Advanced Search
May 5, 2026
The U.S. energy sector has a data center problem. In 2023, data centers accounted for 4.4% of the nation’s energy consumption, a significant increase from the 1.9% reported in 2018. This surge has taken a toll on both consumers and the environment due to rising energy and water consumption. With data center development projected to rise, their energy consumption may nearly triple by 2028, placing an unprecedented amount of strain on the already-stressed electrical grid and raising electricity prices for nearby communities. Approximately 40% of the energy and nearly all of the water used by data centers go directly to server cooling, with most of the energy ultimately converted to heat. Data centers draw directly or indirectly from 90% of U.S. watersheds. Many convert potable water into water vapor that raises the temperature of surrounding communities while depleting their water supplies.
One promising solution is to establish district heating systems that take waste heat from data centers and reuse it in nearby buildings through an efficient community-wide network of heat-carrying pipes. By viewing the heat generated by servers as a commodity rather than a byproduct to be discarded, district heating systems can capture and divert excess heat to warm homes, factories, and public facilities. This approach, already used across Europe, has the potential to deliver substantial benefits for the climate, environment, and economy.
One facility’s waste heat is another facility’s heat supply. Data centers use thousands of processor chips which generate large amounts of heat. Heat damages microchips, so data centers use several different cooling methods, most of which are energy or water intensive (or both). Heat is usually disposed of, but it could be reused and transferred to buildings and facilities that need heat, either to warm their air in the winter, or to warm their water all year round. Transferring heat can be done efficiently through hot water pipelines as part of a district heating system. Newer district energy (as opposed to district heating) systems can be used both for heating and cooling. Synthetic refrigerants or water flow through buildings after connecting to heat exchangers that siphon heat away from the pipelined water for heating—or that transfer heat into the pipelined water if the building needs to be cooled.
The next generation of community-scale heating and cooling system is called a thermal energy network. Thermal energy networks (TENs) are composed of water-filled pipes that use heat produced naturally from geothermal sources or as a byproduct of industrial activity (like data center processing), rather than heat produced directly from energy generation as is the case in most district energy systems. Whereas district energy systems generate heat in a centralized location (usually from fossil fuels), TENs can harness many different sources of warmth, including natural sources like ground heat and bodies of water. Integrating data centers into TENs would facilitate a more efficient use of the heat generated by the centers.
Whether a data center uses air cooling, water cooling, or some other form of liquid cooling, the heat evacuated from the server rooms can in many cases be captured by water through passive heat exchangers. The heated water can then be integrated into a broader TEN that pumps it to the end user. Using waste heat in this way means that homes and businesses can use less energy from the electric grid (which is still mostly powered by burning fossil fuels) or from the natural gas grid, thereby cutting both costs and greenhouse gas emissions.
Heat reuse technology requires data centers to use closed-loop cooling methods, rather than open cooling techniques, so that the heat can be recovered in TENs instead of released into the environment via evaporation or through a heat exchanger. Many data centers use evaporative cooling, in which water absorbs heat from the servers and then releases the heat through evaporation in large open towers. While this method is energy efficient, it results in up to 80% of the water being lost. Closed-loop water systems, while less energy efficient, ensure the water is not directly exposed to air by keeping it in sealed pipes that circulate around server stacks. This water is continuously recirculated, with only 5-10% lost through leaks and cracks, as heat exchangers siphon heat away from the water loop. Direct-to-chip water systems operate similarly, but the water contacts the chips directly rather than remaining in pipes to dissipate heat.
Reusing waste heat can reduce the financial and environmental costs associated with data centers. Replacing electric cooling with thermal cooling in an entire area can reduce data center power consumption by up to 30%. Fully implementing waste heat reuse across the country could avoid the construction of 54 new power plants, saving customers $22.1 billion in building costs. Investing in TENs could have the additional benefit of shortening interconnection times since fewer power plants would be needed.
By switching to closed-loop cooling systems, data centers with open systems can cut their water consumption by around 80%. That would bring total U.S. data center water consumption down from the 164 billion gallons currently consumed annually (equivalent to the annual water demand of 1,122,500 households). Additionally, by switching away from evaporative cooling for both data centers and structural cooling, TENs can reduce the amount of wastewater that needs to be treated, resulting in lower operational and infrastructure investment costs.
The construction of data centers has led to higher energy bills for nearby residents, and higher energy bills disproportionately impact lower-income communities and communities of color. Data centers in some rural areas have drained water supplies, leaving residents with murky or dry taps. By reducing their energy and water consumption, data centers can minimize the impact they have on local populations. Lower energy consumption would have the additional benefit of reducing greenhouse gas emissions that contribute to climate change (which disproportionately affects low-income and vulnerable communities).
