Gaming sector presents data and energy challenges for data centre operators

In December 2023, the European Commission initiated a process which ultimately will lead to the establishment of an EU-wide scheme for rating the sustainability of data centres. This is the latest step in the hardening of the regulatory environment towards the development of data centres.  

The global gaming market, which was worth an estimated $250 billion in 2022, is undergoing rapid development and technological evolution. That has led to soaring demand for sophisticated data processing, storage and energy infrastructure. Ireland – as an open economy with very active renewable energy, tech and data centre sectors – is a useful case study in considering this apparent data, energy and gaming ‘trilemma’.

In today’s market, the most successful gaming titles are highly interactive, online-based and increasingly require uninterrupted storage and processing infrastructure. The highly global and competitive nature of the online gaming sector means any outage, downtime or interruption in the gaming experience could lose players and, by extension, revenue. The funding model is often subscription based, so loss of confidence in the system can be critical to gaming businesses. Whereas in the past five years, data centre developers have committed to joint ventures and long-term power purchase agreements with energy developers, gaming developers and publishers are now similarly looking to find data partners who understand and can meet their specific storage and processing needs.

Several trends in the gaming sector, such as the rise of ‘cloud’ gaming and the impact of virtual reality (VR) and artificial intelligence (AI), continue to drive up the demands for data storage and processing even further. Cloud gaming, for instance, has completely disrupted the entire gaming model and the data storage and processing needs of gaming companies. This model, which is effectively a streaming model, relies on the installation of remote servers in data centres.

The trend towards the creation of VR as an immersive gaming experience drives and is dependent on data requirements of a more technical and complicated nature. These requirements include security, accessibility, consistency in gameplay, lack of downtime and low latency network connectivity. These developments add greatly to the demands already on the data centre sector.

Tightened regulatory requirements on data centres

For data centre developers and hosts, there are ongoing issues in relation to delivering future capacity. Data centres need to design in and plan for resilience across several variables including power load, consumption and cooling to avoid outages. However, the tightened regulatory environment in the EU on data centres to connect to electricity grid networks will make it harder to meet the gaming sector’s increasing requirements for data processing and storage.

In some countries, including Ireland, regulators have already tightened conditions on data centre connections to the national electricity grid. Ireland’s Commission for the Regulation of Utilities (CRU), for example, has provided the operators of Ireland’s electricity grid, EirGrid and ESBN, with greater scope to refuse applications for grid connections made by data centre developers. It is concerned that “continuing to allow data centres to connect to the electricity network in accordance with current arrangements” could present a risk to the security of electricity supply in Ireland. Moreover, data centre development is increasingly presenting difficult to reconcile political, industrial development and economic policy issues.

All new data centre grid connection applications in Ireland will be assessed against set criteria “to determine whether a connection offer can be made within the system stability and reliability needs of the electricity network”.

Despite the significant digital infrastructure needs of the modern gaming sector, it is difficult to see how such applications would rank as a priority given the demands already being made on the electricity grid. According to a forecast by EirGrid, data centres’ increasing demands on Ireland’s electrical supply may account for as much as 29% of consumption by 2028. Gaming data is unlikely to be prioritised if there is limited capacity in the grid for new data centre storage.

There are still ways for gaming companies to overcome such challenges, such as the use of power purchase agreements or forming partnerships with electricity suppliers. The recent partnership between Microsoft and Irish energy company SSE Airtricity for the construction of solar panels to offset its data centre consumption could be replicated in a gaming context.

Co-written by Conall Ennis of Pinsent Masons.