so slowly because they were doing all these nested searches and things and that the amount of computing power it needed was just growing to a point where it was unsustainable. And I think that will happen with AI as well, if we carry on, on the same this trajectory is just too much power. I'm sure there will be advances in that kind of thing and as Dawn knows, most data centers run at 50, 60, maybe 70% utilization, but we have to provide and take contracts for 100% in case it's needed. There never has been in the history of data centers. And if you multiply that across the world, there's probably like 85 gigawatts of power being contracted and used at the moment. So that's probably 20 or 30 gigawatts of that, it just isn't used.
Dawn Childs 19:24
Stranded power that tapped into, if we could think about it in the right way.
Alex Thomas 19:28
And so, from a UK perspective, what would be some of your biggest asks, and of whom, both from an on operator side and also a generator side, to try and solve some of this mismatch?
Ash Hein 09:38
Let's actually look at what drives strategic growth. A gigawatt data center located anywhere in the UK will take, not just for the data hall, but the computer equipment in it that will be in excess of a 30 billion pound investment is a nationally, strategically significant investment and project that needs to get prioritized, and prioritization then means grid connections and faster planning approvals.
Natalie Adomait 09:59
Yeah. We have committed up to $10 billion to invest in a large, next generation hub for AI, and this will include a 750 megawatt data center development. It's really predominantly focused on kind of the sovereign compute needs. And that is a theme and a thesis we have seen a lot across Europe, but also globally. And so our data center business is really setting themselves up to really serve and meet the demands that governments have, in addition to what we're seeing just around broader AI use cases across businesses and consumers. On the renewable side, we are responding to that on a global basis as a result. So, you mentioned Microsoft earlier. Microsoft is a large corporate partner for us, so we, last year, signed a 10 gigawatt framework agreement to supply green power to them across Europe, as well as the US. And what that allows us to do is actually, when we're pursuing new development platforms or new development opportunities, we can actually pre-vet those with Microsoft and our other off-take partners and say, this is where we're seeing the pipeline come. If we actually went after these projects, would this match up with where your data center needs are, and it allows us to really tailor our investment priorities to meet where that demand is coming from. And that's a real Net Advantage that we found. We're doing this also in India. We've got a business in India called CleanMax. CleanMax is one of the largest suppliers of corporate PPAs, and they just signed a Three Year Framework Agreement with Meta to develop out a lot of power to meet Meta’s needs in that market. And this isn't just data centers, it's also the supply chain. So, we're starting to get a lot of questions from our data center operators and our technology partners to say, well, how can you help us find renewable power solutions, or just lock in that low cost fixed price that comes from a renewable energy asset for our supply partners as well as they look to expand to meet the demands that they require.
Alex Thomas 11:43
Great. Thank you. And, what are your thoughts in terms of the relative ease and constraints of doing business in various markets?
Dawn Childs 11:50
There are challenges globally, so there's nowhere where it's super easy. If there was a simplicity scale, I guess the easiest in terms of finding power and it being the right power, because it's renewable and the land is the Nordics. But then getting the customer commitment to having that AI factory there is probably the challenge in that market. Universally across the rest of the globe, there are power challenges, whether it's around the consenting side, the time to get the power, it's slightly easier in the Gulf, because they sort of created their transmission grid for a future state rather than the initial state they had. Whereas the UK and Europe sort of started it from where it was, got all this disaggregated power and connected it together. One thing that I would say, the thing that gets in the way most often is regulation. So, different markets have different approaches to regulation, and particularly around private wires. And so even in the US, where private wire was ostensibly allowed, there was a recent behind the meter solution that was put together and that was disallowed or overruled by the regulator. So even where private wire capability exists, some of that is being rowed back. So I think the biggest ask that I would have is a focus on regulation and enabling good solutions to be put together and thought through from a regulatory perspective, rather than the, No, that's not allowed, because, particularly in the severely constrained markets where there are effective moratoriums, take Dublin, for example, great solutions are being put together, and they're just being blocked from a regulatory perspective, then you end up at an impasse, which doesn't help anybody.
Natalie Adomait 13:20
Dawn makes a great point, and maybe I can underscore that with an extra example. We have an investment in a joint venture called Carbon Tera Vault. CRC owns a massive CCGT that sits on top of a ton of land that is privately owned, right over top of a sequestration reservoir that we are developing. We could provide 24/7 green power. But the challenge is you still have to go through kind of the federal permitting process to do anything behind the meter, which becomes restrictive and makes it a lot more challenging. But there is a very active, live available solution to provide 24/7 power and in an incredibly, attractive market from a demand perspective for data centers. So we are having those conversations, but the regulations can just slow down a lot of the momentum of what could be a fantastic opportunity. And I think there is some work now being done in the US to try to unlock and to clarify and provide a speed-to-market for behind-the-meter solutions, but they've still got a little bit to go.
Neil Cresswell 14:17
And that was primarily the reason we went in to Berlin is it was exactly the right mix of the demand and supply. So 50 Hertz, who are the local grid provider there have one of probably the largest onshore wind farm in Europe, or one of them. So they have 500 megawatts of power that they can't use, because most of the industry in Germany, or the heavy industry, is not around Berlin. But obviously, Berlin is a big city, 4 million people. It's the center of government and a growing and booming city. And one of the things that's driving decentralization of data centers and AI and cloud is the kind of sovereign cloud, and soon-to-be sovereign AI requirements as well. And those were typically, we think, will go near the kind of seat of government places, for obvious reasons. So, you know, for us, Berlin was a was a really good mix. But I'd echo what Dawn said about regulation. We're being forced to become a grid operator in Germany, we're a data center developer, and I don't want to be a grid operator, but because we're now such a big user, we have to do that.
