Iberdrola Seeks AI Data Center Stake in Spain Joint Venture

(Bloomberg) -- Iberdrola plans to provide a Spanish data center with a grid connection and renewable power in exchange for up to 20% of the facility, which will cost as much as €2 billion ($2.2 billion) to build.

Europe’s top clean energy generator is in advanced talks with developers to provide land connected to the grid for the joint venture, but no cash, while its partner would make the investment to build the center and operate it, according to people with knowledge of the matter, who asked not to be named because the information isn’t public. 

The unusual deal structure is a sign of how keen Iberdrola is to develop a global data center portfolio. Providing electricity in exchange for equity is a way for the Spanish utility to expand its presence in a capital-intensive but fast-growing sector.

Processing a ChatGPT query uses nearly 10 times more energy than a Google search, according to analysts at Goldman Sachs Group Inc., who expect AI to drive a 160% surge in power demand from data centers and reach as much as 4% of global electricity consumption by 2030. 

That makes it an especially attractive business for renewable power generators, as large technology firms like Microsoft Corporation and Meta Platforms have set ambitious clean energy goals.

Related:Solaria Signs Deal to Build Spain Data Center With Japanese Firm

The joint venture is expected to be set up in the first half of 2025 and would initially focus on Bilbao-based Iberdrola’s home market, according to the people. The new company would later seek to expand in other markets. Through the venture, which is in line with its business plan, Iberdrola is seeking to position itself ahead of competitors in the data center market, the people said.

Iberdrola is already selling energy to several data centers through power purchase agreements, or PPAs. For the new venture, the company will also provide land with 200 MW grid connection capacity and will rely on pumped-storage hydropower to ensure that the PPA suffers no interruptions, even though the energy will be fully renewable. Later, Iberdrola may decide to add a solar plant, the people said. 

The first data center is expected to start operating by 2030 when Ibedrola aims to reach 20% of Spain’s data center market share.

The utility has created a new unit, named CPD4Green, to manage the development of the new business. It has chosen Spain as the initial market because of the vast availability of land, along with a well-developed power network and more than 22 GW of renewable energy capacity. 

Other Spanish companies have also shown interest in the data center boom. Earlier this month, Solar developer Solaria Energia y Medioambiente signed a deal with Japanese company Datasection to build a data center of as much as 200 megawatts. Real estate company Merlin Properties Socimi in July raised almost €1 billion ($1.1 billion) to expand its data center business. 

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