Denmark is responsible for the number of data centers among the types of energy grid

COPENHAGEN, Denmark – The Nordics, long seen as a magnet for data center investment due to their stable climate and abundance of renewable energy, are now weighing on the growth of power-hungry facilities as growing energy demand forces a rethink.

At the center of the debate is Denmark, the first of the Nordics to face the question directly, as the formation of a new government and the increase in requests for access to the grid mean the suspension of new projects.

Data centers around the world are increasingly facing setbacks due to concerns about their energy consumption. In the US, Maine recently came close to banning the construction of a data center and in Pennsylvania, a setback could hurt stakeholders before the election. Other states, including Virginia and Oklahoma are considering a moratorium.

Only two European countries have implemented a complete shutdown of data centers, namely the Netherlands and Ireland. Both member states have since reduced restrictions under certain conditions. But grid pressures are spreading across the continent, as the AI ​​boom adds to the acceleration of electrification that was fueled by the energy transition and digitalisation.

In March, Denmark’s state-owned grid company Energinet introduced a moratorium on new grid connection agreements due to an “explosion” of capacity requests, a CNBC spokeswoman said. About 60 GW of projects are waiting to be connected. That far exceeds Denmark’s peak electricity demand of around 7 GW. Data centers make up about a quarter (14 GW) of the 60 GW new grid connection projects, the spokesman said.

An extension of the announcement will not be issued, CEO of the Data Center Industry Association (DDI) Henrik Hansen, told CNBC.

“We have to be realistic and look at what is really available. It is not possible to just argue with all kinds of coordination agreements, because the power is not there. We have to depend on this discussion and maybe re-direct our industry a little.”

He added that the increase in requests has resulted in a “legendary” queue, where the gap between what is available and what is requested widens. The industry, therefore, needs to take a closer look at projects that may not be as effective, he said, adding that the association wants more criteria to determine who should be prioritized and connected quickly.

“We are strongly opposed to the need to clean up that line and look for stricter measures in terms of maturity, real investment decisions, customers and community value,” Hansen said. In some countries such as the Netherlands, the choice between who should have access has been reduced to a debate about what is more important: a data center or a hospital.

Sebastian Schwartz Bøtcher, country sales director for the energy management specialist Schneider Electricdescribed the debate on LinkedIn as “power policy hunger games” between data centers and businesses. He suggested that certain industries should not be singled out.

His sentiments were echoed by Tobias Johan Sørensen, Concito’s chief analyst, who said that no one should be placed behind the queue, but there should be separate queues based on a set of criteria.

The temporary suspension in Denmark will last for three months or until Energinet can carry out an overview and implement new ways to increase capacity. In order to start making decisions on how to prioritize the many access requests that are blocking the line, new political agreements and reformed regulatory frameworks will be needed, Energinet said.

No political decisions have been taken as Denmark is currently in the process of forming a new government following the national elections. The Department of Energy and Climate declined to comment.

Before the election, Energy Minister Lars Aagaard told local media that he would investigate the possibility of giving grid access first to Danish customers, who put data centers at the back of the queue.

“I suspect that data centers and battery parks, among other things, use a lot of capacity available in the electricity grid,” Aagaard told business news outlet Finans in January, according to comments translated by Google.

It was against this background that questions about standardization and who should get priority were discussed at the Data Centers Denmark conference in Copenhagen last week.

Gone are the days when you could build data centers quietly, Joana Reicherts, director of government affairs for EMEA Microsofthe said during a CNBC-moderated panel at the conference. This statement is echoed by other hyperscalers and operators as they look to engage more with communities waking up to the reality of having large server warehouses in their backyards.

Denmark had an estimated 398 MW of installed data center capacity by 2026, with an additional 208 MW under construction. That is expected to grow by 1.2 GW by 2030, according to the DDI Association. Hyperscales make up 60% of Denmark’s current capacity.

“You can wait a long time,” said Diana Hodnett, global director of public affairs, partnerships and economic development at Diana Hodnett. Googlehe told CNBC in an interview. If there is no certainty that the suspension will be removed in three months, and the result is not clear, then there is a quick pivot to look at other markets, he said, noting the need to speed up the service customers.

“I’m not sure governments and TSOs realize how quickly that can happen,” Hodnett said, referring to the transmission system operators who run the grid.

Pernille Hoffmann, managing director of Nordics at the data services company Digital Realty, noted how times have changed. “In the past, there’s always been a lot of energy here, so it’s never been a problem. … I think we’re seeing this huge demand and it’s coming from data centers that don’t really fit into the distribution network at all, or the grid. So that needs to be taken care of,” Hoffmann told CNBC.

When asked if the temporary suspension of grid operations could be extended, Pernille said, “I’m afraid it will be, but I hope not.”

“If you can’t get your AI workloads located in Denmark, you’ll just move them somewhere else, and that’s what we’re going to see. And that goes both to Denmark, but also to the Nordics as a region. If we can’t provide those necessary facilities that are needed for the deployment of AI to be here, they will move elsewhere,” he said.

Some hope that the situation in Denmark will lead to new laws that could provide examples for other Nordic and other European countries. Energinet’s Chief Operating Officer, Soren Dupont Kristensen, said during the panel discussion that the temporary suspension could be seen as a “window of opportunity” to rethink the law.

Ireland eased its restrictions late last year and that led to “one of the most comprehensive regulatory frameworks in Europe for managing large energy users,” said Alistair Speirs, general manager at Microsoft’s Azure Infrastructure. Microsoft plans to invest three billion dollars in data center capacity on Danish soil between 2023 and 2027.

“Our investment answers the question of our Danish customers who want to store and process their data closer to home and under EU law,” Speirs told CNBC in an email. “We hope that we will be able to continue to provide our Danish customers with the level of computing power for cloud and AI solutions that they demand, in order to support the competitiveness of the Danish economy and the functioning of a growing digital society.”

He stressed that these institutions are important infrastructure that keeps the modern world running.

“The key question is not whether the demand for computing power is going down – it’s how quickly the infrastructure and policy catch up,” he said.