Local sourcing of heat and power makes TENs more reliable because they are less affected by issues with the electrical grid and fossil fuel supply. TENs have the additional benefits of equity, safety, and quietness—TENs serve all neighborhood connections equally and are largely undetectable, given that they are underground. Installing TENs can support the transition to clean energy by providing new jobs to fossil fuel utility workers who already have applicable skill sets.
Reused heat is incredibly versatile. It can be used for a wide variety of buildings, factories, swimming pools, and greenhouses. In the agricultural sector, it can be used to grow algae, dry grains, and farm seafood. For chemical and material manufacturing plants, recovered heat could run industrial drying processes, in addition to preheating feedwater for high-temperature applications. Food and beverage processors, as well as biomedical companies, can use recovered heat for cleaning and sterilization, while also supporting processes that require boiling water or dehumidification.
Countries across Europe have been quick to implement waste heat reuse systems. Stockholm, Sweden, repurposes heat from data centers in an open district heating scheme, which has recovered enough heat to warm 30,000 apartments every year while reducing carbon dioxide emissions by 50 grams per kilowatt-hour (using natural gas for energy emits 185 grams per kilowatt-hour, for comparison). The Nebius Group in Finland has a data center in Mäntsälä that has recovered enough thermal energy to heat 2,500 Finnish homes annually. In 2023, Ireland’s Tallaght District Heating Scheme saved over 1,100 metric tonnes of carbon dioxide by repurposing data center heat for local buildings. During the Paris 2024 Summer Olympics, a data center heated the training pool in the Olympics Aquatics Center (the system is scheduled to ramp up and recover enough heat to warm 1,000 homes annually). Other operations in Helsinki, Finland, and London, England, are currently under construction to use data centers to heat nearby homes.
In collaboration with state and local governments, corporations have already begun to research and build heat reuse projects. In Pennsylvania, Gneuton has launched a project that uses waste heat from data centers to distill wastewater, such as stormwater and oilfield wastewater. SAI.TECH in Ohio has begun demonstrating how waste heat from data centers can be used to heat greenhouses, with future expansion into residential and commercial applications. Similarly, Fidelis in West Virginia proposed a campus that would use data center waste heat and carbon dioxide captured from on-site hydrogen production to supply local greenhouses with heat and carbon dioxide for plant growth. The University of Virginia has proposed a new data center whose waste heat would be repurposed to heat the research park where it would be located.
There are three main barriers to the implementation of waste heat reuse: the difficulty in connecting data centers to waste heat consumers, high upfront costs and financial risks for projects, and a lack of political support for waste heat reuse. Policymakers can help navigate these hurdles by offering grants to support the creation of TENs, expediting permitting and zoning for new waste heat reuse and TEN projects, and mandating or incentivizing energy efficiency and resource intensity standards for data centers.
To create pathways for data centers to be integrated into TENs, Congress could invest in new pilot programs via Department of Energy (DOE) grants tied to reductions in consumer energy bills, energy use, or pollution. The DOE has already funded similar community grants for geothermal heat. Enforcing stricter energy standards for data centers and placing greater emphasis on metrics such as power usage effectiveness (which reflects a data center’s power efficiency) can help data center operators become more efficient overall. Congress could also mandate that data center energy consumption be analyzed specifically, following the successful Data Center Pilot survey that was part of the 2018 Commercial Buildings Energy Consumption Survey (CBECS). By refining the survey, which is regularly conducted by the Energy Information Administration, to include data centers as a distinct building type, the CBECS could better provide the comprehensive, standardized benchmarking the industry requires.
Congress has introduced federal legislation on data center resource use and efficiency, reflecting a push to make data centers less disruptive to communities and more environmentally friendly, although no proposed bills specifically target waste heat reuse. Introduced in March 2026, the Data Center Water and Energy Transparency Act (S.4213) would require data centers to publicly report on the amount of water and energy they consume so that federal agencies and local governments could make regulations and recommendations related to their operation and construction. The No Harm Data Centers Act (H.R.8033), the Power for the People Act of 2026 (S.3682), and the GRID Act (S.3852) all look into the electricity use of data centers, as well as strategies to ensure that costs are not passed onto consumers.
States have begun to take matters into their own hands, with Virginia recently passing HB323, the very first data center waste heat reuse bill in the United States. HB323 directs the Virginia Department of Energy to convene a working group to guide the department’s research and recommendations on waste heat reuse. Nine other states have passed legislation relating to TENs, including New York’s Utility Thermal Energy Network and Jobs Act (S9422), which directs utilities to establish publicly-regulated TENs. These laws lay the groundwork for future progress on connecting data centers to innovations in heat reuse. While states have taken important steps to encourage the advancement of TENs, action from the federal government could help spur the widespread adoption of waste heat reuse to aid decarbonization and water conservation efforts across the country.
Author: Aastha Singh
Advancing science-based solutions for a sustainable, resilient, and equitable world
Top-Rated Climate Nonprofit – 4-Star Charity