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Market Overview

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The global carbon neutral data center market reached a value of $5.02 billion in 2021 and is projected to grow to $16.53 billion by 2027, with a CAGR of 22.19% during the forecast period of 2022-2027. This growth can be attributed to several factors, including increasing government regulations on carbon emissions, a focus on renewable energy, energy-efficient cooling alternatives for data centers, electricity tariffs, sustainable development efforts, and corporate social responsibility activities.

Data centers are physical spaces used by businesses to store important data and applications. As data center operators improve their efficiency, there is a growing demand for IT services, which has led to increased awareness about the carbon emissions associated with digital infrastructure. This has given rise to the concept of carbon neutral data centers. A carbon neutral data center aims to minimize its negative impact on the environment by using energy-efficient mechanical, lighting, electrical, and computer systems. These facilities must source 100% renewable energy and maintain a power usage effectiveness (PUE) of less than 1.2.

To achieve a PUE of less than 1.2, data centers are adopting various techniques such as immersion/liquid cooling and natural or free cooling systems. Free cooling involves utilizing naturally cold air and water from the surroundings for cooling purposes. For example, LinkedIn’s data center in Hillsboro, Oregon utilizes a cutting-edge water side economizer that takes advantage of the state’s mild climate for free cooling. Microsoft’s Natick project submerges data centers in water and uses untreated sea water for cooling, resulting in zero carbon emissions.

The carbon neutral data center market is still in its growth phase, driven by environmental-friendly policies and government regulations. Research and development activities are increasing to develop technologies and products for carbon neutral data centers, fueled by the rising demand for data storage and digital transformation.

As the world focuses on achieving climate-neutral goals and managing data storage demands, the shift from non-renewable to renewable energy sources in the data center industry presents significant opportunities. This shift is particularly prominent in regions like Europe and North America, where countries with naturally cold climates have high potential for such initiatives.

Despite the adverse effects of the COVID-19 pandemic on various sectors, the data center industry has experienced growth due to increased demand for data storage driven by digitalization, cloud computing, AI, 5G adoption, and remote work. This accelerated transition towards digital economies has been notable in regions like Asia-Pacific and the Middle East and Africa.

Data center operators are reshaping their facilities at a faster pace than ever before. Many corporations and technology companies are committing to becoming carbon neutral, exemplified by initiatives like the Climate Neutral Data Centre Pact announced in 2020.

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Market Segmentation

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The market is segmented based on various factors, including industry, data center type, carbon neutral solutions, and region.

Segmentation by Industry
IT and Telecom
Banking, Financial Services, and Insurance (BFSI)
Government or Public Sector
Healthcare
Manufacturing
Retail
Others

Segmentation by Data Center Type
Hyperscale Data Centers
Enterprise Data Centers
Colocation Data Centers
Others

Segmentation by Carbon Neutral Solutions
Hardware
Software and Platforms
Support Services

Segmentation by Region
North America – U.S., Canada, and Mexico
Europe – Germany, France, Netherlands, Sweden, Norway, Denmark, Finland, Iceland, Switzerland, and Rest-of-Europe
U.K.
China
Asia-Pacific- Japan, Singapore, South Korea, and Rest-of-Asia-Pacific
Rest-of-the-World – Middle East and Africa, and South America

The IT and telecom industry is expected to dominate the global carbon neutral data center market in the application segment, primarily due to its status as the largest consumer of data centers. As data transmission and delivery operations rely heavily on connectivity, data centers play a pivotal role in the ICT industry. The increasing demand for data processing, rising internet protocol (IP) traffic, and the growing focus on environmental protection and carbon neutrality trends have significantly influenced the adoption of carbon neutral data centers across various industries. In 2021, the IT and telecom industry held the largest market size at $2,499 million, given its crucial role as the backbone of modern economies, where effective communication is integral to growth. Among industrial applications, the retail sector is expected to experience the most rapid growth, projected at a CAGR of 24% by 2027.

