Data Centers and the Environment

The Rapid Growth of Data Centers

Data centers are under increasing pressure to reduce their carbon footprint due to concerns over climate change. While data centers have been part of our economy for decades, the landscape changed significantly starting in the 1990s with the evolution of microprocessors and client/server computer models. Different types of data centers can power core economic development needs such as cloud computing and emerging technologies like artificial intelligence—and they can also power less vital services such as Bitcoin/Cryptocurrency mining, which can use massive amounts of energy (despite less energy-hungry alternatives) and creates few jobs. The rapid expansion of these digital technologies come with a significant environmental cost due to the immense energy consumption required to operate 24/7.

The challenge with the rapid proliferation of data centers is the impact on energy demands in.a very short period of time. The most significant concern with this imbalance is the potential to create instability in the electricity grid.

According to the IEA, U.S. data center electricity consumption is expected to grow at a rapid pace in the coming years, increasing from around 200 TWh in 2022 (~4% of US electricity demand), to almost 260 TWh in 2026 to account for 6% of total electricity demand, with 33% of global data centers located in the U.S.

Data centers will account for up to 12 percent of all U.S. electricity consumption by 2028, or 132 gigawatts annually, triple what they consumed in 2023, according to a December 2024 analysis by Lawrence Berkeley National Laboratory. That’s roughly equivalent to the annual power demand of Norway or Sweden.

However, certain “Hyper Scale” data centers are also driving the demand for clean power that can operate 24/7 due to their climate commitments. For example, Google has announced its plan to procure clean energy around the clock by 2030 on every grid where it operates. And Microsoft has committed to becoming carbon-negative by 2030, with green power for all its data centers.

In Kentucky, Power Engineering Magazine reported in October 2024 that Louisville Gas & Electric (LG&E)/Kentucky Utilities (KU) are forecasting in their Integrated Resource Plan filed with the Kentucky Public Service Commission the need for additional generation due to the expected influx of data centers and economic development across the utilities’ service territories. Despite the amount of energy efficiency, customer-installed solar, and other energy-saving activities that are forecasted to reduce load by over 3.5% by 2032, LG&E and KU expect economic development to increase system load by 30% to 45% by 2032 compared to 2024.

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Credit: Rocky Mountain Institute, “Powering the Data-Center Boom, ” November 2024

Legislative History

House Bill 8 (2024 General Assembly) gave sales tax breaks on data center equipment if a data center owner or operator makes a capital investment of at least $450 million or a “project organizer” invests at least $150 million. Those tax breaks would need approval from the state’s incentives board, the Kentucky Economic Development Finance Authority.

[See additional legislative history on Artificial Intelligence and Cryptocurrency.]

Media:

Driving Surge in Demand for Power, Data Centers Eye Kentucky, Kentucky Lantern, July 2024.

Kentucky Utilities Brace for Data Center Impact, Power Magazine, October 2024

Kentucky Utilities Predict Load Growth Due to Data Centers, Economic Development, Daily Energy Insider, Oct. 2024

Resources and Reports:

Environmental Issues

Northern Virginia is an example of the rapid proliferation of these facilities. The region is home to data centers that process nearly 70 percent of global digital traffic, leading officials to call for additional electricity infrastructure at ratepayers’ cost. The above webinar examines the environmental impacts and policy implications of data center growth

Data Centers can impact the environment in the following areas:

  • Electronic waste: The equipment that data centers house – such as servers, network switches, and power supply units – can contain chemicals like lead and mercury. This means the equipment has the potential to become e-waste when it's no longer in use.

  • Water consumption: Data centers use significant amounts of water, primarily for cooling their servers, with a single large facility potentially consuming millions of gallons daily, which can put pressure on local water supplies. Rhis water usage is largely due to the immense heat generated by computing operations, requiring intensive cooling systems to maintain optimal performance.

  • Reliance on critical minerals and rare elements

  • Noise pollution generated by multiple cooling fans

  • Electricity use…particularly since these operations can be concentrated in the same region, resulting in a potential overload of power infrastructure in a short period of time

Regulatory Issues

Without strong regulations, the growth of data centers can quickly overwhelm a regional power service provider.

  • Energy Efficiency: These kinds of operations are not only high energy consumers—they also can lack adequate standards to encourage energy efficiency/reduction of energy waste.

  • Integration with renewables: Data centers typically requires a steady power supply with 24/7 operation. This creates challenges for the use of renewables, unless those renewables are paired with battery storage to address daily and seasonal power load changes.

Types of Data Centers

Data centers vary depending on the type of use that the end-user requires. These are some of the more typical “types” of data centers:

“Enterprise” Data Centers: Typically a private data center facility that supports a single organization. These types of data centers are best suited for companies that have unique network needs—or companies that do enough business to take advantage of economies of scale. Enterprise data centers are custom built to be compatible with the organization’s distinctive enterprise apps and processes. These are typically located on-site or off-premises at a site chosen for the connectivity, power and security it offers.

“Colocation” Data Centers: Sites that offer space to businesses that want to host their computing hardware and servers offsite. These facilities provide the proper data center components (power, cooling, security and networking equipment).

“Hyperscale” Data Centers: Facilities that are designed to support very large-scale IT infrastructure. Companies such as Amazon, Microsoft and Google account for more thank half of all hyperscale data centers.

“Container” (or Modular) Data Centers: Ready-made units, typically shipping-container sized that simply require a power source and internet access. These units typically contain servers, storage, networking gear and cooling systems. These kinds of modular units are popular with cryptocurrency miners due to their portability and convenience.