Powering the Next Era of AI-Driven Data Centers: Energy, Water, and Cooling Innovations for Sustainability
The rapid pace of artificial intelligence (AI) and machine learning (ML) innovations over the past decade has transformed AI from a specialized capability into a mainstream driver of the digital economy. As cloud services proliferate and web-enabled devices become ubiquitous worldwide, the demand for data centers—the backbone of this digital shift—has surged. A 2024 assessment by the International Energy Agency (IEA) warned that data centers could double their energy use by 2026, underscoring data centers as a new, significant factor in overall electricity consumption. Today, data centers account for about 1.5% of global electricity use and roughly 1% of energy-related greenhouse gas emissions. The expansion is not just about more servers; it’s about higher power density, more sophisticated cooling, and a broader integration with evolving energy systems, all within an intensely data-driven economic framework.
Data Center Energy Landscape: Magnitude, Drivers, and Distribution
The contemporary data center ecosystem is expanding rapidly, with more than 10,000 facilities operating worldwide as of March 2024. This growth is propelled by several converging trends: the broader adoption of 5G networks, the shift to cloud-native services, and the rising demand for AI-powered workloads, including the development and deployment of large generative models. These drivers amplify the energy intensity of data centers, given the computational heft required by modern AI systems. In practice, a single AI-powered interaction can impose an energy burden that far exceeds that of a simple text search, illustrating how AI workloads skew electricity demand higher than traditional IT tasks. The escalation in AI capabilities—such as audio and video generation—promises to intensify energy requirements still further, making energy efficiency in data centers a strategic priority for operators and policymakers alike.
An in-depth look at electricity consumption within data centers reveals a near-even split between computing activities and cooling systems. Computing tasks account for approximately 40% of total energy use, while cooling—the critical process that preserves processing efficiency and reliability—also consumes around 40%. The remaining 20% is attributed to other associated IT equipment and supporting infrastructure. This distribution highlights the central role of cooling in total energy demand and explains why innovations in cooling technology can yield substantial reductions in overall power usage. The cooling challenge is not merely about lowering temperature; it’s about maintaining stable operating conditions under high load, reducing thermal throttling risks, and enabling denser configurations without compromising reliability.
The energy landscape is also shaped by the modular expansion of data center capacity. As facilities are commissioned or expanded, power and cooling systems must scale accordingly, often in ways that push existing grids and local utilities to adapt to new load profiles. This is particularly relevant as digital services migrate toward edge computing models, bringing data processing closer to end users and changing the geographic distribution of energy demand. The velocity of AI-related services, especially in the past year, has accelerated the demand for more powerful compute capabilities at scale, intensifying the strain on energy networks and prompting a reevaluation of energy procurement, cooling strategies, and facility design.
From a macro perspective, the data center sector’s energy demand intersects with broader electricity market dynamics, climate commitments, and national strategic objectives. Utilities are increasingly tasked with balancing reliability, affordability, and carbon intensity, all while accommodating rising peak loads from data centers and other energy-intensive industries. The sector’s energy profile is also inextricably linked to the carbon footprint of electricity generation. While progress is being made to reduce carbon intensity through cleaner power mixes and energy storage, the pace of transformation varies regionally, influenced by resource availability, policy incentives, and the pace of technology adoption.
As data centers continue to evolve, several supporting trends are shaping the energy landscape. The expansion of 5G and cloud-based services expands the footprint of data centers into new regions and markets, increasing the reliance on robust, low-latency power and cooling systems. The rapid development of AI services—especially generative AI—drives demand for high-performance computing, accelerators, and GPUs, all of which are power-hungry components. In response, operators are turning to advanced energy management techniques, energy-efficient hardware, and innovative cooling modalities to curb consumption while maintaining performance. In sum, the data center sector remains at the crossroads of digital growth and energy policy, with efficiency gains and cleaner energy sources as central levers for sustainable expansion.
Power Demand and Utilities in the Face of Rising Data Center Loads
The expanding energy appetite of data centers presents a complex challenge for utilities and energy providers. Utilities face pressure to meet growing demand while adhering to climate pledges and decarbonization commitments. The push toward expanding data center capacity often coincides with the need to scale power supply in ways that reduce environmental impact. Utilities are responding by shifting away from carbon-intensive sources such as coal and certain liquid fuels toward lower-carbon options, including natural gas—often with hydrogen capabilities—and, where feasible, nuclear power. These transitions are complemented by a broader deployment of cutting-edge renewables and energy storage technologies to manage the intermittency of renewable sources and maintain grid stability.
