A data center can be just a large energy consumer or, with correct planning, it can become an investment that supports new power generation and strengthens the local economy. The outcome depends, above all, on how the data center is integrated into the energy system and the broader investment environment created around it.

Data centers are currently amongst the most widely discussed investment opportunities in Finland. Their impact on employment and energy consumption makes them strategically significant and raises an important question: what does data center development mean for Finland’s energy system?

Buying renewable energy is not enough

It is commonly assumed that a data center powered by renewable energy is automatically a sustainable solution. However, the practicalities are more complex.

If a data center buys its electricity from currently operational renewable energy assets, it does not increase the overall supply of energy on the market. Instead, the energy it uses will need to be replaced elsewhere in the system, often with power from less carbon-neutral sources.

For data centers, one solution to this challenge is the requirement of additionality. The principle is simple: a new energy consumer should also enable new power generation, rather than using energy already available on the grid.

What does additionality mean in a data center project?

In practical terms, additionality means linking the project to a new power generation investment. The simplest way to do this is through a long-term Power Purchase Agreement (PPA) with a new renewable energy project, typically wind or solar farms coupled with energy storage solutions.

In practice, a new wind power project is challenging to finance without a valid long-term electricity sales agreement. When a data center signs a PPA with a new wind farm for, e.g., 15–20 years, the wind farm gains certainty over the sale of the electricity it generates. This unlocks financing instruments that, in turn, enable construction. Without such a commitment, this new generation of renewable energy would most likely not materialize.

This logic is at the core of UB Renewable Energy’s projects. In energy parks, renewable energy generation, energy storage, and data center demand are planned as one integrated system, allowing generation and consumption to be aligned over time as well. In this way, the data center shifts from being just an electricity consumer to supporting the development of new power generation.

Waste heat makes a data center part of the energy system

Another important way a data center can strengthen the energy system is by utilizing waste heat.

Data center servers generate large amounts of heat. If this heat is not directed into a district heating network, it is released into the air. When used in district heating, waste heat can replace heat produced from other energy sources and reduce the overall load on the energy system. Since heating buildings accounts for approximately one quarter of Finland’s final energy consumption, this can have a significant system-level impact.

In UB Renewable Energy’s projects, the potential to utilize waste heat plays an important role in project selection. In practice, each project is planned to direct waste heat primarily into the district heating network. In larger projects, it can also be used more broadly, for example by offering it to small-scale industrial operators at a competitive price.

This provides municipalities with tangible benefits beyond landowner income and property tax revenue. When waste heat is utilized, it can reduce pressure on district heating production costs and open new opportunities for energy-intensive local operators.

Finland’s climate and relatively low electricity prices are attractive

Finland is currently an internationally attractive location for data centers. Electricity prices in Finland are competitive by international standards. In addition, electricity generation is largely fossil-free, and the cool climate supports data center energy efficiency.

Predictable electricity costs are one of the main reasons a PPA- or FPA-based approach is a natural fit for data centers. Electricity represents a significant share of a data center’s operating costs. A long-term electricity purchase agreement directly with a producer helps protect against price volatility, ensure availability, and align with the long investment horizon of data center projects.

It is also important to note that the electricity price paid by data centers does not increase consumers’ electricity bills. Data centers purchase electricity directly from producers under long-term agreements, rather than competing with households for the same electricity on the wholesale market.

The investment environment determines the outcome

Without clear direction, projects planned in Finland can only move forward within the limits of existing electricity generation capacity. A data center cannot afford the risk of electricity being unavailable or priced unpredictably. Without new power generation, these projects will not materialize. In other words, consumption and new generation are closely linked: each depends on the other to move forward.

Both data centers and the wind and solar power projects that support them require several years of development and decades of operation. Investment decisions are made in environments where regulation is clear, consistent, and built to last.

Now, Finland’s investment environment is partly uncertain. At the national level, repeated, long-running regulatory changes have been proposed without clear outcomes. Some municipalities have also changed zoning criteria during project development, leading to project cancellations. Such retroactive changes are highly damaging to projects both now and in the future. New rules should apply only to future projects, not to those already under development.

At the same time, Finland also has municipalities with a predictable, long-term operating environment. UB Renewable Energy’s decision-making includes locating energy parks in areas where both data centers and renewable energy projects can commit to cooperation over several decades.

How is a data center’s electricity consumption divided?

The international PUE metric, or Power Usage Effectiveness, indicates how efficiently a data center uses energy. It compares the data center’s total energy consumption with the electricity used by the IT equipment itself.

• The closer the PUE figure is to one, the less electricity is used for cooling and other supporting infrastructure.
• A PUE of 1.0 would mean that all electricity is used for computing, but in practice this is not achievable.
• For modern data centers, a typical PUE range is 1.3–1.5.
• If computing uses 100 units of electricity, total consumption is 130–150 units.
• The difference is used primarily for cooling and other infrastructure and ultimately becomes heat.

In practice, the lower the PUE, the more energy-efficient the data center is.

Source: Uptime Institute, Global Data Center Survey 2024