John Whelan: High electricity costs threaten Irelands data centre and AI expansion
Amazon Web Services located in Sterling, Northern Virginia, in the USA, is the largest data centre market in the world.
Europe’s data centre industry is centred around a familiar group of cities, Frankfurt, London, Amsterdam, Paris, and Dublin; the so-called Flap-D markets.
They have, over the past few years, attracted most investment, infrastructure, and operator activity.
These locations have dominated in the past because they combine major internet exchange points, strong demand from finance and tech sectors, excellent connectivity, a strong cloud presence, and stable regulatory and business environments.
Data centre investment across Europe is experiencing an unprecedented surge driven by AI demand, and while the Flap countries are highly ranked across Europe, including the UK, they may not be able to support the enormous demand for new data centres in a sustainable way.
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Grid capacity and power availability are major bottlenecks, forcing investors to focus on regions with a secure energy supply.
Ireland, in particular, lags behind in the total number of data centres and is likely to continue to fall behind if the cost of electricity is not brought down and planning approvals are not streamlined, according to keynote speakers at the Bord na Mona (BnM) energy conference in Tullamore last Thursday.
The high cost of electricity, the highest in Europe by a significant margin, was identified as a key issue in the retention and expansion of the data centre industry in Ireland.
Niamh Gallagher, country lead for Amazon Web Services (AWS), with 14 data centres in Ireland, speaking at the conference about barriers to data centre development, stated “the planning system needs to deliver”, and “better supporting infrastructure was required”.
Stressing the link between data centre capacity and AI, she said now is a moment of opportunity and Ireland needs to be in the race.
Amazon CEO Andy Jassy in February, announced plans to raise overall investment plans of $200bn for 2026, doubling the forecast for 2025, with the majority earmarked for expanding AWS data centre capacity to meet AI demand.
Some of this may be invested in the Kildare Innovation Campus, following a long-term lease agreement announced earlier in the year.
However, as of March 2026, Amazon announced its biggest EU investment will be in Spain.
The €33.7bn total investment in Spain is geared to expanding the AWS cloud infrastructure, aimed at transforming Spain into a European hub for AI.
Donal Travers, IDA executive director, made it clear at the BnM conference that attracting investment in Data Centre development was one of the IDA’s three key objectives for the coming year, alongside pharma and semiconductor (chips) investment.
He will no doubt be aware of the challenges in attracting foreign direct investment into the sector, while the energy costs are non-competitive and planning decisions continue to be uncertain.
Further competition for international investment is emerging in the Nordics (Norway, Sweden, Finland, Denmark, and Iceland) as major technology firms such as OpenAI, Microsoft, and Google seek locations for their energy-hungry AI workloads.
The region offers a combination of low-cost energy, 100% renewable energy, a cool climate, and high operational reliability.
Minister for climate, energy and the environment, Darragh O’Brien, assuring delegates at the Tullamore conference that the issues are being addressed, that data centres were a key asset for the future development of the Irish economy, stating these centres now employ 29,000 directly.
The minister further advised that the Government’s approval of a landmark investment package of up to €18.9bn in Ireland’s national electricity grid and network for the period 2026-2030, will enable energy cost reductions and certainty of supply, to enable data centre expansion.
Mr O’Brien also stressed that the Government’s Large Energy Action Plan is also aimed at supporting increased technology investment into Ireland, with renewed scope on the provision for energy-intensive industries such as semiconductors, pharmaceuticals, and precision engineering.
The big question from industry executives at the BnM Energy conference was, will the Government’s planned actions be too late?
