UK tightens energy regulations: challenges and opportunities for data centres

The UK has been tightening its energy efficiency regulations, which could profoundly impact commercial properties like data centres.

With sustainability becoming a global priority, the focus on energy efficiency is increasing. The UK Government is taking firm steps towards a greener future, creating both challenges and opportunities for data centre industry, which is known for its high energy consumption.

The Minimum Energy Efficiency Standards

The Minimum Energy Efficiency Standards (MEES), first implemented in April 2018, demand that commercial leases can only be granted if the property holds an energy performance certificate (EPC) with a minimum rating of E. There a few exceptions to this rule.

On 1 April 2023, these regulations tightened, making it unlawful for landlords to continue leasing properties that do not meet the required standards unless all possible cost-effective energy efficiency improvements have been made or an exemption has been registered​.

By 2027, the UK Government aims to have all rented non-domestic buildings achieve an EPC of C, before attaining B by 2030. As of the latest assessments, only 12% of all registered commercial properties meet this criteria.

Data centres, like all commercial properties, will be subject to the same standards. To avoid significant financial penalties and potential reputational damage, data centre operators must comply to these standards. Some operators may need to make substantial changes to their operational procedures and infrastructure to meet the requirements​.

The Building Regulations in England

In June 2022, the Building Regulations in England were amended to tighten energy efficiency requirements for commercial properties, including data centres. Under the new rules, CO2 emissions from new buildings must be reduced by 27%.

These amendments also focused on building fabric requirements like better insulation, with the aim of making all new commercial buildings ‘net-zero carbon ready’. This move involves eliminating the use of fossil fuel energy in new buildings once the grid decarbonises.

“In addition to actual or proposed regulatory drivers applying to the assets themselves, there is also pressure from customers of data centres: large companies or financial institutions often have their own net-zero targets and may be subject to mandatory reporting of their emissions,” said Siobhan Cross, a London-based real estate expert at Pinsent Masons.

Phasing Out New Fossil Fuel Usage in Commercial Buildings

The UK Government’s recent revision of its Net Zero Strategy also confirms its intention to phase out gas heating entirely by 2035, and potentially as early as 2033.

The Government has also consulted on phasing out new fossil fuel usage in commercial buildings, applicable to buildings over 1,000sqm from 2024 and to smaller buildings from 2026. This would prevent the installation of new fossil fuel heating in new or existing commercial buildings.

Heat Network Zones

The recently introduced Heat Network Zoning policy may also influence the data centre industry. This policy requires local authorities to identify Heat Network Zones in their area and incorporate these into their local plans. All new buildings and existing large buildings will be expected to connect to a heat network, which could impact the reuse of waste heat from data centres.

Data centres located in these zones may need to modify their heating and cooling systems to be compatible with the heat network, potentially leading to increased upfront costs, but also potential long-term benefits in terms of energy efficiency and reduced carbon emissions.

“The high energy consumption of data centres is likely to be causing concern about the emissions in the supply chain of these companies. Those data centres which are energy efficient and using renewable or low carbon energy sources may have a competitive advantage over those who are not,” added Cross.

Facing the Future: Energy Efficiency and Data Centres

The journey towards a more sustainable future in the UK has set the stage for a significant transition within the data centre industry.

Amendments to the MEES and Building Regulations in England have initiated a shift towards more energy-efficient practices, with the aim of achieving stringent EPC ratings and reducing CO2 emissions.

The proposed phasing out of new fossil fuel usage in commercial buildings and the Heat Network Zoning policy further underscore the Government’s commitment to a green transition. These initiatives may require substantial alterations in the operations and infrastructure of data centres, but they also pave the way for long-term benefits like reduced carbon emissions and improved energy efficiency.

However, these changes not only represent challenges but also opportunities for data centre operators. The industry’s high energy consumption makes it a prime candidate for significant emission reductions and potential improvements in energy efficiency. Owners and operators that are proactive in complying with these standards can enhance their reputation and competitive standing, particularly among clients with their own net-zero targets.

As regulatory pressures and customer expectations continue to grow, energy-efficient and low-carbon solutions are no longer optional. It is a necessity and a key to the industry’s future success.

In navigating these changes, the sustainability-focused data centre stakeholders can play a pivotal role in the UK’s progress towards its net-zero targets.

> Read more: Net Zero vs. Near Zero Emissions: Negative or Positive?

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