Desert storm: Can data centres slake their insatiable thirst for water?

There has been a lot of focus on the implications for power grids, but less on the toll this unbridled growth will take on a commodity that is in even shorter supply: fresh water.

The average mid-size data centre uses about 1.4 million litres of water a day for cooling servers, according to Verisk Maplecroft, and these requirements will increase as the climate gets hotter.

"Data centres have become super-users of fresh water at a time when globally, demand for fresh water is expected to outstrip supply by 40% by the end of the decade," a recent report by NatureFinance states. What's more, 45% of these centres "are located in river basins where water availability is a high risk".

One city where this issue is playing out is Phoenix, Arizona. The city's metro region is one of the fastest growing in the U.S. and a booming data centre hub, with more than 150 facilities either in operation or in the planning stages, according to Kirsten James, lead author of a new report on the impact of data centres on regional water stress.

James, who is senior water programme director for nonprofit advocacy group Ceres, said in an interview that the number of data centres in the report has jumped from 124 to 152 since May, when they collected the data. "It's not 100% that all of those will get built, but they're in the pipeline," she says. "So, it just goes to show how quickly things are moving."

Periods of prolonged drought, an over-allocation of water supplies from the Colorado River, as well as dwindling groundwater resources make Phoenix a "severely water-stressed region", according to the Ceres report. If all the data centres now planned come online, the city will experience a 32% increase in annual water stress.

So why are data centres attracted to this region? "There's a lot of different factors that go into siting these data centres," says James. Phoenix has low humidity, which reduces the risk of equipment corrosion, lower energy costs (than neighbouring California, for example), tax incentives and a favourable regulatory environment. Also, there's a lower risk for natural disasters – aside from extreme heat – and, importantly, a major fibre-optic pipeline that links Texas and Southern California.

The companies that own and operate these vast centres – so-called hyperscalers such as Microsoft, Meta and Google, and those providing "co-location" services, for instance, CyrusOne and Iron Mountain – say they are aware of the impacts of their operations, and are seeking to mitigate them.

Data centres use water to regulate humidity and to cool down servers, but increasingly companies are exploring low- or zero-water methods. Microsoft has released a new data centre design that uses zero water for cooling and states that "new projects in Phoenix, Arizona, and Mt Pleasant, Wisconsin, will pilot zero-water evaporated designs in 2026".

Edged, another computing infrastructure provider in the region, will use a waterless cooling system at its Phoenix location.

Meanwhile, Beale Infrastructure switched to a closed-loop air cooling system at its proposed Project Blue data centre near Tucson, Arizona, after an unprecedented outcry from the local community there, which opposed the huge amounts of water and electricity the facility would consume.

According to Renee LaManna, sustainability manager at CyrusOne, "all new facilities (in Arizona) will incorporate our latest sustainability standards, including advanced closed-loop cooling systems that reuse liquid continuously with no evaporation, consuming almost zero water after the initial fill, which is critical in Arizona's desert climate."

The company is "also pursuing LEED green building certification where feasible and implementing energy-efficient designs", says LaManna.

But there's a trade-off: waterless cooling systems tend to be much more energy-intensive. "Because they require more energy to run, air-cooling systems are generally less efficient at cooling data centres than water-cooling systems, resulting in higher energy use," states the Ceres report.

And that brings us to the elephant in the room: indirect water use, notably what's used to generate the electricity that powers the facilities. Though less discussed, indirect use is by far the largest source of water withdrawals connected to data centres, accounting for up to 75% of total consumption, according to the report.

The total amount can vary depending on the type of electricity generation used to power the facility. For example, hydroelectric and coal-fired plants generally have much higher water intensities compared with natural gas power plants, while solar- and wind-powered plants have small water footprints.

As a report by the Lawrence Berkeley National Laboratory points out, decarbonisation of the power sector "will inevitably impact the future indirect water consumption and GHG emissions associated with data center electricity consumption".

So, are data centre companies addressing their indirect water impacts?

"When it comes to indirect water consumption, that's information an energy provider would need to give to a data centre provider, and that's not necessarily happening," says Konstantina Koulouri, one of the authors of the NatureFinance report. She points out that electricity companies don't have any incentive to share that information.

In general terms, there is a dearth of disclosures around both direct and indirect water use by data centres, she says, something that NatureFinance is currently working to address.

The research lab is a knowledge partner of the Taskforce on Nature-related Financial Disclosures, and is developing sector-specific guidance for the technology sector around disclosure metrics.

Data centre and semi-conductor companies will be included in this guidance, a draft version of which is due to be published in January. "Part of the guidance is proposing metrics to the industry to report on, that we think are material and important for someone in the financial industry to be aware of," explains Koulouri.

Ceres points out that to get a full picture of data centres' water risks, investors also need to understand the substantial amount of water used to manufacture the millions of semiconductors that power them. The average semiconductor factory today uses as much water as 33,000 U.S. homes.

Back in Arizona, some municipalities, responsible for granting planning permission for construction of data centres, appear to be playing catch-up with their own policies. Data centres are not even discussed in the city of Phoenix's 2021 water resource plan, according to the Ceres report.

The City of Phoenix declined an interview for this article but pointed to policies that have been adopted by the council in recent years. One is the City's large water user ordinance, adopted in March 2024, which mandates that projects expected to use more than 250,000 gallons per day must submit a water conservation plan, and those over 500,000 gallons per day must meet part of their demand with recycled or conserved water.

The smaller Arizona city of Chandler, meanwhile, implemented a policy back in 2015 that limits data centres to 115 gallons per day, per thousand square feet of space. Any water needs beyond that must be met through an outside source.

But is it too little, too late? "It is a bit of a scramble," says Lindsay Rogers, policy manager for municipal conservation for non-profit research organisation Western Resource Advocates. "Folks are trying to understand really quickly how to best address these new proposals. But I don't think it's too late … Depending on where these big developments are in the review process, there can still be some tools and opportunities for cities and counties to influence their water use," she says.

For Rogers, reduced indirect water usage is an opportunity for the hyperscalers to invest in renewables and on-site power generation: "We would like to see a lot of industry leadership in this area. These are some of the largest, most well-resourced companies in the world, and they have the technical prowess to figure out these solutions."