Some aging fossil fuel power stations in Europe may soon become high-tech and start powering the digital economy, as demand for AI services keep souring.
Tech firms including Microsoft and Amazon are looking to repurpose disused coal and gas plants into large-scale data centers, attracted by their existing access to electricity infrastructure and water cooling systems. This comes as AI systems have been proven to take up vast energy resources, forcing tech firms to think of alternative renewable energy sources to power their systems, while the likes of Google want to limit data center power usage during peak demand periods.
Energy utilities stand to win in Europe
European utilities such as France’s Engie, Germany’s RWE and Italy’s Enel are working to convert shuttered power stations into digital infrastructure hubs.
The move helps offset the costly process of decommissioning old sites, while potentially generating new income through long-term power deals with tech partners.
“You have all the pieces that come together like … water infrastructure and heat recovery,” said Bobby Hollis, Microsoft’s vice president for energy.
Amazon’s EMEA energy director, Lindsay McQuade, noted that permitting may be faster at these sites, where much of the infrastructure is already in place.
Energy firms stand to gain more than just rental income. By leasing land or developing and operating data centers themselves, utilities can secure high-margin, long-term power contracts.
“It’s more about the long-term relationship … that enables you to de-risk and underwrite your infrastructure investments.”
Simon Stanton, RWE’s head of global partnerships.
Many of Europe’s 153 hard coal and lignite plants are set to close by 2038 to meet emissions targets. Already, around 190 plants have shut down since 2005, according to data from NGO Beyond Fossil Fuels.
Data centers are expected to unlock billions in potential revenue
Data centers have become highly lucrative. Operators often pay a “green premium” for low-carbon energy, up to €20 per megawatt-hour, according to Gregory LeBourg, environmental director at French data center firm OVH.
With some centers requiring hundreds of megawatts or more, long-term contracts could be worth hundreds of millions, or even billions, of euros, according to Reuters calculations.
One emerging model is the “energy park,” where a data centre is directly connected to a renewable power source and only uses the grid during emergencies. While still a nascent approach, it is attracting interest.
Engie aims to double its renewable capacity from 46 GW by 2030 and has identified 40 potential data center sites worldwide, including many retired coal and gas plants. One notable location is the Hazelwood coal plant in Australia, which closed in 2017.
Other European energy giants, including Portugal’s EDP and France’s EDF, are also pitching old sites for digital infrastructure use.
“This is business model diversification,” said Michael Kruse, managing partner at consultancy Arthur D. Little.
For tech firms, the appeal is clear—it’s time. Grid connection delays in Europe can drag on for over a decade, while converted power plants offer faster access to energy and cooling.
“You actually have the opportunity to move faster,” said Microsoft’s Hollis.
Data from Synergy Research Group shows Europe lags the US and Asia in data center capacity, partly due to slower permitting and grid delays.
Some real estate players are already involved. JLL is developing a 2.5 GW data center at a former German coal plant, and four sites in the UK for an undisclosed tech client, said Tom Glover, who leads JLL’s data center transactions.
Britain’s Drax is also offering parts of its former coal site in Yorkshire, now partially converted to biomass, for digital redevelopment. “Behind-the-meter” arrangements are being proposed, where the data center draws power directly from the plant, using the grid only when needed.
EDF, meanwhile, has selected developers for two gas plant sites in central and eastern France.
“Speed to power is just the phrase we keep hearing over and over again,” said Sam Huntington, director at S&P Global Commodity Insights.
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