To support reliable and sustainable operation, many utilities are integrating energy storage solutions, especially battery energy storage systems (BESS). BESS plays a pivotal role in absorbing surplus renewable generation, smoothing rapid load fluctuations associated with AI workloads, and enhancing grid resilience. The synergy between data centers and grid technology is increasingly recognized: smart grid solutions and advanced grid management enable data centers to ride through energy supply fluctuations without compromising uptime. This is critical because downtime or data loss incurs significant financial and operational costs, underscoring why grid reliability is a central concern for data center operators.
Transitioning to lower-carbon power generation is not without its challenges. The shift from coal and more carbon-intensive fuels toward natural gas and hydrogen-ready capabilities requires careful planning, infrastructure upgrades, and often substantial capital investments. Hydrogen, whether used as a blending component in natural gas or as a potential carrier for zero-emission energy, is viewed as a strategic component in diversifying fuel sources for large-scale power generation. Nuclear energy, though regionally contentious, also appears in some strategic energy plans as a stable, low-carbon option to backfill demand growth when renewable generation is insufficient.
Beyond generation, grid modernization efforts—such as enhancing transmission capacity, deploying flexible demand-side management, and improving forecasting accuracy—play a crucial role in maintaining a balance between supply and demand. These advancements ensure data centers can rely on a stable power supply even when weather events or market conditions create volatility. The overarching objective for utilities and data center operators alike is to maintain continuous operation while accelerating progress toward net-zero goals and reducing the carbon intensity of electricity consumed by data centers.
As the AI and data center sectors continue their expansion, regional dynamics become increasingly important. In rapidly growing markets, utilities must align capacity expansion with the availability of clean energy, fair pricing, and robust reliability. Operational guardrails—including demand response programs and energy efficiency incentives—can help align data center growth with broader climate and energy objectives. The result is a more resilient energy system that supports digital growth without compromising environmental commitments.
Water Footprint of AI and Data Center Cooling: The Hidden Dimension
A critical, often underappreciated aspect of data center sustainability is water use. The cooling responsibilities that enable high-performance computing also drive substantial water withdrawals and consumption. In some estimates, even brief AI interactions can translate into measurable water use, reflecting the cooling load required to keep servers operating within safe thermal envelopes. In practice, a short dialogue comprising around 20 to 50 questions and responses with a generative AI model could necessitate about 500 milliliters of water for cooling the servers. This cooling water use varies with the type of power plant, cooling technology, regional climate, and the local cooling approach employed by a data center.
The water footprint is tightly linked to cooling technology and the source of power generation. Traditional air cooling, including swamp cooling or evaporative cooling methods, uses significant volumes of water to reduce ambient air temperatures and protect equipment, particularly in dense server environments. Swamp cooling, while effective for certain applications, consumes large quantities of water, which can be a limiting factor in water-constrained regions. As data centers densify and performance demands rise, reliance on water-intensive cooling strategies raises sustainability questions, especially in arid or water-scarce regions.
To address these water challenges, the industry has been exploring alternatives that can mitigate freshwater withdrawals while preserving or enhancing cooling effectiveness. Liquid cooling, which directs coolant directly to hot components, can dramatically improve heat transfer efficiency and reduce overall water requirements. Immersion cooling, wherein servers are submerged in a non-conductive liquid bath, represents a further leap in efficiency, enabling higher density deployments with lower cooling water consumption. Rear-door heat exchangers provide an additional approach to managing heat in dense racks, enhancing cooling efficiency and enabling more compact deployments. Collectively, these innovations help reduce the water intensity of data centers while maintaining the necessary thermal headroom for high-performance AI workloads.
In practice, water use remains a crucial metric in the sustainability equation, particularly for mid-sized data centers. A representative figure suggests that a mid-sized center in the United States consumes around 300,000 gallons of water per day, equivalent to the water use of approximately 100,000 homes. Projections for the AI era project that by 2027, accelerated global AI demand could drive water withdrawals within the range of 4.2 to 6.6 billion cubic meters annually. These projections underscore the urgency of integrating water stewardship into data center design and operation, as water scarcity becomes a strategic constraint and a policy focus in many regions.
