UK and Germany to tighten energy efficiency rules for data centres

The German government passed a draft of the Energy Efficiency Act in April, which is now being debated in parliament. Section four of the draft is dedicated in detail to new requirements for the energy efficiency of data centres.

According to the draft, newly built data centres would be obliged to comply with energy efficiency standards, to ensure a minimum temperature for air cooling and to use the waste heat they generate. Existing facilities would be partially exempt from the new rules, but would be obliged to pay attention to the efficiency of their electricity use and increasingly use electricity from renewable sources.

Specifically, the draft stipulates that data centres commissioned before 1 July 2026 must be built in such a way that they achieve a "Power Usage Effectiveness" value (PUE value) of 1.5 from 1 July 2027. From 2030, these data centres would have to achieve a PUE of 1.3.

PUE value is a measure of the energy efficiency of building technology. With a PUE value of 1.3, no more than 30% of the building’s total energy consumption may be used for building technology. Data centres built after 1 July 2027 must be able to achieve a PUE value of 1.3 from the outset. However, the draft law stipulates in a restrictive manner that the requirements must only be permanently achieved two years after commissioning.

According to the draft, new data centres must also reuse a percentage of their waste heat. For data centres commissioned from 1 July 2026, this would be a share of 10%; for data centres commissioned from July 2027, 15%; and for data centres commissioned from July 2028, 20%.

In addition, all data centres must cover half of their electricity consumption from renewable sources from 1 January 2024, increasing to 100% from 1 January 2027. The draft stipulates that data centre operators must set up an energy or environmental management system by 1 July 2025 and must inform both the government and customers about their environmental performance in the future.

Dr Marc Salevic, digital infrastructure and connectivity expert at Pinsent Masons, said: "Regardless of exemptions and transitional provisions that may be considered under the act, the cut-off date provisions could make it attractive for data centre operators to bring forward or accelerate new projects, in order to not have to comply with the requirements until a later date or to have more time for implementation."

"In any case, operators are likely to face considerable additional expense. The German government's plans are likely to mean that when choosing the location of new data centres, it will no longer just be a matter of proximity to internet nodes or security criteria, but probably also the availability of heating networks," said Dr Benedikt Beierle, also an expert in digital infrastructures at Pinsent Masons.

Compared to an initial draft from October 2022, the act now passed contains only minor changes, which relate in particular to the thresholds and timelines. However, the bill still has to pass through the Bundestag and Bundesrat. In this context, the hearing of associations and other stakeholders will also take place, and changes to the draft law are still possible.

"Germany is moving ahead more swiftly with regulation than the UK. However, the direction of travel is broadly and unsurprisingly the same," said Siobhan Cross, London-based real estate expert at Pinsent Masons. "In terms of use of renewable energy and energy efficiency we have similar actual or proposed requirements on energy efficiency and decarbonising energy sources in buildings."

In the UK, leases of commercial buildings can only be granted - with some exceptions - if there is a minimum EPC rating of E. This is expected to rise to B by 2030.

The Building Regulations in England were amended in June 2022 to tighten commercial property energy efficiency requirements, and further amendments are promised for June 2025. The 2022 amendments focused on building fabric requirements - for example for better insulation - for all commercial property including data centres. The aim of the amendments is to make all new commercial buildings "net zero carbon ready", which will involve not using fossil fuel energy in new buildings once the grid decarbonises. In addition, a UK government consultation on the details of the "Future Homes Standard", which will become mandatory from 2025 onwards, is also expected.

The UK 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. The government’s recently revised its Net Zero Strategy also confirms its intention to phase out gas heating in property entirely by 2035 and maybe by 2033.

The UK government has also consulted on setting up designated heat network zones in which all new buildings and existing large buildings would have to connect to a heat network, which would be of particular relevance for the reusage of waste heat from data centres.  

Cross said: "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. 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."