The data center market has grown significantly in recent years, and there is no slowdown in sight. How can HVAC providers make the most of this trend?
The ACHR NEWS sat down with Sean Crain, Consulting Engineer Account Executive at Johnson Controls, to find out.
ACHR NEWS: Please give us an overview of the HVAC data center market.
Crain: Over the last three to five years, the data center industry has seen an almost exponential increase. Immediately after the COVID-19 pandemic, we saw a massive jump in demand. I would say things really took off in late 2021. This expansion was driven by people working from home, schooling from home, and a significant increase in cloud-based activity. The way we live changed in North America and globally.
There is definitely a strong response to this shift in funding for the vertical data center market. We have seen a significant increase in demand from colocation providers.
ACHR NEWS: So what are colocation providers?
Crain: There are many different types of data center providers, but two of the biggest are hyperscale and colocation. Hyperscalers are the big web giants. Think of companies like Microsoft, Amazon, and Google. These types of organizations typically build facilities for their own use. They use cloud storage for themselves or their direct customers.
The other major type of data center is colocation providers. They build and sometimes operate a facility for a third-party tenant. They typically enter into service level agreements with their tenants that guarantee a certain level of availability and operating conditions for the server room. Then those tenants lease a certain amount of IT space within the data hall for use. In recent years, we have seen an expansion of both types of data centers.
ACHR NEWS: What kind of HVAC technology are we talking about in these data centers?
Crain: Cooling requirements have changed significantly over the same period. In the past, many data center designs used things like evaporative cooling or DX direct cooling with refrigerants. These types of designs are typically considered “packaged” or “modular” and could easily be deployed at scale in multiple facility designs.
In recent years, there has been a strong trend towards chilled water systems. Manufacturers of HVAC equipment have seen a significant increase in demand in this area. Johnson Controls has invested heavily in this area to support the increasing demand for chilled water systems, both air and water cooled.
We constantly hear AI as a buzzword, but it is still unclear how these systems will be supported at scale. From a data center perspective, AI applications typically require different design considerations compared to a cloud-based computing facility.
AI applications typically require a denser IT infrastructure, requiring manufacturers to continue to push the boundaries of product development and innovation.
ACHR NEWS: What was the reason for the technology change?
Crain: I think it had a lot to do with size. A large plant three to five years ago was maybe a 12 megawatt plant. Today we see 250+ megawatt plants everywhere. The build-out and the requirements for the actual plant have changed, but the design methodology is also significantly different.
I think a lot of sites that were using evaporative cooling and DX systems for data center cooling have reached their useful life. There is replacement activity throughout the industry. This activity coincides with the construction boom that we are experiencing right now. There has been a mentality shift around the useful life of these mechanical cooling devices, which has caused data center providers to look at some more application-focused equipment options.
ACHR NEWS: What about HVAC technicians who see this as a good market but are a little nervous about the low failure rate? What would you say to them?
Crain: Contractors should not be afraid to enter the data center market, but should be aware of the requirements to participate. Activity levels have increased, but there is still a feeling of a relatively tight market.
Many people have worked in this field for the majority of their careers and know it well. Word gets around quickly. Successful contractors are contractors who have been doing this for some time. If new contractors want to enter this vertical market, they definitely need to be prepared for a change in pace and expectations from the client perspective.
ACHR NEWS: How are contractors trained for this type of work?
Crain: As far as installation goes, it’s quite normal for us to do training on how to install all of our equipment. As far as HVAC equipment goes, the contractors know how to install our equipment. It’s not overly complex. The contractors, in my experience, are much more flexible and able to adapt to changing technology.
ACHR NEWS: Is there more work than with HVAC contractors who do this type of work, or vice versa?
Crain: There are certainly more jobs than HVAC contractors doing this work. Contractors are aware of the labor shortage, and we see similar pressures in the data center industry, particularly for skilled mechanical and electrical labor. We can’t get enough of those people to come into the industry.
I think there is some concern in the industries not to get into data centers because of the mission-critical nature of it. As the opportunities continue to expand, more and more contractors will have the opportunity to get in.
It will be up to individual contractors to figure out what that job creation will look like. But right now we can’t get enough help. We’re struggling to train and get the right people up to speed on everything from manufacturing to installation and commissioning to operations and maintenance.
There is a lot of discussion and focus in the industry on how we can reach the labor market, educate contractors about the expectations of the data center industry, and get them excited about working on data center projects.
ACHR NEWS: Is there anything contractors need to consider when reviewing the data center market?
Crain: I would say there is an opportunity specifically for contractors to align a little bit more with their OEM partners. In our current situation in the industry, because of the expansion, there is a lot of activity in the area of direct owner sourcing or owner-procurement. Agreements are being made to align certain owners with different manufacturers as part of the vertical supply chain integration model that is being implemented in the data center industry.
Currently, the contractor is only brought in at the beginning of construction, which means that they are sometimes already behind schedule because many design discussions have already taken place and the equipment has usually already been purchased. They are already working with less information than they are used to from day one.
That’s why there’s an opportunity for contractors to partner with manufacturers. For example, let’s take a market like Northern California. If a contractor wants to get into the data center market, they might want to partner with a few different OEMs that are already in that region to figure out how to bring them to the table as a contractor to be an effective part of the team.
I think one thing HVAC contractors need to figure out is the national landscape of this market’s expansion. Many data center providers operate nationally or globally, which means their partners need to do the same. Smaller, locally owned contractors are immediately at a disadvantage and need to be creative about how they can potentially support large-scale construction projects.
