Next in Tech | Ep. 286: Resilient Digital Infrastructure

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[00:00:02] Eric Hanselman: Welcome to Next in Tech, an S&P Global podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for industry research at S&P Global, and today we're going to be talking about the Datacenter and Energy Conference that's coming up, will be kicking off the 1st of October. And joining me to discuss it is Kelly Morgan.

[00:00:23] Eric Hanselman: Kelly, welcome back to the podcast.

[00:00:25] Kelly Morgan: Thank you for having me, Erik.

[00:00:27] Eric Hanselman: It is great to have you on. You are, one of the, the key content contributors, and, I guess general event maven in terms of pulling all this together. Can you give us a little bit of background for those of our listeners who are not familiar with the conference, and what it's all about?

[00:00:46] Kelly Morgan: Sure. Yes. This is our annual conference we've had for a few years now on data center and energy. So, AI data center infrastructure, its impact on energy, and we try to bring together energy folks, data center industry people, regulators, anyone interested in essentially these two areas and how they interact, and this is clearly becoming more and more important. So, it's a good sort of venue for people to mix and to learn what both sides are thinking and ways to deal with some of the challenges coming up for both of them.

[00:01:21] Eric Hanselman: Well, this is an outgrowth of 451 Research's Hosting and Cloud Transformation Summit that's gone on for, what, lo these many years? HCTS was 15-17 years before we transitioned into an integration of the energy pieces as well. Although that was something that was actually taking place, and one of the reasons why we did this, had a transformation of the conference, because really, if you take a look at so much of what's going on with data centers, it is not only the data center capabilities, all of the, I guess the more sort of technical things we'd typically looked at it, but even with HCTS, we'd always looked at the financial side and what that meant from an investment perspective.

[00:02:09] Eric Hanselman: And as those conversations became more and more energy-centric, it just seemed to make that much more sense to be able to integrate it. And so now that is as much of a portion of this, the, the overall agenda and the conference program than as is the technical piece

[00:02:26] Kelly Morgan: Right. And it's been wonderful, as part of this to become part of the energy team at S&P. So, this conference this year is taking place in Houston, and that's partly because we're following on from the Financing Energy Conference that's happening there held by S&P. So, it's a great opportunity for us to get to know our energy analysts, for us to interact with the energy clients and people who come to that Financing Energy Conference, all the infrastructure finance folks, as well as bringing our data center people into that fold.

[00:03:02] Kelly Morgan: So, it's a great opportunity all around.

[00:03:04] Eric Hanselman: Well, yeah, this is a change from last year in which we were in Washington DC, our nation's capital, for a couple years, which we brought in a whole really interesting set of perspectives from the regulatory side. But my guess is that there's going to be more than enough regulatory interest in Houston as well.

[00:03:22] Kelly Morgan: Exactly. Yes, we had Department of Energy representatives, FERC representatives, those kind of folks, you know, regulators, all of that last year in DC and the year before. And so yes, I think this will continue to be a hot topic and we should have a nice mix attendees and speakers.

[00:03:39] Eric Hanselman: Well, and it is something that, hopefully our audience members are hearing this, if you have interest, are in the Houston area, or would like to travel there for the conference, hopefully this will get people a view into that beforehand. But we also, of course, as always, have got a lot of research that is feeding into this that is also available, that will be part of the discussions and feeding a lot of discussions that are part of the program.

[00:04:03] Kelly Morgan: Yes, and we have some webinars coming up ahead of time as well. So, I guess the easiest would be to keep an eye out on the 451 Research site and you'll see other key inputs coming together before the conference October 1^st.

[00:04:17] Eric Hanselman: Well, I will make a plug for the webinar, if it's the one I'm thinking of. This is really talking about data center reactions, community responses, a lot of the concerns about data center build-outs. And that I'll have a link to in the show notes. We'll actually be covering that on a later episode as well.

[00:04:37] Eric Hanselman: That's actually got a whole set of perspectives about what has become another challenge in data center siting, which is making sure that you actually are helping communities to understand what the data center is, is going to be bringing to their environment, and addressing community concerns about those capabilities.

[00:04:56] Eric Hanselman: Which, again, has become just as much of a concern around the data center build-out environment, as some of the fundamentals around data center construction itself.

