Energy & Infrastructure Insights — Data Centres in Frankfurt: A City Fit for the Future?

The global digitisation sector is booming, with Frankfurt ranking as one of the top locations for data centre operations worldwide. Dozens of international providers now operate in the so-called “capital of the German digital economy”. How does Frankfurt (and the state of Hessen) compare nationally and internationally, and which factors are influencing its future development? Latham Energy & Infrastructure partner Dr. Alexander Stefan Rieger discusses these questions with Oliver Schiebel, CEO of Mainova WebHouse, and Frank Zachmann, Managing Director DACH at NorthC Group.

Rieger: Frankfurt is often referred to as the digital heart of Europe. The city is a significant data processing hub, now recording the largest growth of this sector on the continent. However, market participants have recently launched discussions around the extent to which Frankfurt is still fit for the future as a data centre hub. What is the current status?

Schiebel: Frankfurt has established a city development plan, or cluster plan, which intends to concentrate data centres to specific areas and which, as a consequence, restricts the development of new “independent” data centres — i.e., data centres which are not affiliated with a particular company — to specific commercial and industrial areas within the city boundaries. As a result, data centre providers face limited access to new sites, even though the demand for new data centres keeps growing. Even within the geographic clusters, data centre providers struggle to find suitable land and sufficient power capacity to continue their growth within city limits.

"Data centres now represent a global industry, rather than stand-alone facilities."

Oliver Schiebel, CEO of Mainova WebHouse

Zachmann: In addition to the city development plan, or cluster plan, Frankfurt now seeks to establish guidelines for the construction of new data centres in order to better integrate such projects into urban planning and to reduce their energy consumption. These guidelines would, among other obligations, require providers to build some data centres on mixed-use sites and into building complexes, where they would sit next to car parks, offices, or medical centres. Furthermore, the city plans to introduce some technological specifications (e.g., usage of water-cooling systems and reuse of waste heat). However, these suggestions do not reflect reality. For example, integrating data centres into other buildings is not feasible for hyperscalers and is very difficult to achieve for colocation operators. Large investors and data centre providers are therefore increasingly considering data centre developments in Frankfurt’s surrounding areas.

Rieger: Where do you see room for improvement in Frankfurt’s approach to data centres?

Zachmann: The city needs to consider the bigger picture. The ideas of Frankfurt may be individually reasonable, but implementing them all together and at the same time is nearly impossible. While the data centre providers and the city share similar sustainability goals, their approaches to achieving these goals oppose each other completely. Some of the requirements suggested are — in practice — nowhere near as easy to implement as, for example, the legislators of the Energy Efficiency Act or the Frankfurt guidelines anticipated when they decided on these requirements. We therefore request to initiate a dialogue and jointly create a road map, which the data centre branch is able to implement.

Schiebel: Data centres now represent a global industry, rather than stand-alone facilities. For example, a hyperscaler plans the equipment of its data centre in Frankfurt in a similar way as it would for any other data centre in the rest of the world. Standardised solutions apply in all areas. This industry approach is not new. As an example, the aviation industry uses the same concept: Instead of developing a specific plane for each country, airlines simply create a fleet they can use globally. This fact is partially still disregarded when it comes to data centres. Frankfurt believes that it can (at least partially) go its own way. Simultaneously, it is often forgotten that, by expanding their business, data centre providers also create critical infrastructure, which enables digitalisation in the first place and also attracts many companies to Frankfurt. At the moment, however, the market is facing much uncertainty, which could be avoided if everyone worked together to plan for a common future.

Rieger: How well is Frankfurt equipped in terms of power capacities?

Schiebel: Frankfurt’s power grid is at the forefront of Europe in terms of reliability of supply, which is a key factor in choosing a data centre location. The power suppliers are also significantly expanding the electricity network in Frankfurt. For example, only Mainova is expanding its grid with the capacity in an amount that would suffice to serve another city such as Hannover. Unfortunately, the demand in Frankfurt is still growing much faster than the time it takes to extend the grid. Therefore, the city’s local grid operators have announced that no new capacities will be allocated in Frankfurt in the next few years and that new allocations will only make sense again under different circumstances. We do not expect the circumstances to change before 2030. Accordingly, any sites for which a grid connection has already been secured are now incredibly valuable.

Rieger: Will data centre providers need to find new locations as a consequence?

Schiebel: Regardless of whether we look at Berlin, Düsseldorf, or Munich, all cities end up facing the same challenges: a lack of sufficient power capacity in the city’s electricity networks, in the transmission networks, and sometimes also a lack of energy production. The lack of sufficient power capacities also results from extensive planning permission procedures and construction times which result in realisation times of up to 10 years for individual lines instead of only two years. This is a big challenge, especially for the industrial sectors, which have not experienced this problem in the past. Meanwhile, the market is slowly beginning to realize that companies which have recognized and mitigated this issue early now hold an advantage.  

Zachmann: Smaller, integrated, and decentralised data centres can indeed form part of the solution, if no electricity or other capacities are available or can be accessed only within limitations. The market, therefore, keeps evolving as well.