Ireland’s debate on data centres has become increasingly polarised. On one side sit those who see data centres as essential national infrastructure powering our digital economy, attracting investment and supporting Ireland’s position as a global technology hub.

On the other are those who see them as incompatible with our climate ambitions, a growing source of electricity demand that risks crowding out homes, industry and the wider economy. Both sides are potentially right.

Data centres already account for approximately 22 per cent of Ireland’s electricity demand and projections suggest that figure could approach 30 per cent by the end of the decade, exceeding the combined electricity demand of Irish households. Those numbers understandably provoke concern.

But increasingly I believe we are asking the wrong question. The question is not whether Ireland should support further data centre growth. The question is whether we can harness that growth to accelerate investment in the energy infrastructure Ireland already needs.

That opportunity is becoming clearer. The recent KPMG report, The Value of Data Centres to Ireland, concluded that the sector contributed approximately €2.2 billion in economic value and supported almost 20,000 jobs in 2024.

More fundamentally, the report argues that digital infrastructure has become foundational to national competitiveness in much the same way as transport and energy infrastructure in previous generations. If that analysis is correct, attempting to stop digitalisation is neither realistic nor desirable. Instead, we should ask more from those who benefit from it.

That is precisely where recent Irish energy policy deserves more attention than it has received. The Commission for Regulation of Utilities’ new Large Energy Users connection policy represents a subtle but important shift in thinking.

Rather than simply permitting new demand onto an increasingly constrained system, Ireland is beginning to require large energy users to become part of the solution. The headline measure requires new qualifying data centres to provide on-site or proximate dispatchable generation capacity equivalent to their maximum import capacity.

This is a remarkable policy intervention. Historically, large electricity users connected to the network and relied on the system operator and wider market to deliver generation adequacy. The new model starts from a different premise: developments that materially increase demand should contribute directly to maintaining system resilience.

But there is another feature of the policy that may prove equally important — new qualifying data centres must reach 80 per cent renewable electricity consumption within a six-year glide path.

This requirement creates a powerful commercial incentive for integrated energy solutions, combining renewable generation, storage and flexible dispatchable capacity in a way that could ultimately strengthen the overall electricity system.

This is potentially transformative.

For years, one of the biggest barriers to renewable development in Ireland has not been ambition but bankability. Offshore wind in particular requires long-term, creditworthy demand.

Data centres may be uniquely capable of solving that problem. Long-term power purchase agreements, direct renewable investment and co-development structures can provide the revenue certainty required to unlock billions of euros of renewable generation and supporting grid infrastructure. In that model, data centres stop being passengers on the energy transition and become anchor customers for it.

The government’s emerging private wire policy could push this further. Co-located energy parks, combining renewable generation, storage and large energy users behind the meter, offer the possibility of reducing grid congestion while accelerating investment.

Rather than consuming scarce capacity, future data centre developments could help build it.

And we should also be realistic about what comes next. Even highly renewable electricity systems require predictable dispatchable generation. Gas will remain part of Ireland’s energy mix for some time.

The challenge is therefore not ideological opposition to gas but decarbonising it. Renewable biomethane produced through anaerobic digestion offers a practical pathway.

Scaling indigenous biomethane production can reduce lifecycle emissions, support rural economies and create lower-carbon fuel options for dispatchable generation associated with large energy users.

Commentators often frame digitalisation and decarbonisation as competing objectives. If we get the policy architecture right, data centres could become one of the most powerful mechanisms available to fund grid expansion, accelerate offshore wind and help deliver Ireland’s energy transition.

 

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