Hyperscale demand pushes limits and demands innovation.
The drain that data centers put on the power grid has gone from technical preoccupation to global cause. AI data centers and other hyperscale complexes drawing hundreds of billions of dollars in investment continue to also draw so many electrons that many states and major utilities have drawn up policies forcing end users to pay for or generate their own power, including the pending deployment of small modular nuclear plants.
Lost in power’s shadow can be the sector’s equally unprecedented demand on water resources — resources that other sectors need too. But it’s coming to the fore: A hyperscale complex looking at 1,300 acres in Polk County, Florida, for example, got city council approval in tiny Fort Meade but was met with a letter in opposition from Florida Commerce Secretary Alex Kelly, who noted among other things that the proposed project’s projected use of 50,000 gallons of water per day “appears woefully underestimated” for a 4.4-million-sq.-ft. data center.
As for those other sectors’ water needs, the Michigan Strategic Fund recently approved a $17 million infrastructure grant to the City of Coopersville in western Michigan that will allow the addition of a 20-inch transmission main and additional water storage tank that will accommodate the provision of 1.1 million additional gallons of water per day. The grant serves as the initial funding to begin a three-phase, $47 million water infrastructure upgrade plan, with additional water infrastructure costs to be covered by major water users and community service agreements. The upgrade will allow fairlife to create more than 150 new jobs and secure more than 400 existing positions at the company’s operation while also supporting the region’s overall food and agribusiness cluster.
“Investments like this strengthen the region well beyond a single project,” said Jennifer Owens, president of Lakeshore Advantage, noting that the combination of private investment and public infrastructure improvements “also builds momentum for the Lakeshore’s growing agribusiness and food production industry cluster, where reliable infrastructure and a strong supply chain are essential.”
What type of strain are data centers placing on such essential infrastructure? The 2024 United States Data Center Energy Usage Report published in December 2024 by researchers at Lawrence Berkeley National Laboratory put it in stark terms: “In 2014, data centers consumed 21.2 billion liters of water, with 64% in internal data centers. By 2023, hyperscale and colocation account for 84% of the 66-billion-liter total, while internal data centers fell to just 12%, driven by water efficiency improvements. These trends are expected to continue through 2028, with internal data centers falling to just 2% of the total. Hyperscale data centers in 2028 are expected to consume between 60 and 124 billion liters.”
In March, University of California Riverside engineering Professor Shaolei Ren published “Small Bottle, Big Pipe: Quantifying and Addressing the Impact of Data Centers on Public Water Systems,” based on collaborative research between experts at UC Riverside and Caltech. They found that “community waterworks across the United States will need billions of dollars in new infrastructure to meet spikes in data center water demands during peak usage. Without new water efficiencies, data center cooling systems four years from now could require 697 million to 1.45 billion gallons of additional peak water capacity per day — roughly equal to the typical daily water supply of New York City. Even with optimistic water use reductions, the new water capacity, if pooled, could rival the supply to half of New York City for most of the year.”
“There is no national reservoir.”
— “Small Bottle, Big Pipe: Quantifying and Addressing the Impact of Data Centers on Public Water Systems,” by Prof. Shaolei Ren (pictured) and co-authors, March 2026
In February 2026 alone, a UC Riverside release noted, “three major technology companies announced they had secured multi-million gallons of water per day for projects in Virginia, Louisiana, and Indiana, with the total water infrastructure cost approaching $1 billion. “Even if you have money, the water source is another challenge,” Ren said. “In many cases, the water is naturally replenished by snowpack and reservoirs. But reservoirs and snowpack are limited. You may have money to build treatment plants and pipes, but money can’t buy more snowpack.”
In an interview, Ren tells me his team found data through government records, water utilities and some industry disclosure. “If we wrote the paper last year, we would not have been able to see as much useful information,” he says. “In recent months, we were seeing huge investments in water infrastructure and some disclosure from government records because they signed water allocation agreements,” including for major projects in Indiana, Virginia and Oregon. He says he reached out to a few hyperscalers but none responded. “It’s not surprising, because this is something they don’t want to talk about in the public domain. I don’t really blame them. They’re doing their job, and we’re trying to understand the real challenge and also quantify the challenge.”
Ren says misinformation abounds on both sides of the issue: Data center users are neither taking away everyone’s water nor are they achieving true zero water consumption, though many of them have been working for years on better conservation and efficiency practices. Compared to agriculture, data centers use “a very small amount of water,” he says. “But there is not a national reservoir. It is mostly municipal water systems, and those are potable water. In some cases, one data center gets up to 8 million gallons per day. That amount of water is the region’s reserve for the next few decades.”