[00:05:05] Kelly Morgan: Yes. I think that actually might be becoming the number one concern, or at least the potential choke point for a lot of data center builds. Local resistance, worries about what data centers can do to the local community, to the environment. There's some misinformation out there, but this also may just stand in for worries about AI in general and big tech and what that means.

[00:05:29] Kelly Morgan: And so we've been publishing some papers on that. Matt Richesin is our expert on kind of the psychology. He's got a PhD in psychology. He's on our data center team, and he's done a lot of work around what this means and why there's so much local opposition to data centers, and he'll be on one of the panels, at the conference.

[00:05:47] Eric Hanselman: It is something that if you sort of wonder the extent to which it's a lightning rod, to your point, for AI concerns broadly. And is this something where it's reflected in concerns around data centers that really echo to overall anxiety about AI, of which there is no shortage?

[00:06:08] Kelly Morgan: Exactly. Yeah, it's one of the few ways, at least we've heard, that locals feel they can have some input, right? That there's sense that a lot of AI is happening very quickly and perhaps outside of the control of average people. And so, protesting your local data center is one way for individuals to feel they have some input in this whole process. So, it's certainly an interesting topic to cover, it's kind of fun. I think it'll be useful. What's helpful about the conference is because we combine these data center energy points of expertise, the energy kind of industry has dealt with a lot of local opposition for years, right? So, we're hoping there may be things we can learn from each other as well.

[00:06:56] Eric Hanselman: It's not like building a power plant. Oh, wait a minute. Maybe it is.

[00:06:59] Kelly Morgan: Right? At least, yeah, from the local opposition perspective, or like an oil well or something, right? There's been a long history of opposition to these things.

[00:07:08] Eric Hanselman: And one of the things the conference talks about is behind-the-meter power, and in fact that with the data center may in fact come power generation facilities that are there. When we look at what's going on with everything in the gas turbine markets and a lot of those areas. I am sure there will be lively discussions about those opportunities, the realities of what's going on in those markets as well.

[00:07:33] Kelly Morgan: Yes, we definitely have a panel on behind-the-meter options, nuclear, right? Everyone's wondering when that'll be a thing, so we've got a nuclear company attending and speaking. Behind-the-meter natural gas, but also battery storage systems, right? There are a lot of different options we're hearing about, cells as well.

[00:07:54] Kelly Morgan: So, discussion, I think, on all of those will be happening at the panel.

[00:07:58] Eric Hanselman: Well, especially at the point at which, one of the largest concerns we have for data center siting right now, is where are you going to get your electrons from?

[00:08:06] Kelly Morgan: Right.

[00:08:07] Eric Hanselman: Tony Lenoir was just on a couple episodes ago, talking about the continuing push in sustainable energy and delivering those capabilities, and some of those broader impacts.

[00:08:17] Eric Hanselman: And really the fact that it is such a complicated equation to really understand, both the energy picture, the water consumption picture and you start thinking about secondary water consumption from tied to power generation.

[00:08:32] Kelly Morgan: Exactly.

[00:08:33] Eric Hanselman: It, yeah, it starts to get into a complex calculus pretty quickly.

[00:08:39] Kelly Morgan: Yes. Yeah, and Tony's been doing some great work on trying to model impacts of that secondary power source and the water going to that, which I hadn't necessarily thought about. And so, I think it's good for us to be modeling and thinking through those effects, those impacts further down the line.

[00:09:00] Eric Hanselman: Now, the conference, of course, is also going to be looking at some of the technology pieces that are tied to this, both from the consuming side, this little thing called AI, strangely features prominently.

[00:09:13] Kelly Morgan: Yes.

[00:09:14] Eric Hanselman: As well as some of the technology supply side pieces of this, which of course are just as big an issue.

[00:09:22] Kelly Morgan: Yes. Yep, we definitely have a panel on the new technology. It's amazing to me, having covered data centers for about 20 years now, how this was a pretty conservative industry. Things didn't change that quickly. These are very critical infrastructure. Folks were nervous about making any kind of change to something that has to be running 24/7. And now AI has just pushed those boundaries super quickly into, "Oh my gosh, we need a whole new design for our data center, and we're trying these things that have never been tried before." And the density and potential for DC power and liquid cooling, there are all these new technologies that are having to be implemented quite rapidly really, compared to where the industry was 10 or 20 years ago.

