Spain: the new hub for data centers in Southern Europe
Iberian Lawyer talks to legal experts about regulatory challenges and solutions for the expansion of data centers in the country
Experts: Iria Calviño, partner and head of the Public Law and Environment practice of Herbert Smith Freehills in Madrid; Conchita Sainz, partner and head of the real estate department of Bird & Bird in the Madrid office and José María Barrios, partner in charge of the Regulatory Law practice in the Madrid office of DLA Piper.
by julia gil
Spain is currently among the top ten European cities by number of data centers, with 143 facilities. According to the real estate consulting firm CBRE, Madrid and Barcelona have become real emerging markets, attracting the attention of investors and operators of this type of infrastructure. But why has this happened if, until now, the preferred locations for this type of facilities were Frankfurt, London, Amsterdam and Paris (FLAP)? The truth is that, according to the partner and head of Herbert Smith Freehills’ public law and environmental practice, Iria Calviño, the FLAP hubs, where most data centers in Europe are located, are showing signs of saturation. “Spain is becoming a potential “paradise” for the installation and development of this type of facility,” Calviño explains. And she is not the only one to show this positioning. Conchita Sainz, real estate partner at Bird & Bird, agrees with Herbert’s partner that the main reasons why Spain is positioning itself as one of the markets of greatest interest to investors are threefold: it has the leading investment in fiber in southern Europe, its excellent geographical location and the enormous potential for renewable energy generation in the territory.
REGULATORY CHALLENGES
Despite the great attractiveness of Spain, there are still major regulatory challenges affecting data centers. Specifically, the biggest challenge is the small number of connection points for existing demand and the difficulty for electricity grids to absorb this new energy demand. “Connection points are currently limited and are insufficient for the new energy consumption needs that have arisen following the boom in the development of data centers in our country,” explains Sainz.
In accordance with this opinion, the partner of Herbert Smith Freehills warns that the existing connection points are not sufficient and that, except for the assumptions of self-consumption, the manager of the transmission grid has been understanding that “the current planning for the development of the transmission grid does not allow to request for demand a position destined to generation”. In other words, we are facing a moment of over-demand of electric power, and as the partner explains, we are waiting for the approval of the Ministerial Order that regulates the criteria applicable to demand access capacity tenders in the transmission grid nodes.
The fact is that, due to this situation, this leads to the choice of locations far from large urban centers for the installation of the centers. José María Barrios, partner in charge of regulatory law at DLA Piper Spain, says that it is not just a question of economics. “Apart from the economic savings that such a choice may entail in terms of the price to be paid for the land, the capacity available in the network for consumption in rural areas is generally much greater,” he adds. Despite this, he warns that there are other challenges, such as the compatibility of the project with the environmental and landscape values of the area, the deployment of sufficient telecommunications networks, or the possibility of guaranteeing, if necessary, the water supply required for the cooling work, derived from the selection of these locations.