Similar to power, water is another bottleneck, Ren says. “We just need to learn and optimize. How can we build AI in a water-constrained world?” Asked for examples of solutions, he says one technical pathway is to increase the temperature set point for non-AI servers, which “will help reduce the water need a lot.” Meanwhile, policy solutions are available too. In some cases, state law or local authorities require new water users to pay for part of the water infrastructure cost. But that doesn’t necessarily get to the root of the issue.
“You pay for the share you’re responsible for,” Ren says. “But the water system is all interconnected. Maybe you have a new pipe and you pay for that pipe, but then you are stressing the upstream water treatment plant. That is community wealth. Instead of paying what you’re obliged to pay, companies can more proactively pay for infrastructure and maybe bring in more infrastructure.” Ren and his co-authors also recommend that data center developers report peak water use, not just yearly averages, since annual figures can hide short periods when cooling systems demand the most water. And they say data centers could work more closely with utilities by adjusting cooling methods — “using water-based cooling when the power grid is stressed and switching to dry cooling when the community water system is stressed, which uses fans or vapor-compression technologies similar to home air-conditioning systems but often requires significantly more electricity.”
Ren thinks all data center companies are focused on the water issue, and salutes Equinix and Google in particular for their willingness to openly talk about the benefits and challenges they are having with water. Indeed, in a March 2026 post about his company’s focus on responsible water use, Equinix Global Head of Masterplanning and Sustainability Andrew Higgins wrote, “At Equinix, we remain dedicated to being responsible stewards of water. We do this by assessing the local water context of all new builds and optimizing our data centers for water efficiency, measuring and reporting water usage effectiveness, and proactively working with partners and communities to expand the availability of alternative water sources.
Ultimately, Ren says, companies and communities alike need to face a simple fact: “Water is a constraint, and in some places a binding constraint. Let’s be straightforward about it and address this issue more proactively. Dismissing these concerns … is not helpful.”
WaterCampus Leeuwarden in Northern Netherlands is home to a robust cluster of European university water technologies R&D and water tech startups.
Photo courtesy of NOM
Innovators Build On Netherlands’
Water Technologies Heritage
In March, two international water technology companies announced they had established European operations at WaterCampus Leeuwarden in the Northern Netherlands. One was Latvia-based Spectromarine. The other was Brooklyn, New York-based Cobalt Water Global, in a sense returning a favor centuries after the Dutch founded what became New York City.
“The main reason for choosing Leeuwarden and WaterCampus is the innovation system that has been built here,” Cobalt Water Global CEO Jose Porro stated in a release from the Investment & Development Agency for the Northern Netherlands (NOM), the regional development and investment agency for the provinces of Drenthe, Friesland and Groningen. “It provides direct access to investors, customers, partners, R&D facilities and funding. That combination is important in accelerating both our growth and impact.”
“As water systems worldwide face increasing pressure from pollution, climate change and stricter environmental regulations, scaling proven water technologies has become increasingly urgent,” NOM explained. “While innovation in water treatment, monitoring and emission reduction is advancing rapidly, many technologies still struggle to move beyond the pilot phase. For international water technology companies seeking to expand across Europe, access to testing facilities, early adopters and coordinated support networks is often decisive.”
WaterCampus Leeuwarden brings together Wetsus (the European center of excellence for sustainable water technology), the Centre of Expertise for Water Technology (CEW) and Water Alliance. The campus, NOM explains, provides laboratories, testing facilities, business development support and direct connections to industry partners and public authorities.
“If a company chooses to set up operations here, we are often prepared to invest as well,” said NOM Investment Manager Betty Postma. “It is a relatively new approach for us — and an exciting one, focused on attracting companies that add real value to the region.”
“While our willingness to invest builds confidence, what ultimately sets this region apart is close collaboration between government, knowledge institutions and industry — combined with a high quality of life that attracts international talent,” added NOM Project Manager Internationalization Reinder de Jong.
Reinder de Jong, Project Manager Internationalization, Investment & Development Agency for the Northern Netherlands (NOM)
In an interview from his office in Leeuwarden, de Jong points out that one thing WaterCampus Leeuwarden does not address is the Netherlands’ expertise in delta technology, i.e. the knowledge developed to keep the sea at bay by a country where the majority of the land mass is below sea level.