The water dimension also intersects with climate resilience. Local weather patterns, evaporation rates, and the availability of cooling resources influence water usage. Cooling technologies that minimize water withdrawals can complement energy efficiency measures, helping to align data center growth with regional water management priorities. This alignment is particularly important in water-stressed regions, where the resilience of the broader energy and digital infrastructure depends on careful water stewardship, efficient cooling, and the adoption of next-generation cooling technologies that reduce water intensity.
Modern Cooling Innovations and Power Solutions: Toward Lower Footprints
To address both energy and water challenges, data centers are embracing a spectrum of advanced cooling techniques and power generation technologies. Liquid cooling and immersion cooling are at the forefront of this shift, offering superior heat removal capabilities that enable higher server densities and improved energy efficiency. Liquid cooling channels coolant directly to hot components, reducing thermal resistance and enabling tighter packaging of high-performance GPUs and CPUs. Immersion cooling, which submerges hardware in a dielectric liquid, can virtually eliminate air cooling losses and dramatically reduce cooling energy requirements while cutting water usage. Rear-door heat exchangers add another layer of efficiency by removing heat more effectively in densely packed server configurations, enabling better thermal management without escalating cooling water consumption.
In parallel with cooling innovations, the power generation side of the equation is evolving. A prominent pathway involves aero-derivative gas turbines, exemplified by the LM series technology from GE Vernova, as well as heavy-duty gas turbines such as GE Vernova’s H-Class. These turbine designs offer fuel diversity and the potential to operate on various low-carbon fuels, including hydrogen blends, natural gas with hydrogen enhancements, and associated gas. Their flexibility makes them well-suited to supporting data centers as they progress along sustainability trajectories, including pathways to net-zero emissions and reduced water dependence. The role of these turbines is to deliver reliable, efficient electricity while complementing renewable energy sources, thereby creating a more resilient and flexible power system for data centers.
Beyond generation, grid technology is central to enabling reliable power supply for data centers. Advanced grid systems, including smart grid controls, demand-response mechanisms, and energy management platforms, help ensure a stable power flow, even amid fluctuations or disruptions in energy supply. This reliability is essential for preventing downtime and data loss, which carry significant financial and operational costs for data center operators. Grid technology also supports the seamless integration of BESS and renewables, enabling a more comprehensive decarbonization approach and facilitating better matching of supply with demand. In practice, the combination of modern generation assets, advanced storage, and smarter grids creates a powerful triad for sustainable data center operation, reducing the carbon footprint while maintaining high availability.
The strategic implications of these technologies extend to regional markets as well. In energy-intensive regions with high solar or wind penetration, the synergy between aero-derivative gas turbines, hydrogen-ready options, and BESS can provide flexible, low-emission power to data centers. This approach supports a path toward lower water use, reduced carbon intensity, and improved energy security, aligning data center growth with climate and energy policy objectives.
Regional Focus: The Middle East’s Data Center Trajectory and Water Considerations
The sustainability challenges and opportunities surrounding data centers have clear implications for Gulf Cooperation Council (GCC) economies as they pursue leadership in AI and digital services. The United Arab Emirates (UAE) stands out as a regional hub for data center activity in the Middle East and North Africa (MENA) region, reporting a substantial expansion in live IT capacity. In particular, the UAE has seen a notable 15.3% increase in live IT capacity, reaching approximately 235.3 megawatts, underscoring the Middle East’s role as a burgeoning center for data center development. Saudi Arabia, meanwhile, has posted a stronger growth rate, with live IT capacity increasing by 29.7% to about 109 megawatts, positioning the kingdom as the fastest-growing data center market in the region. These trajectories reflect a broader regional ambition to become regional AI superpowers, supported by significant investments in digital infrastructure.
This expansion, however, must be pursued with a clear plan for sustainability, particularly in a water-scarce region where the availability of fresh water for industrial uses is constrained. The Middle East’s climate—characterized by high temperatures and arid conditions—amplifies the importance of water-efficient cooling and robust water management strategies. As data centers scale, the region faces the dual pressures of meeting rising digital demand and protecting scarce water resources. This tension has driven a push toward modular, energy-efficient design principles that minimize water use, as well as innovations in cooling that significantly reduce or eliminate freshwater withdrawals.
