EU moves toward regulating data center energy and water use

The European Union will take a big step toward regulating energy and water use by data centers in September, when organizations operating data centers in EU nations will be required to file reports detailing water and energy consumption, as well as steps they are taking to reduce it.

The EU’s data center reporting rules are part of a larger regulatory package ultimately aimed at reducing energy consumption by 11.7% between 2020 and 2030. Regulators are targeting data centers because they are estimated to consume 2% to 3% of all energy used in the EU, with processing-heavy AI technologies driving the demand for greater computing power and more data centers.

A handful of data center hubs in the EU require thousands of megawatts of power to operate, notes Ermengarde Jabir, a senior economist at research firm Moody’s. Data centers in Amsterdam require about 950 megawatts of energy capacity, with Dublin’s data centers requiring more than 700 megawatts of capacity. Data center hubs in Paris and Frankfurt require nearly as much energy as the Dublin hub.

By comparison, 1 megawatt of power is enough to power 750 to 1,000 homes for a year. The world’s largest data center hub is in northern Virginia, with a capacity of 4,500 megawatts.

The EU model

For now, the EU reporting mandates — as well as any potential energy-reduction regulations following the reports — apply only to data centers located in EU nations. But EU environmental regulations tend to be a model for many other parts of the world, with North America an exception, says Cándido García Molyneux, a Brussels-based environmental lawyer with the Covington & Burling law firm.

“Ultimately, the reality is, when the EU adopts these reporting requirements, be very sure that many other countries will start adopting the same or very similar requirements,” he says.

In addition, countries that want to join the EU or trade with the EU may need to comply with data center energy rules, he adds, and the EU has already passed government procurement regulations around energy efficiency. Companies providing cloud or web-based services to EU residents and businesses from data centers located elsewhere may also be subject to future energy use regulations, he says.

“If they have a data center in India, maybe these reporting requirements do not apply to them, but many of the sustainability requirements that the EU is adopting may have an impact on data centers in India,” he says.

Phasing out fossil fuels

The EU’s push to reduce its energy consumption is driven by several factors, including goals to cut its use of fossil fuels and to lower its dependence on foreign energy sources, Moody’s Jabir says. While the efforts to cut consumption started before Russia invaded Ukraine, the conflict there has strengthened the EU’s resolve to cut imports of Russian oil, gas, and coal.

An early step toward regulation is the energy and water use reporting rules. While some energy experts believe most data center operators are ready to comply, Molyneux sees some data center operators struggling to meet the deadline. Smaller operators, for example, may not be aware of the rules, and others may find it difficult to collect the right information.

CIOs operating data centers on EU soil on behalf of their enterprises may be among them.

Moreover, in some cases, data center users or operators aren’t the data center owners, which may complicate the reporting process, Molyneux says.

Many larger data center operators have been working toward monitoring their energy consumption in the past year, says Sebastiano Paganini, global product line manager for ABB Smart Buildings, provider of energy-efficient solutions for the construction industry. Data center operators are often turning to outside services to monitor consumption or provide monitoring tools, he says.

A major priority for the EU’s reporting requirements is to create a ratings system for the sustainability of data centers. The end goal, of course, is to create more sustainable data centers, but many data center operators have already begun to address sustainability, Paganini says. In addition, the EU released a voluntary energy code of conduct for data centers, outlining some best practices, this past September.

“Potentially, this regulation will find some or most data center operators heading in the right direction,” he says.

What’s in the rules?

CIOs who operate data centers in the EU need to know what they are up against when it comes to September’s reporting deadline.

The reporting rules will require them and other data center operators to:

• Measure their energy efficiency
• Show how much of their energy comes from renewable sources
• Describe how they reuse waste heat that’s produced
• Measure the effectiveness of cooling
• Show the effectiveness of carbon use
• And report their use of fresh water

The water reporting requirements are included because data centers are massive users of the resource, Jabir says. A hyperscale data center can use up to 200 million gallons of water per year to cool its hardware, and nearly all that water evaporates, making it impossible to recycle. Even a small data center can use six to seven million gallons per year.

Even as the EU is focused on data center sustainability, the demand for data centers is growing significantly, with interest in AI rising and data generation increasing exponentially across the world. Several analyst firms, including McKinsey & Co., project an annual data center growth rate of 10% or more through 2030.

“The proliferation of data centers isn’t going to stop anytime soon, because demand is extremely strong,” Jabir says. “Having said that, there is concern around the potential to build new plants that burn fossil fuels.”

This combination of heavy demand and sustainability regulations will add complexity to the industry. In addition to likely sustainability regulations, data centers are expensive to build and operate, and they need to be in areas with high energy supplies and access to fresh water, she notes.

“The big concern around data centers is this constant use of nonrenewable resources at an extremely fast pace,” Jabir says. “The question is, ‘What’s the balance between the needs for people’s everyday lives and feeding these extremely resource-draining data centers?’”

Expect CIOs’ strategic decisions, reporting obligations, and budgets to be increasingly impacted by this equation.