January 09, 2024

Environmental, Natural Resources, & Energy Law Blog

Powering Data Centers During a Climate Crisis: Meeting Future Energy Demands within a Renewable Framework - Matt Gallagher


Powering Data Centers During a Climate Crisis: Meeting Future Energy Demands within a Renewable Framework

Emerging Topics – Fall 2023

Matt Gallagher


  1. Introduction

It is hard to imagine life without it. From morning until night, most of us spend significant portions of our days interacting, in some way, with the internet. The morning news appears on our hand-held devices before our alarms sound off. Our favorite podcasts interact seamlessly with our navigation apps to alert us of construction slowdowns on our way to work. And whether we work in an office or an auto shop, our systems require access to web-based platforms and information that can only be accessed via the internet. While it often seems like magic, the internet does not actually exist in the clouds. Rather, it is supported by a global network of computers and servers collocated in real, brick and mortar facilities. But what are the environmental impacts of these facilities?

This article provides an overview of the different ways the internet—through data centers—interacts with the environment. The article then identifies tools Federal and State governments could utilize to shape the growth of the digital infrastructure with a focus on minimizing the energy impact data centers will have in the future. It is nearly impossible to imagine life without data centers, but much can be done to lessen their environmental footprints while ensuring the data needs of the future are met.

  1. Data Centers in the United States

Data centers are where the internet and cloud-based computing live.[1] They are physical facilities that house networks of high-capacity computers and data storage resources.[2] These computers and servers store web applications and extraordinary amounts of data, which are then connected to the world wide web.[3],[4] Although data centers have roots dating to the 1940s, rapid growth in the industry since the late 1990s has transformed the global economy and increased the demand for data centers.[5]

Globally, nearly 8,000 data centers support our ever-increasing need to upload and download data. The United States houses the majority of data centers, with estimates ranging from 2,700 in 2022 to more than 5,375 currently operating within U.S. borders.[6],[7] On the East Coast, Virginia is turning into a data center hub while Silicon Valley on the West Coast—not surprisingly—serves as another.[8] The network of data centers extends far beyond these regional hubs, and centers are often located near major metropolitan areas or in areas where energy and environmental resources (i.e., land, water, and electricity) can be sourced inexpensively.[9]

While most minds jump to social media and personal internet use when considering how data centers touch their lives, data centers are a crucial component of the entire digital economy.[10] Federal agencies rely on data centers to communicate with the public and regulated industries.[11] The U.S. healthcare industry relies on cloud computing to store medical records and protected health information.[12] And the American education system is increasingly moving from paper books and library stacks to tablets and servers.[13] By any realistic prediction, our reliance on the internet and the facilities that make it possible will only grow in the coming decades.

III. Environmental Requirements and Impacts

Although data centers do not require smokestacks, their environmental impacts can be disproportionately high.[14] Significant amounts of electricity are needed to power data center servers and some type of cooling mechanism is required to keep those servers functioning.[15] Striking the balance between both requirements has led industry to innovate.[16] However, failing to account for the energy demands of new data centers can transform what seems to be a virtual problem into a real-world environmental impact.[17] Additionally, the ever-increasing need for data and processing power will, unless changes are made, increase the environmental impacts of these data centers.

For example, increased reliance on water for cooling data centers has raised concerns as many companies choose to locate data centers in places where renewable energy—mainly wind and solar—are plentiful.[18] Unfortunately, many of these areas, especially west of the Mississippi, are also areas where water is scarce, creating environmental and human-health concerns.[19],[20] Further, environmental concerns surrounding electronic waste (or e-waste) and recycling are increasingly complicating waste management practices.[21] But most notably, especially in light of the economics involved in supplying reliable electricity to the U.S. grid, data centers’ increasing demand for energy must be addressed.

Data centers require significant amounts of energy to operate. According to the U.S. Department of Energy, data centers consume between 10 and 50 times the amount of energy per floor area than other commercial buildings, making them one of the most energy-intensive building types in the United States.[22] In 2018, data centers consumed approximately 2% of the global share of electricity, with some predicting that number to reach 8% by 2030.[23] However, recent social changes and technological advances make this figure difficult to predict.[24] First, the work-from-home trend that sprung during the COVID-19 pandemic has shifted some web-based computing needs away from urban centers to suburban and rural areas.[25] Second, and perhaps most dramatic in effect, advances in Artificial Intelligence (AI) and virtual reality environments (i.e., the Metaverse) are expected to exponentially increase the demand placed on data centers.[26] Very recently, the Biden-Harris Administration announced further federal support for fostering the AI industry, signaling the AI industry’s rapid growth in the United States.[27] However, while the Executive Order discusses responsible AI growth from myriad perspectives, notably absent is a discussion of how the environmental and energy impacts of AI should be addressed.