Policy and industry actions in the Middle East are increasingly focusing on strategies to reinforce data center resilience while pursuing decarbonization goals. These strategies include adopting zero-water cooling approaches, selecting low-water cooling fluids, recycling water where feasible, and employing energy sources with low water intensity. Additionally, the integration of renewable energy—such as solar and wind—with energy storage systems helps align data center growth with national sustainability targets. The regional trajectory thus reflects a nuanced balance: rapidly expanding digital infrastructure and AI capabilities, coupled with a commitment to reducing water use and lowering carbon emissions, in line with broader national and regional climate ambitions.
The region’s data center growth is also tied to the wider energy transition. As Gulf countries pursue diversified energy mixes, including natural gas with hydrogen-ready capabilities, nuclear, and renewables, data center operators gain access to more flexible and resilient energy options. This alignment with national energy strategies can help ensure consistent service delivery while reducing environmental footprints. In addition, cross-border collaboration on grid modernization, hydrogen infrastructure, and energy storage deployment can enable more efficient, sustainable data center operation across the region.
Looking ahead, the Gulf region’s path to sustainable data center growth will depend on careful planning of water resources, efficient cooling technologies, and integration with clean energy generation and storage. The emphasis on modular designs and scalable cooling solutions will be central to maintaining performance while reducing water consumption. As the region positions itself as a global AI hub, its ability to translate digital growth into sustainable prosperity will hinge on the willingness to invest in water-smart cooling, energy-efficient infrastructure, and robust grid integration, all guided by transparent policy and market mechanisms.
Net-Zero Pathways: Tackling the Power, Carbon, and Cooling Trilemma
Solving the intertwined challenges of power supply, carbon emissions, and cooling efficiency—the so-called power, carbon, and cooling trilemma—will be essential for data centers to meet growing demand in a sustainable manner. This triad of pressures requires a comprehensive strategy that spans generation, energy storage, cooling technology, and grid integration. The objective is to deliver reliable, scalable compute capacity while minimizing environmental impact and aligning with national and global decarbonization targets.
A promising route involves aero-derivative gas turbines and heavy-duty gas turbines that can operate on a mix of fuels, including hydrogen, natural gas, and associated gases. These turbines offer fast-start capabilities, high power density, and lower carbon intensity relative to traditional fossil-fired generation, particularly when supplemented with hydrogen blending or renewable fuels. Their fuel flexibility supports data centers’ reliability needs while enabling a gradual transition toward lower-carbon energy resources. Coupled with advanced energy storage solutions, such as BESS, these turbines help smooth renewable intermittency and provide backup capacity during peak demand or supply disruptions. The result is a more resilient energy fabric capable of sustaining data center operations during extreme events or grid stress.
In addition to generation and storage, grid technology plays a pivotal role in ensuring continuous power delivery to data centers. Modern grid systems enable seamless integration with renewables and storage assets, supporting the decarbonization of electricity while maintaining power quality and reliability. Grid modernization also supports demand-side flexibility, allowing data centers to participate in demand response programs that reduce or shift consumption during periods of peak demand or grid stress. This combination of cleaner generation, intelligent storage, and smart grid coordination helps data centers operate within a net-zero or near-net-zero framework, while preserving uptime and data integrity.
Another critical dimension of the trilemma is water. Cooling efficiency is deeply connected to water usage, and water scarcity can impede decarbonization efforts if not addressed. The adoption of zero-water cooling, low-water additives, recycled water where appropriate, and innovative cooling technologies can significantly reduce freshwater withdrawals. The integration of water-saving cooling methods with low-carbon energy sources is therefore essential to achieving sustainable data center operations, particularly in water-stressed regions.
In practice, implementing these strategies requires a coordinated approach among data center operators, energy providers, policymakers, and technology developers. Operators must invest in state-of-the-art cooling and energy systems, deploy highly efficient IT equipment, and adopt data-driven energy management practices. Utilities and grid operators must ensure reliable energy supply and maintain grid stability as generation mixes evolve. Policymakers can support this transition by providing incentives for energy efficiency, storage deployment, hydrogen-enabled generation, and the adoption of low-water cooling technologies. All stakeholders benefit from transparent, data-driven planning that aligns digital growth with climate and resource stewardship goals.
