Éire / Ireland

In the culture wars over data centres, there is no space for the middle ground. But a realistic examination of the benefits and costs is what we need.

Ireland’s data centre debate is the latest culture war, pitching environmentalists against those who refer to “Ireland Inc” when making their pro-business arguments. While seemingly endless growth in the tech sector has underpinned official support for the growth in data centres over the past decade – providing a trump card against objectors – the latest wobbles in employment in the sector and challenges in energy generation change the backdrop a bit. Ireland has bent over backwards to accommodate the multinationals over the years, but what happens now? The debate is born out of Ireland’s outsize dependence on Big Tech for jobs, many of them well paid, and particularly for corporate tax revenues. Companies like Apple, Microsoft, Meta and Alphabet – Google’s parent – have been significant employers and taxpayers. The green light for data centres has been seen as part of the overall package attracting them to Ireland – and means that the State has a high proportion of European capacity, adjusting for its relatively small size.

Data centres consume around 22 per cent of the State’s electricity and, at a time of tight supply, are under the microscope. Ireland urgently needs a better roadmap here. Data centres are part of this. But so too is increasing energy supply more rapidly, primarily from renewables but also vital gas-fired generation. As well as housing and public transport, part of the failure of vital infrastructure development in recent years has been in energy. Ireland did not plan for higher energy demand across the board as the population and economy grew and data centres landed. Data centres, as part of the infrastructure of the tech sector, play a role in economic development. Just how much is a key argument. The Government has oversold the story this week, based on a report it commissioned from KPMG, with Minister for Finance Simon Harris referring in the Dáil to estimates the report contained that across six sectors €100 billion in annual gross value added (GVA), 875,000 jobs and €14.6 billion in annual employment related taxes were “enabled” by data centres capacity located in Ireland. The key word here is “enabled”. The report also says that data centres “underpin” these economic impacts. There is some consultant-speak going on here. What this means is that the companies in these sectors use and rely on data centres. But the attribution of so many jobs directly to the presence of data centres in Ireland is a stretch too far. Using it weakens the Government’s argument by giving critics a target to attack. The real case for data centres is more nuanced, but to be credible, Ministers need to be making it. [ Ireland’s data centre strain a ‘cautionary tale’ for rest of world, UN saysOpens in new window ] The question that is impossible to answer is: what exactly is the link between the presence of the data centres and the creation of jobs and wider economic activity by Big Tech? The central argument in the KPMG report is that the ability of Big Tech companies locating here to be able to establish their own data centres “has strengthened Ireland’s ability in retaining and existing and attracting new FDI [foreign direct investment] from big players”. In KPMG’s view, it creates “a sticky investment footprint”. This is the essential point in the pro data centre narrative. But it also requires balancing with a look at the costs involved. Friends of the Earth, the environmental lobby, put the opposite case this week in a report arguing that data centre demand pushes up costs to electricity consumers. Due to the structure of the energy market, it argues that households pay more because the system is close to capacity more often and thus has to rely to a greater extent on more expensive energy produced via gas-fired stations. In turn, this pushes up carbon emissions. The arguments about the structure of the energy market are complex and just as a report commissioned by the Government is always likely to take one side of the case, one commissioned by an environmental lobby will also advocate the other. In the culture wars, there is no space for the middle ground. But the allocation of costs across the electricity system – and how much data centres pay for power and their wider obligations about location and the use of renewables – are valid issues. As is the extent to which Irish industrial and planning policy should accommodate them. You can’t do without data centres in a digital economy, especially in the era of AI. But the rules of the game are important. There are also questions here about balancing growth with climate targets. The data in the KPMG report shows how the centres owned by the big so-called hyperscalers – including Microsoft, Amazon, Meta and Google – are responsible for the bulk of electricity demand from Irish data centres. But the so-called “gigafactories” where massive computing power is based in data centres central to AI development, are in the US. This is a point of concern to the EU, which is aiming to develop five such facilities in the Europe at a cost of €20 billion to try to reduce tech reliance on Trump’s US. [ Data centres’ energy use being ‘managed appropriately’ by Government, Darragh O’Brien saysOpens in new window ] We are unlikely, given Ireland’s energy position, to see a gigafactory off the Naas Road any time soon. But the future of data centres will remain tied up with Ireland’s outsize dependence on US Big Tech and the trade off with the jobs and tax revenue this has created. This is the data centre trap and part of a live debate in policymaking circles about how to hold on to existing FDI and attract the next wave, at a time when the big firms are now being pushed to invest more in the US market. Those big companies will push for everything they can get. And Irish governments in the past have not been slow to meet their demands, at times excessively. These centres will remain part of economic investment in the AI era, but policy needs to recognise that Ireland has already contributed significantly in terms of international capacity. Ireland needs to decide its own priorities and central to this is a realistic analysis of likely energy supply in the years ahead.

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