As energy usage for technology rises and computational use cases including artificial intelligence, rendering, data analytics, edge computing, and Bitcoin mining become more widely accepted, global energy requirements for communications and technology is expected to increase exponentially and represent up to 51% of global energy usage by 2030.
It’s understandable when you consider the rapid progress being made across the sector, for example, Google’s DeepMind AI tool can now outperform human radiologists for spotting breast cancer. Simply put, the more computing power that is used as we transition to a data-driven and autonomous society, the more data center infrastructure and energy are required. In fact, securing the Bitcoin network through Bitcoin mining alone consumed 73 terawatt-hours of electricity in 2019, which is as much energy as the entire country of Austria used in that same period.
Tackling this energy waste, a new breed of startups is emerging that harnesses low-cost and sustainable energy to help institutionalize the infrastructure that supports new technologies.
The standard of new-age data infrastructure companies is slowly being cemented with energy companies like Crusoe Energy Systems, Layer1, and Iris Energy all shifting the paradigm to create energy-efficient systems. Showing market appetite for the shift, Macquarie Group recently agreed to acquire a majority stake in AirTrunk in a deal valuing the data center operator at about $3 billion.
Competing against China’s Mining Dominance
One of the most highly profitable and immediate use cases for new data centers is securing the Bitcoin network and generating real-time revenue. Until now, the mining process was energy-intensive meaning most nations could not afford the vast electricity bill, except China through their subsidized production. But as Western energy companies, experts in efficiency calculations, begin mining the Bitcoin network with cleaner and cheaper technologies, a new competitive mining market is created.
The profitability of Bitcoin mining is also asymmetric; a lower Bitcoin price means miners operating on razor-thin margins are forced to bow out, leaving behind energy-efficient operators to collect a bigger share of the global revenue pool, which reached US$5bn over the course of 2019. On the other hand, growth in the Bitcoin price results in more competition, although typically with a lag relative to the price movement as it takes time for newcomers to install and ramp up their operations, with incumbents earning even higher yields in the meantime.
Bain Capital has recently led an investment round in Crusoe Energy Systems, a Colorado company that converts natural gas to computing power. Their mining system will harness otherwise wasted gas flares – enough energy, they say, to power 10 million homes. Crusoe’s investors are betting that the company’s natural gas-powered mining can eat into China’s coal-based market dominance.
Peter Thiel, a backer of Crusoe, seems to be confident in the emerging industry having also backed Texas-based energy company, Layer1. The company will run its own power sub-station with inputs from solar and wind farms creating a near-zero-emission and scalable mining facility. This is only a fraction of Layer1’s ambitions, which is to control the entire mining process from electricity production to chip manufacturing.
Iris Energy also joins the field of startups tackling the data economy’s energy efficiency woes. The Australian startup is backed by Regal Funds Management and has raised over 10 million AUD from senior executives in the finance sector as well as the private equity, energy, and infrastructure sectors. Founded by brothers Daniel Roberts and Will Roberts, it is building a substantial portfolio of real assets, including energy and data center infrastructure capable of leveraging high-growth technology and supercomputing markets. It has even caught the eye of the Australian Tax office who granted the company tax concessions due to its use of renewable energy initiatives.
Interestingly, Iris’ strategy isn’t focused solely on Bitcoin mining given the significant overlap with the computing power, energy demands, and infrastructure required to power complex data processing generally. Since Bitcoin has many of the same needs, Iris Energy’s customized energy-efficient infrastructure offering is catered towards other high-growth and emerging applications like AI, data analytics, rendering or edge computing. Considering that data center demand will grow 10x by 2030, substantial growth opportunities for companies efficiently powering them.
The sector is validating itself, not just through large investment rounds, but through acquisitions of related technologies that add value to data and energy infrastructure. Iris Energy’s acquisition of the Canadian data center business PodTech provides in-house design, expertise and construction capability for its new generation data center infrastructure. The combined business has wasted no time with immediate plans to expand their data center in British Columbia to 30MW.
Based in the Canadian Rockies with strong support of the local community and operating on clean hydroelectric energy, PodTech is a living embodiment of the future Iris Energy is striving for. PodTech constructs modular, purpose-built and energy-efficient data centers (called “MegaPods”) within their own on-site fabrication factory, which address many of the issues that currently face infrastructure providers when determining how to service the needs of energy-hungry technology companies.
MegaPod’s design stands out because it can be efficiently transported anywhere in the world, giving it tremendous flexibility for where it can be deployed. Additionally, MegaPod’s Power Use Effectiveness (PUE) rating of 1.08 makes it one of the most energy-efficient solutions in the industry. PodTech achieves this through its unique temperature control system, which can either emit or recirculate warm air produced by servers while bringing in cooler outside air. Through automation, MegaPods can keep its servers at an optimal temperature 24/7. From an operations standpoint, it means MegaPods will be cheaper to operate and less power-hungry than a traditional data center, making the decision to deploy MegaPods to lesser-served regions more palpable for cloud computing titans such as Amazon, Google, Microsoft, or IBM.
The Talent Behind PodTech
The acquisition of PodTech doesn’t just represent the inclusion of a game-changing data center product, it also gives Iris Energy access to the talent that first developed the product. PodTech is different to many other data center fabricators due to its rural British Columbia location — a fact that’s reflected in its location and very loyal employee base. Operating out of an old sawmill site, PodTech’s factory is a pillar of the local economy and is the direct result of cultivating home-grown talent.
One of the greatest benefits of the PodTech acquisition is the chance to work alongside two of the company’s founders: Brian Fehr and Brian Fry. Brian Fehr is a proven entrepreneur who has built BID Group into a billion-dollar group of companies providing innovative technical systems and construction services for wood products industries across Canada and the US. In the last 5 years alone, Fehr has built 12 sawmills totaling C$1.5 Billion in Canada, revitalizing local economies. What makes Fehr such a valuable addition to Iris Energy can be reflected in his commitment to rural communities such as Canal Flats, which led to him being awarded the Order of BC. In British Columbia, Fehr has trained approximately 300 trade apprentices, supporting promising individuals and local projects, and setting up housing plans so his employees could afford homes close to their jobs.
Brian Fry brings extensive experience to the creation and operation of data centers. Before he founded PodTech, Fry co-founded Rackforce Networks, which he grew to become the largest cloud hosting provider in Canada servicing the industry giants in IBM, Microsoft, and Cisco until it was acquired in 2015.
With all technological advancements currently in development, current infrastructure in place today simply won’t be able to address the demand for energy, processing power, and data storage that will inevitably occur.
With demand estimated to grow 10X by 2030, the energy requirements associated with hosting and running both the cloud and vital blockchain networks are going to be staggering. A cloud-based future needs to be environmentally sustainable, which is why efficient servers and more renewable energy options are crucial to keep up with the ever-evolving technological environment we find ourselves in.
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