Spain, Portugal Power Cost Edge Seen Fueling AI Data Center Boom-OxBig News Network

(Bloomberg) — Spain and Portugal’s low-cost renewable energy is fueling investments in artificial intelligence infrastructure that will increase data center power consumption more than eightfold in a decade, according to Aurora Energy Research Ltd.

The abundance of solar and wind energy in the two southern European nations, coupled with reliable grids and extensive fiber connectivity, gives them an edge over higher-cost countries like the UK and Germany for such investments, the Oxford-based research firm said in a report. 

The Iberian peninsula can “offer a security of supply which is among the world’s best, paired with low spot energy prices,” Aurora analyst Javier Pamos said in a phone interview.

The boom of generative artificial intelligence has already drawn the interest of several companies in Spain and Portugal, which see data centers as a potentially lucrative source of revenue. 

While utility Iberdrola SA and solar developer Solaria Energia y Medio Ambiente SA announced they’re seeking to create joint ventures to enter the industry, real estate company Merlin Properties Socimi SA in July raised almost €1 billion to expand its data center business. Spanish builder Actividades de Construccion y Servicios SA also said it would create a dedicated unit. 

In Portugal, Davidson Kempner Capital Management and Pioneer Point Partners are investing in a data center being developed in Sines, on the coast south of Lisbon.

Aurora expects annual power demand from Iberian data centers, currently at about 2.8 terawatt-hours, will increase by 21 terawatt-hours until 2035, before plateauing. That will help absorb an oversupply from the peninsula’s renewable power generation.

A liquid market for power purchase agreements is also another factor contributing to make the region attractive, given data centers’ need for a constant clean—energy supply, said Pamos.

The main hurdle to the expansion of the industry could be the hot temperatures in certain parts of the Iberian peninsula, which can increase the cost of refrigerating chips, he said. 

–With assistance from Joao Lima.

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