Practical Pathways: Implementing Sustainable Cooling, Storage, and Generation
To translate the trilemma into actionable outcomes, the industry is pursuing practical pathways that combine efficiency, innovation, and policy support. These pathways prioritize modularity, scalability, and flexibility to adapt to evolving compute requirements and energy landscapes. The role of advanced cooling technologies—such as liquid cooling and immersion cooling—cannot be overstated, as they enable higher density deployments with lower energy and water footprints. Combined with intelligent cooling management, these technologies can deliver substantial reductions in power usage effectiveness (PUE) and total cost of ownership, while also reducing freshwater withdrawals.
In parallel, the deployment of gas turbine-based generation with hydrogen-ready capabilities provides a viable backup and balancing resource for data centers, especially in markets where renewable penetration remains uneven. Aero-derivative gas turbines, with their rapid ramp capability and high efficiency, can bridge the gap between intermittent renewables and consistent, reliable power supply. When paired with BESS, these turbines offer a robust mechanism to meet peak demand while supporting grid stability and lowering carbon intensity through fuel diversification.
On the grid side, advanced grid technologies facilitate smoother integration of renewables and storage assets, enabling data centers to participate in energy markets, optimize energy procurement, and reduce exposure to price volatility. Such grid solutions also support resilience in the face of extreme weather events or cyber threats, ensuring continuous uptime for critical data center operations. The convergence of efficient cooling, flexible generation, and intelligent grid management constitutes a holistic approach to sustainable data center growth.
Regional implementations illustrate how these pathways can be adapted to local contexts. In the Middle East, for instance, zero-water cooling and highly efficient energy storage can align data center expansion with regional water constraints and climate objectives. In Europe and North America, the emphasis on reducing carbon intensity through cleaner generation mixes and rapid deployment of storage complements aggressive IT efficiency improvements. Across regions, a combined focus on water stewardship, energy efficiency, and fuel flexibility supports resilient, sustainable data center ecosystems.
Future success will depend on continued innovation, robust policy support, and cross-sector collaboration. Ongoing research into next-generation cooling fluids, more efficient servers, and higher-efficiency power electronics will help drive further energy and water savings. Policymakers can accelerate progress by establishing clear metrics for water use, encouraging the deployment of zero-water or low-water cooling technologies, and providing incentives for low-emission generation and energy storage adoption. The industry must also prioritize transparency in reporting energy and water footprints, enabling better benchmarking and continuous improvement. By weaving together these elements, data centers can scale to meet AI-driven demand while maintaining commitments to climate objectives and water resource stewardship.
Conclusion: A Sustainable, High-Impact Path Forward for Data Centers
The data center sector sits at the intersection of digital growth, energy policy, and water resource management. As AI and ML continue to propel demand for cloud services and edge computing, the energy and water implications of data centers will intensify. The current distribution of electricity use—roughly 40% for computing, 40% for cooling, and 20% for other IT-related needs—highlights cooling as a critical lever for efficiency. The water footprint of cooling, especially in the era of AI, is a defining sustainability challenge that requires a coordinated response across technology, energy, and policy domains. Innovations in cooling technologies—such as liquid cooling, immersion cooling, and rear-door heat exchangers—offer pathways to dramatically reduce water withdrawals while enabling higher compute densities. On the generation side, aero-derivative and heavy-duty gas turbines, with hydrogen-ready capabilities, provide flexible, lower-emission generation that complements renewable energy and supports grid reliability. The integration of grid technology and battery energy storage systems further strengthens resilience, enabling data centers to operate with minimal downtime and lower carbon intensity.
Regional dynamics, including the rapid expansion of data center capacity in the UAE and Saudi Arabia, exemplify how markets are actively shaping a sustainable digital future. The Middle East’s pursuit of data center leadership must be matched with rigorous water management, zero-water cooling adoption where feasible, and the deployment of low-carbon energy solutions to support a climate-friendly digital economy. The broader objective for data centers worldwide is to advance toward net-zero carbon emissions, reduce water intensity, and ensure high availability for critical services that underpin modern life and business.
In sum, the path forward for data centers is defined by an integrated strategy that aligns aggressive compute growth with substantial improvements in energy efficiency, water stewardship, and low-carbon power generation. This holistic approach—combining advanced cooling technologies, flexible generation, robust grid integration, and regionally tailored solutions—holds the promise of meeting AI-driven demand in a manner that preserves environmental integrity, supports energy security, and drives sustainable economic advancement. As the digital era advances, data centers must evolve as reliable, efficient, and water-conscious infrastructure that underpins a cleaner, more resilient energy and information landscape.