“We use quite a lot of technologies in order to keep our feet dry, but that is not what we cover at WaterCampus,” says de Jong. “WaterCampus is purely for water tech companies providing services to the customers on the European market … and elsewhere, by the way, because there are a lot of connections. WaterCampus is the very physical heart of the Dutch ecosystem for water technology companies,” especially startups.
Co-Located European Water Expertise
One reason the location can help startups scale much faster than they could on their own is the presence of Wetsus, a collaboration of fundamental water technology research from two dozen European universities.
“Typically that’s a project for four years on a specific theme,” de Jong says, “but it’s good to remember that all the fundamental research here is business driven, so the companies are in charge.”
Once IP develops, the CEW comes into play, translating that IP into products. Then the physical facilities of WaterCampus and its water application center — supported by the European Union as a co-investor — are there to help validate systems. And then there is the talent.
“If you as a foreign company set up your entity in the Netherlands at WaterCampus, for example, you don’t usually have all the employees in place that can do the work for you, so you need to have knowledgeable workers that can work for you without having them there on your payroll,” says de Jong. “So they work with the Centre of Expertise for Water Technology. They use students. That is a cost-effective approach to translate the fundamental research or your questions as a company into validation and product markets, including testing on the European climate conditions. That really helps foreign companies to enter the European market much quicker, but also with technical issues like transfer to the European grid.”
At the same time, companies are able to benefit from a different sort of grid: the network of water cluster companies that comprise the Water Alliance. “You have to have a Dutch entity to become a member,” de Jong says, but that’s where the cluster companies help with outreach and matchmaking, connecting startups to potential customer.
“We also recognize the need to have what we call demo sites in in in Europe and in particular in the Netherlands,” he says. “I must add that it’s a real issue to to acquire all the necessary permits. And that is really dragging you down because you easily [can] lose six months in your development time only to apply for the appropriate permits in order to be able to test. So we created demo sites. One is particularly for saltwater, one for hospital, one for drinking water applications, but also for wastewater and municipal treatment operations, sensor technology. We did the demo sites with existing companies and we prearranged pretty much all the necessary permits. If you have a development and you want to test it and you have a containerized system, you bring it over there and basically plug and play and you can start testing the same day without having to go through an elaborate permitting process. That speeds up the process.”
Then the loop is closed and new ideas can be germinated to start all over again in the innovation circle, with each step along the way addressed by an entity or program, including subsidies and tax-related schemes supporting water tech companies from national, provincial and municipal governments.
“Since water technology is considered to be a key sector for the Netherlands, there is a huge commitment for government to support that,” says de Jong, including co-investment sources that range beyond venture capital and angel investors to include several government funds. “Obviously the business case still needs to be strong and solid, but there’s a huge opportunity for connecting with government-related funds,” he says, noting the ability to help the company with licensing agreements involving Dutch subsidiaries in order to qualify.
“I think it’s good to know that that the goal is different,” he says. “Obviously a VC fund wants to see the shares be as high as possible within a certain time frame. A governmental related funding is quite different because our ultimate goal is to see that the companies succeed, that they grow and add to the regional economy.”
Take Me to Church
Where do those startups physically land? One location is a nearly century-old former Catholic church on the premises that was purchased by the city in 2004 and is being formally decommissioned and converted into an office center where around 20 water tech companies currently are located, part of a larger cluster of around 100 scattered across Northern Netherlands.
“The dominant language at the former church is probably English,” de Jong says, with firms there from California, Michigan, Canada, the Baltics, Norway and Singapore, among other countries. An added benefit? “We have a lot of international missions coming in. They look for solutions and usually a customer for one is also a customer for the other one. They have a tendency to work together.” And large corporates are paying attention to the technologies being developed, with several firms having been acquired.
There are quite a few applications coming in from the United States, says de Jong, due to the U.S. political situation, “with an administration not very big on sustainability. If your core business is technologies in the sustainability sector, you might reconsider where your main market is. Some of them said to me, ‘Well, we need to focus on the European market because that’s actually where at this very moment our market is.” The Netherlands thus becomes a launch pad to all of Europe. Even as other water clusters develop in Germany, France and Denmark, for example, “The Netherlands,” de Jong says, “is very well positioned to do that.” Even the U.K., which used to be a competitor, is seeing firms migrate to the Netherlands, in part, says de Jong, because of red tape created by Brexit and the exit from the European common market.
“Last week two companies from Michigan both stated that, due to the politics, the European market is much more important than the U.S. market,” de Jong says. “That’s good to know, because WaterCampus is all about speeding up the innovation circle … at the end of the day, the markets and doing business is the most important thing.” — Adam Bruns
