Data centres and infrastructure: an expensive pairing

If you build it, they will compute.

But at what cost?

Governments around the world — India being the latest — have been falling over themselves trying to lure power-hungry, water-thirsty data centre operations to build in their backyards.

In a world where artificial intelligence is the current biggest and brightest thing, the centres offer good initial construction jobs and, post-construction, smaller levels of operational positions, and different administrations have offered everything from financial incentives to tax breaks.

But data centres may not be sustainable at current levels, let alone be able to handle the centres’ planned growth in computing needs for AI — but that doesn’t seem to be a topic many are considering.

In the United States, as other customers watch the growing demand for electricity by data centres, one concern is the cost of electricity. The demand for power from the centres has grown from around three per cent of the total U.S. power demand in 2022 to roughly seven per cent now, and the electrical infrastructure can’t keep up with the rapid growth.

The growing demand means the need for new power sources and that means a corresponding increase in power costs — new infrastructure and generation capacity has to be built. Traditionally, those new costs fall on all customers.

Data centres built in Iowa have increased electricity prices for consumers substantially, and that hasn’t been popular. But it’s just the beginning.

Meanwhile, the consulting firm McKinsey estimates that the demand for data centre capacity will increase by as much as 27 per cent every year, tripling in size by 2030.

Data centre builders are trying to assuage concerns about power by promising to generate their own power or by paying the expansion costs for the electrical grid — but the methods they want to use for power are also alarming. An Amazon data centre in Columbus, Ohio, wants to use natural gas for its main power source, but also plans on having more than 150 backup diesel generation units.

And then, there’s water. Google’s data centres used over 20 billion litres of water in 2023. Their largest data centre, in Council Bluffs, Iowa, consumed over 3 billion litres of water in 2024.

Data centres use the water as coolant for their computer systems — systems that are heating up with all the electricity they’re using — meaning the vast majority of the water heads off into the atmosphere as water vapour, which sounds almost environmentally friendly, except the water is being withdrawn from traditional sources like surface or groundwater, and is then, well, gone with the wind.

The rest of the water — the part that doesn’t leave as vapour — is waste contaminated with highly concentrated minerals which data centre owners often want to dispose of into municipal sewer systems that may not have been designed to handle either the type of contaminants or the new volume of material.

Enticing data centres to town may sound like a leap forwards for cash-strapped towns or provinces, but the costs are considerable and long-term. New electrical generation is not cheap, and neither is new water and sewer infrastructure, nor new potable water sources for cities now sharing their water with unplanned-for high-volume users.

There’s also always the problem that, not only will data centres come for any benefits you offer them, they may also leave when the fiscal equation no longer makes sense for them to stay.

And when they do, they leave their sunk costs hanging on behind them for everyone else in town.