This expected increase poses real-world energy challenges. For more than a decade, the data industry has focused on increasing efficiencies in building and hardware design.[28] While efficiency will continue to be an important part of the solution, tweaking current technologies can only affect a data center’s impact so much. Industry needs innovative approaches to meeting its energy demand. Several companies that provide data centers and cloud computing services recognized this early on. Microsoft’s cloud services business unit Azure has committed to operating from 100% renewable energy by 2025.[29] Amazon Web Services has made similar pronouncements.[30] Finally, Google Cloud became carbon neutral in 2007 and has committed to operating 24/7 carbon-free data centers globally by 2030.[31]

Due in large part to socially responsible energy sourcing spurred by the Environment, Social, Governance (ESG) movement, as well as individual Power Purchase Agreements, the major players in the data industry are pushing the grid to be more renewable.[32],[33] Data management companies across the United States are seeking ways to fine-tune their energy consumption and develop innovative cooling and power management options.[34] However, it is unclear if the projected demand for cloud computing, especially considering the increased use of AI, can be supported by efficiency efforts alone.[35] In fact, some predict future investments in efficiency will become more expensive if we continue to focus on the same technologies, resulting in diminishing returns on those efforts.[36]

  1. Coupling renewable energy and data centers.

Many companies and environmental advocates are looking for synergy between renewable energy projects and data centers as a way of reducing the data industry’s carbon footprint.[37],[38] Even where onsite renewables are not capable of meeting the entire demand, data centers can still reduce their carbon footprint and increase the predictability of energy costs by incorporating renewable energy into the facility’s design or energy portfolio.[39] Certain renewable energy sources may also work in tandem, such as hydrogen fuel cell battery backups for small scale wind or solar farms.[40]

  1. The Nuclear Option.

In October 2023, representatives of two U.S. data center projects located in Pennsylvania and Ohio announced plans to deploy 24 small modular nuclear reactors to supply energy to their high-power data centers.[41] These data centers will support blockchain mining and AI-training that typically require much more computing power than traditional web-based services and applications.[42] The company’s small modular reactor (SMR) designs received approval from the Nuclear Regulatory Commission in January 2023. Some experts suggest that these small reactors are a way to bring safe, clean, and affordable nuclear power one step closer to assisting the effort to decarbonize the U.S. energy system.[43] While using nuclear power for data centers is so far limited to these two centers, the increased focus on AI suggests these high-powered data centers may become the norm and that it will be important to take a close look at this energy source going forward.

  1. Applicable Law and Regulation in the United States

Currently, there is no unified federal scheme for regulating data centers. The siting of data centers is generally a matter of state land use law and federal and state environmental laws that apply to the individual location. Considering their unique characteristics, high intensity energy use, and the interstate movement of data from the centers, the Federal Government may want to start regulating data centers. For example, some experts have argued that the Federal Energy Regulatory Commission (FERC) could leverage its authority under the Federal Power Act to regulate data centers. But neither FERC nor the Biden-Harris Administration have shown signs of exploring this potential stick method of regulation.[44]

Instead, recent federal legislation that offers significant carrots to the data center industry may offer a better pathway. Specifically, U.S. data centers should take advantage of provisions in the Inflation Reduction Act (IRA) that provide investment tax credits (ITCs) and production tax credits (PTCs) for renewable energy generation and storage.[45] Closing a gap between energy storage facilities and energy generation facilities, the IRA opened an available 30% ITC for facilities to build battery storage without the need for the associated generation, creating a direct method for data centers to avail themselves of the ITC benefit. Additionally, taking advantage of this ITC directly supports most data centers’ requirements to have an uninterruptible power supply (UPS) to ensure near constant operation.[46]

Data centers can also capitalize on the PTCs applicable to sellers of renewable energy indirectly through private contracts. The PTCs, found in Section 45 of the IRA, are credits for qualifying renewable energy producers that increase profit margins for new solar, wind, and hydropower facilities by reducing their investment costs.[47] Data centers could arrange to purchase certain amounts of renewable energy subject to this provision and share in the discounts afforded to the power producers. These investments would increase renewable inputs to the grid while improving the individual data center’s carbon footprint.

  1. State Renewable Portfolio Standards and Permitting Processes

States can also help steer the data center industry in a more sustainable direction without federal intervention. First, States can consider the impacts of data centers when developing Renewable Portfolio Standards. Eighteen states already have adopted renewable portfolio or clean energy goals, with several committing to sourcing 100% of their energy from renewable or clean energy sources before midcentury.[48] These goals, if realized, will automatically push data center energy inputs to the mix available on the grid.

