Utility Planning for Data Centers

Data centers are a booming industry right now. With the rapid growth of artificial intelligence (AI) and our ever-expanding hunger for digital services personally and professionally, the growth of these facilities is all but inevitable. Data centers often house thousands of servers and other computing equipment to produce these services, all of which require electricity and cooling, consuming energy and water resources in the process. In some ways, the challenges associated with this growth parallel those of other industrial sectors in the past; in other ways they present new and unique challenges.

Various federal policies have supported the continued development of AI, including executive orders (e.g., 13960 and 14179), funding to reinforce AI innovation, and America's AI Action Plan. More than 1,200 data centers have been built or approved for construction—and this number is expected to increase considerably. As data centers are not evenly distributed geographically, some areas will see many and others will see few to none, making their effects variable.

Economic benefits related to data centers are many, and the digital services they provide are important. The facilities can generate significant tax revenue locally without the need for many of the public services a residential or commercial district requires. With that said, they can also have impacts on the water sector if not planned for appropriately.

The 2024 US Data Center Energy Usage Report estimated that direct water consumption attributed to cooling has grown from 5.6 billion gallons (2014) to 17 billion gallons (2023) and is projected to reach 40–73 billion gallons by 2028. Given that power generation itself also consumes water, data centers consume additional water indirectly through their electricity use. The report estimated the indirect water footprint of data centers in 2023 at 211 billion gallons. A high degree of uncertainty remains regarding the effects of data centers on total water and electric demand, given that the extent of the growth and the needs of future data centers is not yet known.

Water systems may be faced with challenges in achieving sufficient infrastructure capacity to address data centers’ needs. As data centers are frequently built where land can be affordably acquired, they may be located well outside the core of a water utility's transmission system, creating distribution challenges. Utilities should account for any resulting changes to their water source(s) and to treatment, transmission and distribution infrastructure, and wastewater collection and treatment. This will ensure sustainable, uninterrupted, and affordable water supply in the long term. Conversely, utilities should be cautious in their planning to ensure they do not overbuild and end up with stranded assets if high demand does not materialize. As data centers are part of a quickly evolving technology sector, the technology used could change and considerably affect the entity's needs. The total demand (average and peak) will vary largely depending on the cooling technology used, amount of equipment included, and efficiency of these systems.

Over time, water utilities have adapted (such as supplying to factories or accounting for oil and gas development in a source water area) to various industrial entities affecting the water sector. Many of these tools, such as careful evaluation of capital needs to serve new customers and a fair distribution of costs for any needed upgrades, will apply to data centers as they would to other industrial customers. Utilities should be prepared to articulate known and potential effects on their sources, treatment, distribution, waste collection, reuse systems, and anything else, so that these challenges can be analyzed, accounted for, and addressed head on. It is especially important to document the costs associated with any needed upgrades to agree on who will address them early on. Engaging early in the process keeps options open for solutions that can be built into siting and design before those decisions are fully locked in. As always, utilities should provide transparent information to customers regarding existing or proposed data center development and potential impacts on water system operations.

For a more detailed overview, see AWWA's white paper on data centers.