Between Energy Efficiency and Economic Growth: What Does the Data Center Industry Need?

Data center operators are currently confronted with a large number of climate protection regulations: since the beginning of 2025, they have had to determine their waste heat potential in order to use the energy generated in a sustainable way – for heating entire residential areas, for example. 

A further political step towards more energy-efficient data centers provides for this: From 2024, data center operators must report the Power Usage Effectiveness (PUE), i.e. the value by which the efficient energy use of data centers can be read.

As early as 2027, the PUE of data centers commissioned before 1 July 2026 must not exceed 1.5 – from 2030, the threshold will be lowered to 1.3, a further reduction of around 40 percent. For data centers commissioned on or after 1 July 2026, a limit of 1.2 PUE is to be applied. Despite well-intentioned measures for greater sustainability, further regulations mean additional challenges for operators on top of the existing jungle of reporting obligations, such as the requirements of the EU’s Corporate Sustainability Reporting Directive (CSRD). In a recent survey, eco – Association of the Internet Industry therefore asked what issues arise when determining and reducing PUE values.

A single auditor is no longer enough

In addition to the standard requirements that have become a condition for customers today, there are now so many different certifications and audits that one responsible person per company is no longer sufficient for these tasks.

Most operators now have to employ at least two people, if not a whole team, to track and meet the requirements of the German Energy Efficiency Act (EnEfG) and the EU’s Energy Efficiency Directive (EED) and DORA (Digital Operational Resilience Act). Even data center providers without their own customers from the financial services sector are affected by DORA, as many managed service providers have financial service providers as customers. On top of this, for example, the so-called B3S audit, according to the German Federal Office for Information Security (BSI), may not be carried out by just one external auditor, but requires at least two auditors on site. The NIS2 Directive will soon impose even stricter security measures on data centers as part of the critical infrastructure in Germany.

High electricity prices force power

But back to the regulations in the area of energy efficiency. In addition to intrinsic sustainability efforts and regulatory requirements, the price of electricity for operation, air conditioning and cooling is reason enough to operate data centers as energy-efficiently as possible. In view of the competition, companies simply cannot afford not to work on their energy efficiency. Anyone who builds a new data center today with excessive energy consumption will not be able to rent it out. This is an inherent corrective factor in the market

Electricity prices are also the reason why many HPC and AI providers are already moving to Scandinavian countries. Germany is simply too expensive. The climatic conditions certainly also play a role, because where temperatures are lower anyway, less effort is required to cool the servers. But in Sweden or Denmark, for example, electricity prices are a third or even a quarter of the costs in Germany. This can save millions of Euros.

In addition to the fact that the price of electricity also regulates the operation of data centers, Germany faces the challenge of dealing with the availability of green electricity in the long term. Since 2024, data centers in Germany must cover 50 percent of their electricity with renewable energies. From 2027, this will even be 100 percent. Once again, Nordic countries have an advantage here. The relevant stakeholders in Germany seem to lack the necessary speed and willingness to adapt to this mammoth task. In addition, the constellation of bureaucratic hurdles, such as long approval procedures for wind turbines and a lagging mentality, represent an additional stumbling block.

Water instead of air: next-level cooling

Cooling systems with water instead of air could provide a remedy. Because if PUE values of 1.3 and lower are on the horizon, the industry will not be able to avoid water-cooled servers. The eco Data Center Expert Group regularly discusses this topic and predicts that energy efficiency will only be feasible to a certain extent with air-cooled servers. 

Lower PUE specifications will accelerate the switch to water-cooled servers, as this approach requires less energy for cooling. In addition, water can dissipate a higher heat density, which means that waste heat can be reused more efficiently. A positive side effect is that there is no need to divide servers into cold and hot aisles, as is the case with air-based cooling.

Liquid-cooled servers are also becoming increasingly relevant in view of the steadily increasing energy densities within server racks. Instead of 2-5 kW per rack, 12-15 kW per rack is now standard. AI and other HPC applications require even higher power densities – of 50, 80, 100 and more kW per rack. This energy consumption can only be regulated with liquid-cooled systems.

This should change politically

What would also help to make things easier for data center operators, colocation providers and IT infrastructure providers in Germany in the future? The calculation of the PUE value should definitely take into account the utilization of data centers, as a significant proportion of the energy is used for cooling, power distribution and other supporting systems and not just for the actual computing task. Newer and more efficient data centers, in particular, are therefore affected by a distorted PUE value unless they are fully utilized. The German federal government must also make the obligation to use waste heat feasible and focus on a cost-benefit analysis instead of fixed threshold values. The inconsistent thresholds at the EU and federal levels must also be harmonized by the government so that operators of digital infrastructures remain capable of acting and are not thwarted in their efforts to digitalize.

In addition, the Alliance for the Strengthening of Digital Infrastructures in Germany, which was founded under the umbrella of the eco Association, has often criticized the time it takes to build data centers in Germany in the past. It can take up to six years for a planned data center to be approved and finally built. This is particularly detrimental to the user industry, but also to Germany’s economic growth.

Further options for greener data centers

While politicians should work on the regulations, companies are advised to work on long-term technical adjustments. In addition to the increased use of alternative cooling systems such as (immersive) liquid cooling, which can provide energy savings of up to 15 percent per server, the consideration of indirect Scope 2 and 3 emissions offers further potential for reducing emissions. In future, operators must ensure that the materials are low-emission and meet circular economy standards

There is also enormous potential in the use of waste heat – and the trend is rising, especially in view of the growing use of AI. Recently published figures from the German Federal Ministry for Economic Affairs and Climate Action (BMWK) show this impressively: with more than 2,000 data centers and an IT connection capacity of over 2,700 MW, Germany is already the largest location for digital infrastructure in Europe. By 2045, the average level of digitalization in the German economy could rise further to 42 percent. By comparison: in 2024, it was estimated at 20 percent. If the foundation of digitalization – i.e. data center capacity – grows, the potential of the waste heat generated will also increase steadily. We should seize this opportunity.

Dr. Béla Waldhauser is Spokesperson for the Alliance for the Strengthening of Digital Infrastructures in Germany, set up in early 2018 under the umbrella of eco to support Germany’s development as a digital location. As a theoretical physicist, Dr. Béla Waldhauser is Chief Executive Officer of Telehouse Deutschland GmbH and KDDI Deutschland GmbH. Previously, he was responsible for the German operations of Global Switch, and prior to that TeleCity. Before this, he was Managing Director for Germany and Austria for Teleglobe. For several years, he has been Leader of the eco “Data Center Infrastructure” Competence Group and, since 2011, Member of the Jury for the “German Data Center Prize” in conjunction with the annual “Future Thinking” congress. In 2014, he was invited by the German Federal Ministry of Education and Research, as an expert and as a member of the eco Association, to actively participate in establishing the new strategy platform for “ITC in Horizon 2020.” Moreover, since April 2022, he has been a Board Member of the Climate Neutral Data Center Pact (CNDCP).