A second way states can encourage data centers to minimize energy demand is to implement streamlined permitting processes for facilities that meet energy efficiency or sourcing goals. Some states have established processes for renewable energy projects and the underlying rationale could be expanded to “greener” data centers. For example, New York State’s Accelerated Renewable Energy Growth and Community Benefit Act, known as 94-C, provides an avenue for renewable energy facilities with a nameplate generating capacity of twenty-five kilowatts or more to enter a 12-month streamlined permitting process.[49],[50] A major priority of 94-C is clear communication between the State and local communities about the proposed projects. Additionally, the statute places the burden on the State to act on permitting applications within specified timelines, or they will be deemed approved.[51]

States should consider adopting similar permitting processes for data centers that prioritize clean energy solutions. For example, a state could prioritize those data centers that already have commitments from renewable energy producers to supply their power, or those data centers that have plans to invest in onsite renewable generation. These processes would provide predictability for the permit applicants and reduce administrative permitting costs on the front end. They also have the potential to encourage developers to consider areas that may have expensive environmental challenges during development, such as siting in a brownfield, by lowering the permitting costs.

  1. Conclusion

As the bedrock component of our digital world, data centers will only become more prominent in the future. But along with this prominence comes the risk of increased environmental impact. Data centers require extraordinary amounts of electricity and water to function. These demands will likely become more significant as the use of AI is adopted by more industrial and business sectors. While industry is proactively setting conditions to ensure future data needs are supported by the right infrastructure, assistance from the Federal and State governments could incentivize these efforts in a more deliberate manner. First, using federal legislation like the Inflation Reduction Act as a starting point, political leaders must continue to incentivize renewable energy development in support of the national grid. Second, state governments should incentivize more energy and resource efficient data centers through innovative permitting processes. Ensuring the proliferation of the digital economy is not at the expense of the environment should be of national concern, even if the plan is to provide the data industry experts the right incentives to continue to move in a sustainable direction.


[1] Listen to Google’s Podcast “Where the Internet Lives” to hear more about human stories as they relate to data center operations and investments, https://www.google.com/about/datacenters/podcast/ (last visited Dec. 9, 2023).

[2] https://www.cisco.com/c/en/us/solutions/data-center-virtualization/what-is-a-data-center.html.

[3] What is a Data Center?, CISCO, https://www.cisco.com/c/en/us/solutions/data-center-virtualization/what-is-a-data-center.html (last visited Dec. 10, 2023).

[4] The data industry has many ways of categorizing data centers. Generally, there are 5 categories that accommodate different business and user needs. Colocation data centers allow customers to rent hardware at a facility that services many clients. Enterprise data centers are owned by the companies using the hardware and services. Cloud data centers provide cloud data services to third-party customers. Edge data centers are smaller than the previously mentioned facilities and are located closer to the end-users, reducing latency and lag in providing service. Finally, micro data centers are the smallest and most deployable data centers and can be installed using minimal space. See Nlyte Software’s explanation for more information, https://www.nlyte.com/faqs/what-is-a-data-center/ (last visited Dec. 9, 2023).

[5] Nathan Oakley, The Evolution of Data Centers: Tracing the centralization of data infrastructure back to the source, ArcGIS Online, (Feb. 21, 2023), https://storymaps.arcgis.com/stories/a21d93abf29d4b69-90370cfcba143cd9 (explaining in part that data centers were primarily considered defense and military intelligence tools in the 1940s).

[6] Miranda Spivack, More Data in the Cloud Means More Centers on the Ground to Move It, N.Y. TIMES (Jun. 27, 2023), https://www.nytimes.com/2023/06/27/business/data-centers-internet-infrastructure-development.html.

[7] Statistics, Number of data centers worldwide in 2023, by country, STATISTA, https://www.statista.com/statistics/1228433/data-centers-worldwide-by-country/ (last visited Dec. 9, 2023).

[8] Spivack, supra note 6.

[9] Id.

[10] Bernadette Johnson, How Data Centers Work, HowStuffWorks, https://computer.howstuffworks.com/data-centers.htm (last visited Dec. 9, 2023).

[11] Id.

[12] Emily Newton, Why Do Hospitals Need a Data Center Strategy to Strive in the Digital Era?, HEALTHITANSWERS, (Aug. 15, 2023), https://www.healthitanswers.net/why-do-hospitals-need-a-data-center-strategy-to-thrive-in-the-digital-era/.

