Data Centers Need to Look Beyond Green Energy, Siemens Executive Says
Matthias Rebellius says energy sourcing is one of the main factors holding back data centers, which provide computing power for AI models
There isn’t enough green energy around the world to power data centers, and operators need to look elsewhere for a solution to the artificial intelligence energy-consumption conundrum, the head of Siemens’s SIE 2.68%increase; green up pointing triangle Smart Infrastructure division said.
Electrical-equipment makers have been among the early beneficiaries of a boom in data-center construction, as companies snap up gear such as power transformers, generators and switchboards to build more facilities. This gives the likes of Siemens’s smart infrastructure division insight into the challenges facing data-center companies as they race to satisfy AI’s growing computing needs.
Energy sourcing is one of the main factors holding back the data-center market and it needs to be addressed, Siemens Smart Infrastructure Chief Executive Matthias Rebellius said in an interview.
Data centers provide the computing power that AI models need to run, but consume hefty amounts of energy, and water for cooling. Their rapid growth over the last two years has raised the question of where the energy to power them will come from, Rebellius said.
“The world needs a new plan,” Rebellius said. “It’s just a question of speed and how much can be done at the same time.”
Operators of so-called hyperscale data centers are looking at green energy, but Rebellius said this isn’t the solution. Some are now considering nuclear power or small nuclear reactors, while hydrogen could be talked about in the long run, he said.
Nevertheless, Rebellius said the data-center market is bound to experience a normalization after the current phase of rapid growth driven by AI.
In the year to September, orders at Siemens’s data-center business surged around 60% to top 3.6 billion euros ($3.71 billion), while revenue jumped 50% to more than 2 billion euros, the company said.
“We will not see 50% growth every year—not our company, not others—but we will continue to see mid double digit growth in the data-center range, which is more than double the normal infrastructure market and four times [gross domestic product],” Rebellius said.
Siemens Smart Infrastructure in December said it was targeting comparable revenue growth of 6% to 9% and profit margin of 16% to 20% over the next three to five years, which will overlap with President-elect Donald Trump’s second term and a new German government after the country’s elections early next year. In fiscal 2024, the business reported comparable revenue growth of 9% and margin of 17.3%.
In Germany, the uncertain political situation is concerning and Rebellius hopes the new government will come in place soon, he said.
Rebellius remains optimistic about the division’s prospects in the U.S., where he expects the business to be as successful in the next four years as it was during Trump’s first presidency or under President Biden, he said.
Possible trade tariffs aren’t a concern due to the high proportion of local sourcing for Siemens’s smart infrastructure division, Rebellius said. The business has more than 85% localized supply for Americas, China and Europe, Rebellius said. Moreover, the Inflation Reduction Act—President Biden’s signature climate legislation—is unlikely to be stopped, he said.