Hyperscale data centers are anticipated to dominate the global carbon neutral data center market in terms of product and data center type. This is largely attributed to the commitment of leading hyperscale and cloud service providers, such as Google LLC, Facebook, Microsoft, and Amazon AWS, towards achieving carbon neutrality. Hyperscale data centers play a central role in delivering cloud services and cloud computing applications. Considering the current trend of increased migration from physical to cloud computing, hyperscale data centers are projected to exhibit a high CAGR of 23.98% by 2027 compared to other data center types.

In terms of solutions, the hardware segment holds the largest share in the global carbon neutral data center market. This is mainly due to the requirement for specialized hardware in data centers, including servers, racks, and cooling systems. These devices are critical for data center deployment and contribute to the highest capital expenditure in data center infrastructure. Conversely, the software and platforms segment is expected to witness the highest CAGR of 26.35%. This growth is driven by efforts in server virtualization and consolidation, which place greater emphasis on converged and hyperconverged servers. These are then managed and monitored by data center infrastructure management (DCIM) systems or specialized platforms. Despite the rapid growth of software and platforms, the hardware segment will still account for the largest share, considering its significant capital and operating expenditure for data center operators.

Europe emerged as the top revenue generator in 2021, with total revenue reaching $3.09 billion. This achievement can be attributed to research and development advancements, as well as supportive government regulations within the region. Europe is an attractive market for carbon neutral data centers due to its favorable climate for the utilization of renewable energy sources.

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Competitive Landscape

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In recent years, the carbon neutral data center market has experienced numerous strategic and technological advancements as various market players strive to establish their presence in this burgeoning sector. Among the array of strategies employed by these companies, partnering, collaborating, forming joint ventures, and forging alliances with other firms have emerged as the most favored approaches by key players.

Key companies profiled in this report include 3M, ABB Group, Alibaba Group, Alphabet Inc., Amazon.com, Inc., Cisco Systems, Inc., Dell Inc., Digital Realty Trust, Eaton Corporation plc, Equinix, Inc., FUJITSU, Hewlett Packard Enterprise Development LP, IBM Corporation, Intel Corporation, Microsoft, ANS Group Limited, NEXTDC LTD., CYRUSONE, DEAC.

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Recent Industry Developments

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In March 2022, Normative, a Swedish start-up sponsored by Google, unveiled a complimentary version of its carbon emissions tracker in response to the global business community’s challenges in managing their carbon impacts.

In March 2022, Amazon Web Services (AWS) introduced a tool that enables customers to measure the carbon footprint of their cloud usage and compare it to the expected footprint of an on-site data center.

In May 2022, Alibaba Cloud, the cornerstone of Alibaba Group’s digital technology and innovation initiatives, announced the inauguration of its third sustainable data center in Germany. This expansion aims to meet the increasing demand for digital transformation from clients across Europe.

In May 2022, nZero, a carbon management platform, and Corscale, the data center platform of the Patrinely Group, joined forces to offer customers a sustainability solution encompassing continuous carbon accounting and emission tracking capabilities 24 hours a day, 7 days a week.

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Key Questions Answered

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What is the projected revenue size of the global carbon neutral data center market during the forecast period 2022-2027?

What is the expected compound annual growth rate (CAGR) for the forecast period 2022-2027?

What are the key trends, market drivers, and opportunities in the carbon neutral data center market?

What are the major factors restraining the growth of the global carbon neutral data center market?

What strategies are existing market players adopting to expand their market position in the industry?

Based on recent developments, product offerings, and regional presence, what is the competitive strength of the key players in the carbon neutral data center market?

How do carbon neutral data center companies compare in terms of market coverage and potential?

What is the revenue and growth percentage expected for each segment during the forecast period?

Who are the players and stakeholders operating in the market ecosystem of carbon neutral data centers, and what is their significance in the global market?

Which consortiums and associations are leading in the global carbon neutral data center market, and what roles do they play?

How does the regulatory landscape differ across regions for carbon neutral data centers?

How are emerging technologies such as artificial intelligence (AI), 5G communication, and the Internet of Things (IoT) driving the growth of the carbon neutral data center market?

What are the major patents filed in the carbon neutral data center space?

How is the government’s role in environmental issues and safety impacting the landscape of the carbon neutral data center industry?

Which carbon neutral data center technology is expected to dominate the market by 2027?

What has been the impact of COVID-19 on the carbon neutral data center market?