Alex Thomas 15:18
Just to pick up on this demand intensity that we're experiencing at the moment. Do you think there's kind of less focus at the moment on renewable power? Has that kind of dropped down the agenda at this kind of moment in time, would you say?
Dawn Childs 15:30
So definitely, it's still absolutely up there on the agenda. However, I think if you got to a point where there was a fundamental choice of, have data center capacity and it's not green, or don't have the data center capacity, I think our customers would go, I want the data center capacity because the speed to market is really important. You can't necessarily wait for the renewable solution.
Natalie Adomait 15:50
I would say one of the things we've heard from a lot of our customers, as we talk to them, is the green is important, but the power now and then green later is increasingly…
Neil Cresswell 15:58
Exactly, because we need a roadmap.
Natalie Adomait 16:00
The reason why renewables always is the first that comes to mind is because it's the cheapest, like it's not, our customers aren't doing this because it's the it's the best for the world. That's part of it. But customers want renewables because it is the cheapest to enter into a long term PPA for today, that is just true. Now, there are challenges to get to 24/7. You need connection with the grid. You need to look at behind-the-meter solutions, with things like nuclear, which we're starting to see a bit of a resurgence for in the US right now. But renewables is going to always be part of that solution. It's just how much of the solution, when you look at that, 24/7 energy is going to be that. Batteries is going to bridge a huge amount of that. And then it's going to be other technologies, such as hydro, nuclear, gas plus CCGT that are going, or CCS, which is going to bridge that solution to get you to the 24/7.
Ash Hein 16:47
But I was gonna add Natalie. I think that it's a lot about you see the common theme, how do data center operators and colos work together with the power sector? Because there's a lot of those common challenges that we can solve. We talk a lot with hyperscalers and colos about how you manage the variation in load. And so managing that, balancing that, being able to deliver the reliability, but also manage the fluctuations, and then manage the heat from that as well.
Alex Thomas 17:10
And Ash, perhaps if you could give us your insights in terms of how you reconcile what are your capital decisions and your planning decisions, which are multi-year, clearly, versus some of the shorter timescales that some of the operators and customers need.
Ash Hein 17:22
It's very, very hard, Alex, you're certainly looking at what could be the potential demand and the forecasts, etc., and I try and get down to what's the underlying driver of that, and watching Microsoft's report of inferences, and how fast are they taking off, and is AI really going to come? As you say, Alex, in our power world, we plan 5, 10, 15, 20 years. We have to be looking at that world and expecting that to come. And so we absolutely are planning for, how do we get to that as fast as possible and rely on the fact that we think the demand is going to come. But working cooperatively with the data centers and hyperscalers, you need to understand their needs and timescales. And how do you reduce the cost? As Neil was saying, the cost in the UK is very expensive, but we can be very clever as to, how do we create that the lowest PUE factor, the best water efficiency. I think we can be, do some very clever things in the UK for the data centers that make it a really attractive spot to locate them.
Dawn Childs 18:12
I also think there's a slight risk in this sort of moment of the AI sort of gold rush, and that is that there's going to be a whole bunch of busy fools because there are lots of people trying to enter the sector who maybe have some land or have some power, or think they can copy, cut and put a data center here, just because they've got the land and the power. And people are saying that power is a challenge. And so you're getting new entrants to the market who are just trying to make a quick buck. And so that creates this sort of busyness and this sort of like, you know, fizziness in the market, which, which will mean that some of the real projects don't get pushed forward, because people are busy over here with this project, which is never going to go anywhere, because they don't know what the use case is. They don't know who the customer is, but they think they've got some land and some power so they can make a data center and make some money.
Alex Thomas 18:53
Great. We're coming up to time. So, before we wrap up, perhaps from each of you, we'd love to get your kind of parting thoughts, a kind of key takeaway for the audience.
Neil Cresswell 19:00
One thing we don't have to worry about is demand. I see demand from AI, it only increasing, you know, massively, and cloud is increasing as well. You just look at the AI absorption rates in kind of life, you know, it's only going one way. And I would love to put data centers next to cheap nuclear, hydro power resources in the future. And if someone can just figure out how to connect those two, that would be fantastic.
Alex Thomas 19:27
Great. How about you, Natalie,
Natalie Adomait 19:28
I was gonna say we're working on it. I would just say everyone has to remain focused on, this is going to be a major industrial transformation, and so, like what we saw with renewables over the last 15 years, like what we've seen with every major economic, massive shift, it's not going to be smooth sailing along the way. As we continue to see growth, there is going to be a lot of headlines that try to bring up. There's more negatives than positives. You have to remain focused on the long-term use cases, the long-term demand, the long-term business opportunities that a scale up in AI is going to create. I spend a lot of time with our investors, our LPs and our funds, talking about the short-term headlines, which are, sure, Microsoft doing a pause. They're doing a pause because they're learning about how their data centers should be designed efficiently to meet the needs of what they're seeing within their own models, not because they see any loss of opportunity across their business. And I think that's what's sometimes missed in the headlines that grab a lot of attention.
Alex Thomas 20:20
That's great. How about you, Dawn?
Dawn Childs 20:22
This significant shift cannot happen by people working in isolation. If you look at the challenges on the grid, on the transmission, on the regulatory space, governments trying to define what sovereign AI is and how that will be deployed, these are all problems that need collaboration. So we have to work together on this, because demand will go up, deliberate pauses, yes, to understand the design, understand how to optimize and how to deploy. But this is exponential growth. It will continue, and we need to work together to enable that growth.
Joe Coletti 20:50
Thanks again for listening to Powering Sustainable Ideas, brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on June 26, 2025. If you'd like to learn more or continue the conversation, please visit rbccm.com/energytransition.
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