[00:10:14] Eric Hanselman: Well, and to your point, some of this stuff is really fundamental. Things like floor loading capacity.

[00:10:20] Kelly Morgan: Yes!

[00:10:21] Eric Hanselman: That you've got NVIDIA coming out with Vera Rubin that is so heavy that it needs special capabilities in terms of the floor capacity, what the floors can support.

[00:10:32] Eric Hanselman: So this isn't getting into power. This isn't getting into GPUs. This is just can the floor actually support this massive structure that is the GPU cluster that's going to be fueling all this? We're definitely in different places.

[00:10:48] Kelly Morgan: Oh, and between all of these different infrastructure requirements, we mentioned this before, the cost to build these goes up as well, right? Adding structural reinforcement to the floor is not cheap, and liquid cooling is a little bit more expensive, and there are a lot of implications further down the line for capital raising as well and what's required in these.

[00:11:11] Eric Hanselman: Yeah, liquid cooling because, I don't know, we've been talking about liquid cooling in the transition for so long. This is one of those things that just seems like, it must be yesterday's news, but in fact, the volumes of liquid cooling, the nature of liquid cooling are... Are you actually looking at chilled water?

[00:11:27] Eric Hanselman: Are you supporting warm water? Oh, and by the way, all that plumbing, all the pipe for that weighs a bunch.

[00:11:35] Eric Hanselman: We come from a world in which, you know, when we were using air cooling, you have ducting, you are directing that air, but the actual infrastructure to carry it and manage it, you've got your chillers, you've got all the plant infrastructure that's around that, but when you actually get out into the aisles, it's not all that hefty, and now all of a sudden you're running heavy duty piping out to everything.

[00:11:59] Kelly Morgan: And you need leak detection systems, and these things are heavy, and they're complicated to fit together. They have to be fitted perfectly. You need a different workforce really to set all this up. So, there's a lot of implications.

[00:12:12] Eric Hanselman: It, it was one of those things that simply routing chilled water, was the, the thing you did every so often. But now the fact that you've actually got water going into the rack environments, and you've got to deal with all of the, how do you push it, put it in? How do you put it out?

[00:12:29] Eric Hanselman: How do you plumb the racks so that even minor maintenance, if you have to pull a tray out of one of these systems, you are interrupting the flow of water. And granted, they've all got integrated systems to help you pull these things in and out, but you still have to be ready to deal with systems that don't seal well, and the other automated pieces that maybe don't work well.

[00:12:52] Kelly Morgan: And oil involved, right? And all these, or different dialectic fluids that get off and you have to be careful how those are plumbed as well. Yeah, there's a lot.

[00:13:03] Eric Hanselman: Oh yeah, if you're doing immersion, yeah. It's, yeah.

[00:13:06] Kelly Morgan: Yep.

[00:13:07] Eric Hanselman: Hey, it keeps people from getting bored, right?

[00:13:10] Kelly Morgan: Right, exactly. The industry never gets dull. That's why I like it.

[00:13:15] Eric Hanselman: So, in terms of the general format, some of the areas we've been talking about, it seems like, some of this, some of the major benefits is just being able to get all of these different participants from these, what are becoming, more and more disparate communities together, is one of the principal values.

[00:13:36] Eric Hanselman: Because historically, we had folks on the financial side and a lot of the build partners who are part of all this. That integration was already, already in fairly good shape. But now the extent to which you now have to look, you have to be able to look at some of those forward-looking capabilities.

[00:13:55] Eric Hanselman: It used to be that, hey, you knew who was making all of your racks, and you knew how much the racks weighed, and so that was relatively straightforward. Now you actually got to get to a situation where you're talking to the NVIDIAs, the AMDs about where is your next generation rack going, what's it going to look like? What are the requirements for it?

[00:14:15] Kelly Morgan: Exactly.

[00:14:16] Eric Hanselman: Hopefully these are forums that we can start to get some of those conversations put together.

