Grid congestion, space constraints, and criticism over energy consumption are hampering growth opportunities for Dutch data centers, according to a report from Dutch bank ING.

The report described data centers as “incredibly important” to the Netherlands’ economy, but posited that the sector’s growth opportunities are “severely limited.”

“The good news is that it’s technically feasible to accommodate significant additional Dutch demand for data center capacity abroad. The bad news is that if there’s no room for further data center growth in the Netherlands, significant technical knowledge and expertise will be lost in the long term, resulting in lower economic growth and greater dependence on foreign countries,” the report said.

Congestion and coordination

While 200MW of capacity is currently under construction in Amsterdam, ING said that the construction of a further 200MW is unlikely. This is, in part, due to new rules from the Amsterdam city council that mean data center applications in the city will only be eligible for building permits from 2035 onwards due to grid congestion.

According to the NL Times, the only eligible projects in Amsterdam will be those submitted before December 28, 2023, or projects in late-stage negotiations.

ING called for greater coordination nationally, arguing Amsterdam’s leading position in data center capacity in Europe could be quickly lost to other cities and countries with “much more extensive plans for data center construction.”

Other FLAPD markets are experiencing similar congestion issues, but have more ambitious plans. Cities outside of FLAPD are also planning to build more than Amsterdam and, while Dutch workloads could run abroad, the Netherlands would miss out on significant economic growth stemming from data center construction, ING argued.

“The extent of these consequences is difficult to determine, as it’s difficult to calculate the economic impact of a startup choosing another city instead of Amsterdam,” the report said.

“However, the first-, second-, and third-order effects of data centers on the economy are significant. If the sector stagnates, the Netherlands will eventually lose the knowledge and skills of installers and programmers, further increasing its dependence on foreign technology. Data centers also function as a flywheel for digital infrastructure. It’s therefore quite possible that if the sector is not allowed to grow further, the future earning capacity of the economy will be damaged.”

Consumption and criticism

Grid congestion isn’t the only issue. The report also identified increasing energy consumption and public criticism of that consumption as key concerns for the Netherlands, especially with the significant demand increases generative AI is expected to cause.

As part of plans to shift to renewables, the Dutch government is looking to build 21GW of offshore wind energy by 2032, representing 75 percent of the country’s current electricity consumption.

ING suggested that politicians recognize the importance of the data center industry, and look to direct data center building near these sustainable energy sources. Residual heat from their operation could then be used for district heating or heating surrounding buildings.

By doing this, the report argued that data centers can be built in a “sustainable way,” addressing both grid constraints and consumption criticism, but that this will require national intervention.

“With its strong digital infrastructure, data center expertise, and AMS-IX, the Netherlands holds a unique position: it would not be illogical to build on this … Should the decision nevertheless be made to no longer add data center capacity, the Dutch economy will eventually lose knowledge, expertise, and attractiveness,” ING said.

However, the report conceded that space constraints might limit possibilities in the Netherlands, and there should therefore be more centralized decision making in Europe over where data centers should grow if Europe wants to “participate in the field of AI now and in the future.”

The Netherlands has seen a slew of private data center investments this year, including a significant expansion of Microsoft’s Middenmeer facility and new capacity from companies such as Alibaba and Oracle.

The EU has also been active in supporting data center projects across Europe, most recently signing a Memorandum of Understanding with the European Investment Bank and European Investment Fund to support ‘AI gigafactory’ projects.

The Netherlands has launched a bid to host one of these 300MW gigafactories, led by Han De Groot, co-founder of data center firm Switch.