Macquarie buys stake in Virtus as UK data center power issues loom


Macquarie Asset Management has bought a minority stake in UK data center operator Virtus from its owner ST Telemedia, as power consumption at data centers around London comes under renewed scrutiny.

The investment will help Virtus expand its data center operations in the UK, but also expand into Europe, according to Australia-based Macquarie. Virtus currently operates 11 sites with approximately 180MW of data center capacity in and around London (and has a 100MW pipeline under development) representing a significant portion of London’s total data center capacity of 970MW.

“While the London data center market is expected to continue to show increased absorption levels, driven by strong demand for hyperscalers, we believe that Europe – including key markets such as Germany and France – will present significant growth opportunities over the next decade,” Nathan Luckey, senior managing director for real estate at Macquarie Asset Management, said in a press release.

The sale marks the first divestment of Virtus since STT acquired 100% of the company in 2017, after taking a 49% stake in 2015. STT, owned by Singaporean public investment vehicle Temasek, also owns significant interests in data centers in Asia, operating 140 sites. globally.

The UK data center industry faces power and political issues

Although the overall demand for data center capacity will continue to grow, the industry has faced challenges in the short to medium term, first from the Covid-19 induced slowdown, and lately from the increase in electricity costs. These two factors have already led to the bankruptcy of two UK-based companies, Sungard and cooling company FEL Group.

And while the demand for data centers will continue to grow in the long term, concerns about the resources consumed by the facilities, regularly accused of causing capacity problems, will also continue. Last week, the issue of data center energy consumption came to the fore again when a Financial Times report claimed the Greater London Authority could halt housing development in west London due to a power shortage, with data centers being responsible.

The M4 corridor in West London is popular with UK data center operators as it provides easy access to the fiber optic backbone that connects London to the Atlantic. A 2020 report on the UK data center sector by IT industry lobby group techUK shows a cluster of centers around Slough and West London.

But according to the GLA via the FT, this opportunity means the region’s electricity grid is running out of capacity, potentially delaying new construction projects in the London boroughs of Hillingdon, Hounslow and Ealing until 2035. The GLA said that it was exploring options with National Grid. and local operator Scottish and Southern Electricity Networks for alternative options.

Some observers have dismissed the GLA’s claims, with one Hillingdon council member describing the story as “alarmist” according to Construction Management. The website reported that Councilor Eddie Lavery said: ‘We are not aware of any housing projects planned for the affected borough. There is also evidence that electrical capacity has been reserved for developments that may never take place and this latent capacity should be made available for projects that will be delivered.

Colocation trader Tim Anker told Data Center Dynamics it was old news, comparing it to claims that London ran out of power ahead of the 2012 Olympics. But DCD also quoted a representative for Saqiq Khan , who said the mayor of London tried to raise the issue of power constraints with the central government several weeks ago.

Whether or not west London’s electricity capacity is as limited as the GLA claims, the pressure on the UK grid as a whole will increase over time, mainly as a function of decarbonisation. Thus, gasoline and natural gas used for cars and heating will be increasingly replaced by electricity, which will represent a significant increase in demand.

While building more generation capacity is one element in dealing with this, transmission capacity is another major factor – and the current UK grid lacks the intelligence to intelligently manage grid congestion.

Talk to The battery for our recent energy digitization feature, David Sykes, data scientist at Octopus Energy, said: “In local grids, we wanted to do some really smart things like constraint or congestion pricing, to make sure not to blow up the charger at the end of your street.For this, you need to understand each phase of each house, you need to understand the capacity of the charger itself, need live monitoring on this charger, then you can do really smart things like real-time pricing or congestion management.”

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