[00:14:21] Kelly Morgan: Oh, yeah, absolutely. And I think a key area of discussion as well will be supply chain because we're doing a lot of work on that internally now at S&P. We’ve lined up with a lot of our supply chain group to try to examine all the potential impacts, of everything from way down the line copper and steel to all the different potential. I think of it as a very delicate supply chain around chips, right? And everything that could go wrong on that end. So, I think we'll be discussing that as well. It's these various areas of risk, and potential risk involved, not only on the energy side, but on the data center side and the equipment that goes in the data center. So, all of that is a good discussion topic.

[00:15:07] Eric Hanselman: Well, because again, getting the facility up, it was hard enough to sort out whether or not you were actually going to be able to get power because we've now got interconnect queues and you have to worry about not only your facility, but you know, the generation capacity interconnect queue to be able to plug in.

[00:15:25] Kelly Morgan: Exactly.

[00:15:27] Eric Hanselman: And then having to actually realize that, oh, yeah, actually, getting the new, whatever the equipment is you happen to be standing up in there has such incredibly long lead times along with this as well.

[00:15:38] Kelly Morgan: Right. Exactly. And it's not even a given that fiber is available everywhere. The actual fiber, much less being able to dig it and lay it in the place that you want. So, it just stretches all the way through the industry. Every, every aspect there are different supply chain sort of issues to keep an eye on, including labor.

[00:15:58] Kelly Morgan: There are major shortages with builders, power plants, electricians, plumbers, operators of data centers. A lot of them are due to retire in the next few years, so that's been a concern for several years, even before this crazy build-out. Yeah, lots of issues.

[00:16:15] Eric Hanselman: We're moving into physical AI, so we'll have robots to do all that, right?

[00:16:20] Kelly Morgan: Oh, God. Maybe. Yeah. We'll see.

[00:16:24] Eric Hanselman: So we've got to now talk about circular relationships. We've got to have AI to train the robots, but who builds the data centers?

[00:16:34] Kelly Morgan: Yeah, exactly.

[00:16:36] Kelly Morgan: I know the supply chain team is actually looking at some of the key elements going into robots, right? And there may be some constraints around those too. So yeah, there's no kind of easy answer in a way.

[00:16:47] Eric Hanselman: I've actually been part of those conversations. It’s getting into concerns about rare earth magnet supplies because of the motors that you need to run the robots, and yeah. as we keep saying, it's all connected.

[00:17:00] Kelly Morgan: It is, exactly. Yeah. Craziness.

[00:17:05] Eric Hanselman: Wow. It sounds like there's going to be an awful lot going on in Houston in the various forums that are out there. Are there particular things that you're looking forward to in either content or some of the headliners you've got turning up?

[00:17:19] Kelly Morgan: Well, we are starting out with Paul Gruenwald, who is our Ratings chief analyst, so he'll be giving the keynote on AI and its impact on the global economy. So, I think that's always something to look forward to. I always enjoy listening to Paul. And then, we do have an executive roundtable at the end, so far with Sean Kelly, who's CEO of Amperon, and Rich Vorberg, who's chief infratech officer of QII.

[00:17:47] Kelly Morgan: And I always like to get the input of C-level, high-powered folks to get their view of what's going on.

[00:17:55] Eric Hanselman: I'll point listeners a few episodes back, Sean was on the podcast talking about Amperon's efforts and being able to actually leverage AI capabilities to be able to do grid management and to help better understand grid dynamics. But especially, getting data center operators and somebody like QII who's also in there, that, that should be an interesting back and forth.

[00:18:19] Kelly Morgan: Yeah. Yep. I'm really looking forward to that one.

[00:18:22] Eric Hanselman: Wow. That is great, Kelly. I'll have links in the show notes to the site, so hopefully we'll get some of our listenership there to be able to go actually see it in person and certainly follow on with a lot of the content that we'll see afterwards. But thank you for all the insights, and break a leg at the conference.

[00:18:38] Eric Hanselman: I hope it goes well!

[00:18:40] Kelly Morgan: Great. Thank you for having me on. And yes, I hope so too. It's always a really fun event, so I hope our listeners can join and I look forward to talking to you again soon.

[00:18:50] Eric Hanselman: Thank you very much, but we are at time. And that is it for this episode of Next in Tech. Thanks to our audience for staying with us, and thanks to our production team, including Dylan Schieble, Sophie Carr and Feranmi Adeoshun on the marketing events teams. If you liked this episode, please subscribe or like us. I hope that you'll join us for our next episode, because there is always something Next in Tech.