Data centres (DCs) are the factories of today’s industrial revolution. Ireland’s hesitancy on new DC construction for Dublin reflects real limitations in the region’s grid infrastructure but risks long-term economic impact.
Our Strategy team outline these risks below.
Artificial intelligence (AI) and then quantum computing (QC) will be defining technologies of this century. DC infrastructure is the backbone to this digital economy, underpinning innovation and competitiveness across multiple sectors, whose players need access to low-cost storage and compute in order to grow.
Clustering of DCs – Dublin being one of Europe’s five largest such hubs – also acts as an economic catalyst, attracting a spectrum of businesses, suppliers, and talent. Conversely, populous regions without their share of DCs risk declining attractiveness to investment.
Today’s businesses have the flexibility to develop their AI models anywhere in the world and are likely to choose those locations best able to help them scale efficiently and cost-effectively.
Ireland is a popular location for tech startups and giants alike, owing to its well-understood matrix of favourable characteristics: political stability; absence of natural risks; EU membership; English language; position between North America and Europe; ambient climate; developed supply chain; talent depth.
As a consequence of this popularity, as well as structural demand drivers such as cloud adoption and smart device proliferation, Ireland is seeing soaring demand for new data infrastructure.
Data traffic in the Dublin metro is already growing at 41% CAGR. Of Ireland’s ~80 operational DCs, around 30 have been built since 2018, and another ~40 have planning permission.[1] However, supply side bottlenecks threaten to temper this growth in practice; key among them: low carbon energy supply.
Despite the clear interest Ireland has in resolving DC capacity bottlenecks, numerous recent reports point to a near moratorium on new DC builds, owing to a lack of power supply and official hesitancy to accept grid connection applications.[2]
In August 2024, news emerged that Eirgrid had warned the government of a potential “mass exodus” of DCs from Ireland if new connection agreements could not be signed off.[3] Around the same time, the Central Statistics Office (CSO) revealed that DCs now consume 21% of Ireland’s electricity, up from 18% in 2022 and 5% in 2015.[4]
The capacity crunch implied, while still superable, has the potential to become a strategic liability for Ireland at a time when its tax advantage to multinationals has already narrowed.
The moratorium is having real-world consequences. In September 2024, Amazon Web Services’ [AWS] country lead for Ireland, Neil Morris, announced that Amazon would not embark on further DC investment in the country until its offshore wind strategy and energy policies were resolved – despite having announced more than €30bn of investment in other European locations, including Spain, Germany, France and the UK.
Whilst Dublin remains a major DC cluster in Europe, other countries have developed strategies to increase their appeal to investors. Nordic countries, in particular, have carved out a niche as a location of choice for new European DC builds, by leveraging structural advantages such as plentiful renewable energy and colder climates (which make facility cooling cheaper and easier).
As a result, DC hyperscalers are increasingly adopting a Nordic-first approach, which threatens to drain digital talent and investment from elsewhere in the region – including Ireland.
We know, however, that capital is not the primary issue when it comes to DC construction. Hyperscalers have often indicated that they are willing to invest in the required low carbon generation, grid upgrades, and short-term storage options – in effect, ‘tell us what’s required to get a grid connection and we’ll do it’.
For others considering the optimal mix of on and off balance sheet DCs, there is no shortage of international, institutional capital keen to invest in DC construction – capital that can simultaneously invest in the support infrastructure needed. The availability of such capital opens the way to turn DCs from ‘the problem’ into ‘the solution’, but the ongoing lack of clarity on what is required to gain planning approval for DC projects diverts this capital elsewhere.
This in turn, risks Ireland’s early competitive advantage in DCs, which can soon be overtaken if other European clusters scale as Ireland hesitates. This would be an unnecessary and regrettable sacrifice of Ireland’s digital competitiveness.
The immediate economic impact of diverging levels of DC investment can be seen through the lens of one prominent DC company.
One of Ireland’s major DC players is Equinix, the world’s leading colocation player by market share. Our data provides an illustrative snapshot of the economic multiplier effect in action.
Through six DCs in Ballycoolen, Blanchardstown, CityWest, and Kilcarbery Park, Equinix offers secure infrastructure for managing and connecting clients’ systems, cloud services, and networks, facilitating direct and private data exchange between parties and offering a platform for digital innovation, compliance, and security.
Its activities directly serve 260 customers in Ireland, and support an indigenous supply chain. This in turn yields significant benefit to the wider Irish economy, which KPMG has quantified.
Its ongoing DC construction plans employ domestic SMEs that have grown to service global clients. A seventh DC, still in planning, is projected to generate over €200m euro in economic output, but has yet to secure a grid connection.
The diversity and scale of Equinix’s customer base illustrates the broad criticality of DC provision, which is increasingly foundational to all sectors. The combined activities of Equinix’s enterprise clients contributed ~3% of Ireland’s total GDP in 2022.
Equinix’s presence in Ireland not only underpins domestic economic activity, of course, but facilitates efforts to attract global businesses to Ireland. Across the four DCs it operates in Dublin, Equinix Ireland also supports over 130 multinationals headquartered outside of Ireland – some 50% of its customers – highlighting the importance of DC provision to maintaining Ireland’s attractiveness to FDI.
To stay competitive in the AI age, Ireland needs a clear strategy to ensure the construction of vital digital infrastructure. Such a strategy must address the challenges outlined above to reassure investors and other stakeholders that Ireland can provide the power, people, and planning permissions necessary to support DC sector ambitions, as well as those of the many businesses that depend on such construction. To conclude, we highlight the following insights:
At KPMG Ireland, we understand the critical role data centres play in today’s digital economy. Our Data Centre Ecosystem Hub is dedicated to providing comprehensive advisory services that span the entire data centre lifecycle.