[13] Since 2010, there has been significant momentum to move learning to a digital platform. See U.S. DEP’T OF EDUC., OFFICE OF EDUC. TECH., Transforming American Education: Learning Powered by Technology Report (2010), https://www.ed.gov/sites/default/files/netp2010.pdf. (last visited Dec. 9, 2023). This push toward digital learning platforms was greatly accelerated during the COVID-19 pandemic where online learning platforms became the norm to help stop the spread of the disease. See Sean Gallagher & Jason Palmer, The Pandemic Pushed Universities Online. The Change Was Long Overdue, HARVARD BUS. REV. (Sep. 29, 2020), https://hbr.org/2020/09/the-pandemic-pushed-universities-online-the-change-was-long-overdue.

[14] Jeffrey C. Thomson, Tragedy of the Energy Commons: How Government Regulation Can Help Mitigate the Environmental and Public Health Consequences of Cryptocurrency Mining, 11 SEATTLE J. of TECH., ENV. & INNOVATION L. 77 (2020), https://digitalcommons.law.seattleu.edu/cgi/viewcontentcgi?article=1013&context=sjteil (last visited Dec. 9, 2023).

[15] Jacob Roundy, Assess the environmental impact of data centers, TECHTARGET (Jul. 12, 2023), https://www.techtarget.com/searchdatacenter/feature/Assess-the-environmental-impact-of-data-centers.

[16] John Roach, Microsoft finds underwater datacenters are reliable, practical and use energy sustainably, MICROSOFT (Sep. 14, 2020), https://news.microsoft.com/source/features/sustainability/project-natick-underwater-datacenter/.

[17] Thompson, supra note 15 (describing incident where wildfire was sparked by overheated data center being used for blockchain mining).

[18] Yancy Lind, Prineville, data centers and water: There is a cost, THE BEND BULL. (Feb. 11, 2023), https://www.bendbulletin.com/opinion/guest-column-prineville-data-centers-and-water-there-is-a-cost/article_cc232302-6f1f-11ec-91a2-93fa7c891b57.html.

[19] Shannon Osaka, A new front in the water wars: Your internet use, WASH. POST (Apr. 25, 2023), https://www.washingtonpost.com/climate-environment/2023/04/25/data-centers-drought-water-use/.

[20] Michael Copley, Data centers, backbone of the digital economy, face water scarcity and climate risk, N.P.R. (Aug. 30, 2022), https://www.npr.org/2022/08/30/1119938708/data-centers-backbone-of-the-digital-economy-face-water-scarcity-and-climate-ris.

[21] Renee Cho, What Can We Do About the Growing E-waste Problem, State of the Planet, COL. CLIMATE SCH. (Aug. 27, 2018), https://news.climate.columbia.edu/2018/08/27/growing-e-waste-problem/ (last visited Dec. 9, 2023).

[22] DEP’T OF ENERGY, Data Centers and Servers, https://www.energy.gov/eere/buildings/data-centers-and-servers (last visited Dec. 9, 2023).

[23] Robert Walton, The rise of cloud computing is having an impact on data center efficiency – and it’s not great, UTILITYDIVE (Dec. 17, 2019), https://www.utilitydive.com/news/the-rise-of-cloud-computing-is-having-an-impact-on-data-center-efficiency/569183/.

[24] As mentioned above, recent trends are shifting this requirement to alternate cooling sources (i.e. water), creating different environmental considerations.

[25] Meaghan Hornsby, 7 Ways COVID-19 has Impacted the Future of Telecommunications, TELNET WW (Nov. 4, 2021), https://www.telnetww.com/blog/extras/covid-19-impact-on-telecommunication-industry/.

[26] Patrick K. Lin, The Cost of Training a Machine: Lighting the Way For a Climate-Aware Policy Framework That Addresses Artificial Intelligence’s Carbon Footprint Problem, 34 FORDHAM ENV. L. REV. 1 (2023).

[27] Exec. Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (Oct. 30, 2023), https://www.whitehouse.gov/briefing-room/presidential-actions/2023/10/30/executive-order-on-the-safe-secure-and-trustworthy-development-and-use-of-artificial-intelligence/.

[28] DEP’T OF ENERGY, Best Practices Guide for Energy-Efficient Data Center Design (Mar. 2011), https://www.energy.gov/femp/articles/best-practices-guide-energy-efficient-data-center-design (last visited Dec. 9, 2023).

[29] Azure sustainability, MICROSOFT, https://azure.microsoft.com/en-us/explore/global-infrastructure/sustainability/ (last visited Dec. 9, 2023).

