Frankfurt and the surrounding Rhine-Main area have developed into one of Europe’s most important digital hubs. A new study by the Institute of the German Economy (IW Consult) and the consulting firm Detecon for the eco association of the German internet industry underscores the enormous economic significance of the data center industry located there. In contrast to the overall economy, which grew by around 16 percent in Frankfurt and the Rhine-Main region over the past five years, the gross domestic product (GDP) in the data center operator sector doubled during the same period.

According to the analysis, forecasts predict unhindered growth, writes eco: The industry’s GDP is expected to increase by a further 175 percent in the Hessian region over the next five years.

The value creation is not limited to the operators themselves, it states: every euro generated in data centers is expected to spur an additional 51 cents of economic output – 24 cents of which directly in the region. Furthermore, the industry generated tax revenue of 405 million euros in 2023. Of this, 287 million euros are attributed directly to the operators and another 117 million euros to suppliers. It is estimated that about ten percent of the tax revenue remained in the local municipalities, largely due to trade taxes.

Even more significant are the "spillover effects" for user industries: companies that use data center infrastructure are significantly more innovative, according to the IW study. They were able to generate around 18 percent of their revenue with new products or services, while companies not using data centers achieved only just under 8 percent. This effect is amplified by the current AI hype, as corresponding applications have a massive demand for computing power and fast networks.

This pull effect is also illustrated by the De-Cix, located in Frankfurt, the world’s largest internet exchange point. The infrastructure density prevailing there attracts domestic and international companies, which invest at least two billion euros annually in the digital infrastructure of the Main metropolis.

Regional Risks: The Fight for Electricity

Despite the outstanding growth figures, operators in Frankfurt and across Germany are increasingly facing major challenges. The IW study names the critical location factors: high-energy costs, long approval processes, regulatory uncertainty, and land scarcity.

An acute problem is the power supply. Here, the digital boom threatens to push the region’s grids to their limits, as a recent analysis by AlgorithmWatch also revealed. The rapidly increasing energy demand – especially due to the use of AI – is leading to bottlenecks in energy supply and endangering grid stability, according to industry observers. A modern data center can consume as much electricity as a large city. Future, purely AI-driven data centers are likely to have an even significantly higher demand.

This development carries the risk that the urgently needed additional power capacities, available in the short term, can no longer be guaranteed on a large scale in the region. This massively deteriorates the framework conditions for the operators.

Scandinavia is tempting again

Béla Waldhauser, spokesperson for the Alliance for Strengthening Digital Infrastructures, founded under the umbrella of eco, therefore urgently warns against migration to other European countries. He is looking, for example, at Scandinavia, where more attractive conditions prevail in the form of lower energy prices and simpler, more efficient network access.

Waldhauser’s demand to politics and municipalities: Clear political commitment to digital infrastructure is needed. Affordable electricity must be ensured, and accelerated and reliable approval processes must be introduced to preserve Frankfurt and the entire region as a digital center in the long term. This pillar of the digital economy must not be cut off.

(nie)

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This article was originally published in German. It was translated with technical assistance and editorially reviewed before publication.