Climate policy costs of spatially unbalanced growth in electricity demand: the case of datacentres in Ireland

We investigate the power system and climate policy implications of the anticipated expansion in electricity demand from datacentres. We perform a joint optimization of Generation and Transmission Expansion Planning for the island of Ireland considering uncertainty in future datacentre growth under various climate policies. Datacentre expansion imposes significant extra costs on the power system. A renewable energy target is more costly than a technology-neutral carbon reduction policy due to the restriction to invest solely in renewable energy, and the divergence in costs increases non-linearly in electricity demand. A carbon reduction policy is more robust to uncertainties in projected demand than a renewable policy. The increased demand from datacentres, which is relatively constant, is best matched by a power supply with constant output, generally fossil-fuelled power plants, potentially in combination with carbon capture and sequestration technology, than variable supply. Datacentre demand increases power system costs by 6% under a carbon reduction policy, and by 9% to 15% under renewable energy targets. However, the abatement cost of carbon under renewable targets decreases at higher levels of demand, while the opposite is true for the abatement cost under technology-neutral targets. High renewable targets crowd out other low-carbon options, namely CCS, leading to a higher cost solution for the same reduction in emissions, although this result is sensitive to increases in fossil fuel prices. The results suggest that climate-related energy policy should focus on technology-neutral carbon reduction policies. The climate impacts of datacentres on energy demand and thus supply requirements should also feature in climate and energy policy discussions.Key policy insightsClimate policy that focuses on renewable energy only is more expensive than a technology-neutral climate policyThe costs of a renewable-only focused climate policy increase non-linearly as demand increases