[30] Sustainability – The Cloud, AMAZON, https://sustainability.aboutamazon.com/products-services/the-cloud?energyType=true#renewable-energy (last visited Dec. 9, 2023).

[31] Raf Chomsky, Top 10 Sustainable Data Centre Companies, SUSTAINABLE REVIEW (Aug. 20, 2023), https://sustainablereview.com/top-10-sustainable-data-centre-companies/.

[32] Ciaran Flanagan, How Data Centers Are Driving the Renewable Energy Transition, FORBES (Mar. 13, 2023), https://www.forbes.com/sites/siemens-smart-infrastructure/2023/03/13/how-data-centers-are-driving-the-renewable-energy-transition/?sh=1ff6f9034214.

[33] There are also incentives in the IRA that will bolster these efforts. See generally Inflation Reduction Act of 2022, Pub. L. No. 117-169. See also Lenny Simon, US operators scour Inflation Reduction Act for incentives, UPTIME INSTITUTE (Mar. 10, 2023), https://journal.uptimeinstitute.com/us-operators-scour-inflation-reduction-act-for-incentives/.

[34] Chomsky, supra note 31.

[35] Walton, supra note 23.

[36] Id.

[37] Flanagan, supra note 32.

[38] Daniel Neiditch, Big Data and Solar Energy Are a Match Made in Heaven, ENTREPRENEUR (Nov. 22, 2019), https://www.entrepreneur.com/business-news/big-data-and-solar-energy-are-a-match-made-in-heaven/342714 (last visited Dec. 9, 2023).

[39] Christopher Tozzi, Why You Can’t Power Your Data Center Only With Renewables – But Should Try Anyway, DATACENTER KNOWLEDGE (Apr. 6, 2023), https://www.datacenterknowledge.com/power-and-cooling/why-you-cant-power-your-data-center-only-renewables-should-try-anyway.

[40] John Roach, Hydrogen fuel cells could provide emission free backup power at datacenters, Microsoft says, MICROSOFT (Jul. 28, 2023), https://news.microsoft.com/source/features/sustainability/hydrogen-fuel-cells-could-provide-emission-free-backup-power-at-datacenters-microsoft-says/.

[41] Dan Rabb, Small Nuclear Reactors Planned To Power 2 U.S. Data Centers, BISNOW (Oct. 9, 2023), https://www.bisnow.com/national/news/data-center/small-nuclear-reactors-planned-for-data-centers-in-pennsylvania-and-ohio-121021.

[42] Id.

[43] U.S. DEP’T OF ENERGY, OFF. OF NUCLEAR ENERGY, Advanced Small Modular Reactors (SMRs), https://www.energy.gov/ne/advanced-small-modular-reactors-smrs (last visited Dec. 9, 2023). See also Casey Crownhart, We were promised smaller nuclear reactors. Where are they?, TECH. REV. (Feb. 8, 2023), https://www.technologyreview.com/2023/02/08/1067992/smaller-nuclear-reactors/ (explaining recent approval of SMR design that could make nuclear power cheaper and safer to operate).

[44] Joseph R. Briscar, Data Transmission and Energy Efficient Internet Data Centers, 67 AM. U. L. REV. 233, (2017).

[45] Inflation Reduction Act of 2022, Pub. L. No. 117-169, §45. See also Scott Childers, The IRA’s Energy Storage Energy Credits Take Data Centers Into the Future, DATACENTER KNOWLEDGE (Jan. 27, 2023), https://www.datacenterknowledge.com/industry-perspectives/ira-s-energy-storage-credits-take-data-centers-future.

[46] Inflation Reduction Act of 2022 (P.L. 117-169). See also Neil Ford, U.S. storage tax credit opens up new markets for developers, REUTERS (Oct. 27, 2022), https://www.reuters.com/business/energy/us-storage-tax-credit-opens-up-new-markets-developers-2022-10-27/.

[47] Inflation Reduction Act of 2022, Pub. L. No. 117-169, §45. See also Lenny Simon, US operators scour Inflation Reduction Act for incentives, UPTIME INSTITUTE (Mar. 10, 2023), https://journal.uptimeinstitute.com/us-operators-scour-inflation-reduction-act-for-incentives/.

[48] State Renewable Portfolio Standards and Goals, NAT’L CONF. OF STATE LEGISLATURES (Aug. 13, 2021) https://www.ncsl.org/energy/state-renewable-portfolio-standards-and-goals (last visited Dec. 10. 2023).


[50] POWER COMMUNICATIONS, https://www.powerny.com/pdfs/PowerComSynopsis_94-C.pdf (last visited Dec. 10, 2023).

[51] Id.