The rapid expansion of data centres is creating new challenges for energy infrastructure and exposing operators to additional risks, as power networks struggle to keep pace with demand, according to research from insurance broker Howden.

Its latest report, Insuring the Data Centre Supercycle, highlights how the growth of AI is increasing pressure on electricity networks, with delays in securing grid connections affecting the development of new facilities.

US data centre electricity demand has increased by an average of 19% a year since 2000, compared with annual grid capacity growth of just 2%. Power constraints are adding between two and six years to construction times for some projects, with Howden estimating that delays could cost the largest affected facilities up to US$2.4bn (£1.8bn) in lost revenue.

The research also highlights the financial consequences of outages. Half of the data centres surveyed had experienced an incident with a significant impact over the previous three years. Each outage was estimated to cost between US$500,000 (£378,000) and US$1m (£755,000), with power and backup system failures accounting for most major incidents, followed by cooling, network and IT failures.

Howden estimates that outages across the global data centre sector result in annual losses of approximately US$2bn (£1.51bn). However, many incidents do not involve physical damage, potentially leaving resulting financial losses outside the scope of traditional property and business interruption insurance.

The broker says this could create demand for alternative insurance arrangements, including cover linked to service-level agreements and non-damage business interruption policies.

Deborah Duss, global head of advisory and client solutions, global specialty at Howden, said: “The data centre boom is shining a spotlight on an infrastructure challenge that has been building for years. While generation projects often benefit from faster development including permitting, grid infrastructure faces more complex project scopes, lengthy permitting, and multiple stakeholder interests, making it harder to keep pace with growing electricity demand.

“For data centres, this makes location increasingly critical. A data centre, its power source and the grid infrastructure connecting the two cannot be considered in isolation. They are three interdependent parts of the same ecosystem and ultimately three key drivers of project success. Taking a holistic view from the outset allows risks to be identified and managed before significant capital is committed, rather than trying to solve them once an asset is operational.”

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