Digital dependence on the USA: What is needed for more data centers “made in Germany”

If Germany wants to be digitally sovereign, it must act now. Without its own data centers, it can't have its own cloud and AI. This is what an expert says about the situation.

Germany is at a turning point: The federal government's new coalition agreement promises comprehensive support for the digital economy – from lower electricity prices to faster permitting. Data centers play a key role in this; without them, there would be neither cloud services nor AI applications nor a functioning administration. But can the planned measures keep pace with the rapidly increasing demand? And where improvements still need to be made?

The coalition agreement recognizes the strategic importance of data centers and aims to make Germany a European beacon. Specifically, cluster funding is intended to create regional data center hubs and provide targeted support for decentralized infrastructures, such as edge computing at distributed locations. At least one of the planned European "AI gigafactories" for high-performance AI is to be brought to Germany. Such large-scale projects promise enormous computing capacity for artificial intelligence.

Despite high investments, Germany is in danger of falling behind globally. These initiatives are all the more important. At the same time, we are seeing increasing demand for domestic solutions in the first quarter compared to the previous year – with marketing expenditures remaining unchanged. This trend has already begun: Many companies are bringing workloads from public clouds back to Germany for geopolitical and data protection reasons or are re-examining their IT strategies. Demand for sovereign solutions is increasing.

The main obstacles to the expansion of new data centers are lengthy approval processes and the laborious connection to the power grid. The government intends to counteract this: A digitalization initiative among power grid operators and greater transparency regarding available grid connection capacities are intended to facilitate the planning and integration of data centers into the power grid. Operators should be able to identify where sufficient power is available more quickly and submit their connection applications promptly. Furthermore, approval procedures are to be consistently simplified and accelerated.

In other EU countries, data center permits often take only a few weeks, whereas in Germany they take many months or even years. This discrepancy needs to be narrowed. Moving from the planning application to the groundbreaking ceremony more quickly is necessary to meet the increasing demand and prevent customers from abandoning the project.

The sticking point for the industry is the high electricity costs in Germany. Electricity is the largest ongoing cost item for a data center – and here in Germany, we pay the highest prices compared to the EU. Therefore, the coalition agreement relies on several cost-saving measures to increase competitiveness: The electricity tax is to be reduced to the EU minimum, and surcharges and network charges will be reduced. A state-subsidized industrial electricity price for key infrastructure such as data centers is also planned. All of this is intended to improve the economic viability of new projects – currently, electricity costs are a major disadvantage for locations. However, it remains to be seen how quickly these relief measures will take effect.

Customer demand for additional capacity is already growing faster than supply, but high energy costs are slowing expansion. No time can be lost to ensure that capacity expansion keeps pace. Because the Rhine-Main region is one of the most attractive data center clusters in the world, national and international demand will continue to rise significantly.

The government is also taking action in the climate and environmental sectors. Server waste heat, which has so far often gone unused, will be used more intensively in the future – for example, by feeding it into district heating networks to heat neighborhoods. A technology-neutral approach is crucial: Whether through innovative cooling or self-generated energy, any technology that saves electricity or utilizes waste heat will be supported, without rigidly prescribing how climate goals can be achieved.

Planned funding programs for sustainable data centers, such as waste heat infrastructure, can help meet these ambitious targets. Overall, data centers are seen as part of the climate protection solution, which motivates the industry to invest in green innovations.

The government aims to become an anchor customer for domestic digital infrastructures. It is planning an interoperable, European-ready "Germany Stack" – a sovereign cloud and AI infrastructure that provides essential digital services. In this way, the government is creating reliable basic demand by encouraging administration and public authorities to increasingly use domestic data center and cloud services.

Large-scale government digital projects should prioritize local capacities, thus serving as a market stimulus for the private sector. This demand from the government can provide a significant boost to the industry. A basic level of capacity utilization through public contracts facilitates further investment and strengthens digital sovereignty. However, the Germany Stack must be designed with open standards to ensure its attractiveness and acceptance by the private sector.

The promise of reducing bureaucracy also runs across all areas. Unnecessary regulations and complicated application processes are to be eliminated, and procedures are to be digitized and accelerated. Plans include digital approval portals, central contact points, and expert pools within the administration to expedite project reviews. Industry associations have long emphasized that planning and approval processes in Germany are far too slow. Standardized, digital processes would save time and help smaller companies in particular. Every week that a project can go online sooner counts in global competition.

Despite all the positive announcements, the question remains: Are these measures sufficient to meet demand and keep pace internationally? Demand for locally operated infrastructure is growing faster than supply. It seems that some German politicians have grasped the seriousness of the situation regarding Germany's bleak economic prospects.

The planned steps are a good start, but their effects will only be felt with a delay. It will take several years before cheaper electricity tariffs and faster approvals actually become reality. As a result, some companies need several years of lead time before making new investments based on the new laws.

Nevertheless, the coalition agreement is optimistic: Many demands of the digital economy – from electricity price relief to faster procedures to digital sovereignty – have been addressed; the direction is right: Germany is to be positioned as a future-proof location. Now it's all about implementation so that the expansion of the digital infrastructure doesn't stall. It's important to roll up our sleeves, both in terms of companies and in terms of politicians' willingness to change, to avoid heading for an uncertain economic future. If this succeeds, today's decisions will bear fruit in a few years: a sustainable and sovereign digital ecosystem "made in Germany."

About the author: Jerome Evans is Managing Director of firstcolo GmbH, a provider of IT management services and operator of several data centers. Evans has been involved in IT services, specifically data centers, for 20 years, and is responsible for the construction and operation of data centers.