Building more data centres could push up electricity prices, Holyrood committee warned

Building more data centres could push up electricity prices for consumers and challenge climate change targets, MSPs have been told.

Scotland has been identified as a key location for building hyperscale AI data centres because of the high potential for renewable energy, principally from wind.

But academics have warned that could still result in more gas being used to create electricity at times of low wind and solar power, which has been driving up prices in the Republic of Ireland and the US.

The National Energy System Operator (Neso) said plans were in place to decouple the high cost of gas from bills.

But it added that building more data centres in Scotland would be an important way of keeping electricity prices lower.

Holyrood's Economy, Tourism and Energy Committee is investigating the energy use that will come from placing more data centres in Scotland.

MSPs heard that it was unclear how the increased infrastructure costs, linked to a growth in AI data centres, would be shared between operators and wider consumers as additional costs on their bills.

While the tech firms will pay their energy bills, connection costs and their network usage, Dr Wei Sun, from the University of Edinburgh, said it was unclear who would fund broader upgrades required on the transmission network.

He added: "It's a concern of a lot of people worldwide.

"It's a simple question of whether data centres are going to increase the bill or not. There's no simple answer.

"Adding the data centre is probably going to trigger wider system upgrades.

"Does the data centre also pay for that? I think that's really the question we need to answer."

Dr Callum MacIver, research fellow at the University of Strathclyde, said data centres in Scotland would mop up excess renewable energy.

This would cut the multi-million pound bill for constraint payments, which are made when there is too much wind power being generated.

But he warned that the growth was still likely to increase the use of fossil fuels.

MacIver said: "Adding demand in general is likely to put pressure on meeting decarbonisation goals.

"It's not always windy or sunny so adding new demand to the system is likely to increase the amount of fossil fuel burn you have on it."

The academic added that locating data centres in "the most sensible places" could mitigate how big those impacts are by using more wind energy.

Matt Magill, from Neso, said modern data centres came with a degree of flexibility which allowed for supply and demand for electricity to be balanced on both sides.

Bigger AI operators who use, for example, large language modelling are building in enough internet bandwidth to shift the data handling to different parts of the world when needed.

Magill said: "Speaking to some of the large [companies] involved in this, they're looking at some of the [AI] training on a regional basis or even a worldwide basis and can actually move the load around the world depending on what's going on in those places."

He said that offered flexibility to those that run the power service.

The planned data centres would rely on renewable electricity, which is produced in abundance in Scotland by wind turbines.

But turbines are often effectively "turned off" due to lack of capacity in the electricity grid - resulting in substantial "compensation" payments for the wind farm companies.

ILI Group CEO Mark Wilson said they wanted to make better use of that surplus energy.

He added: "Scotland is in a position not a lot of other countries are and we feel this is an opportunity we cannot afford to miss".

Wilson also said the construction of hyperscale data centres across the country could create hundreds of new jobs.

This subject was raised at Holyrood in June by the Scottish Greens at the final First Minister's Questions before the summer recess.

The party called on First Minister John Swinney to back a moratorium on planning approvals.

Swinney said he understood the environmental concerns over hyperscale data centres.

He also pledged to give "active consideration" to whether local authorities should be given new national planning guidance.

Swinney said such guidance might be a way of balancing the rapid expansion of such centres with national energy and climate goals.