Amid climate change, digitalization becomes a dilemma. Europe, a continent committed to sustainability, is caught in this challenge. As digitalization expands, companies build more data centres and consume more energy. Data centres consume substantial amounts of energy and produce considerable waste heat which leads to a challenging balance between operational expansion and ecological responsibility. In Europe, the demand for power consumption nearly tripled from 62 TWh to over 150 TWh with expected to account for 5% of Europe’s total energy use by 2030 from 2% currently. Major tech companies like Amazon, Microsoft, and Google are committing billions to data centre projects across Europe, from wind-powered facilities in Scotland to AI-focused hubs in France, Germany, and Sweden.
Europe’s focus on green energy and sustainable infrastructure makes it a crucial region in the global conversation on data centre energy consumption. In 2023, the EU regulated an Energy Efficiency Directive (EED) which included data centre regulations. Starting in May 2024, data centres with an IT power demand exceeding 500 kW will be required to publicly disclose key information on their energy performance, including metrics such as energy consumption, water usage, and waste heat recovery. By May 2025, the European Commission will review the data collected and may introduce additional measures, including mandatory minimum performance standards and a framework for transitioning toward net-zero emissions. Additionally, the European Code of Conduct for Data Centre Energy Efficiency encourages data centres with an IT power demand of 1 MW to adopt best practices. These facilities must also utilize waste heat for applications like district heating or hot water supply unless they can demonstrate that such reuse is technically or economically impractical.
Improving data centre energy efficiency to move beyond monitoring
Article 8(3) of the EED mandates that Member States consider and promote the role of renewable energy communities and citizen energy communities in achieving energy-saving measures. Additionally, the regulation on heating and cooling supply stipulates a gradual increase in renewable energy integration, mandating that district heating and cooling systems incrementally incorporate higher percentages of renewable energy using at least 50% renewable energy and waste heat.
For instance, companies can deploy solar panels on-site, construct dedicated solar farms, or purchase renewable energy from utilities. Notably, companies like Google have built on-site solar plants at their data centre locations in Brussels. Google’s Saint-Ghislain data centre in Belgium implemented a 2.8 MW solar plant, completed in October 2017, at an investment of €3 million. This installation comprises 10,665 ground-mounted photovoltaic solar panels, generating approximately 2.9 GWh of renewable energy annually, which is utilized to power the facility’s water treatment plant. Specific figures on cost savings have not been publicly disclosed, but the integration of on-site solar generation reduces the data centre’s reliance on the local electrical grid which led to decreased operational costs and a lower carbon footprint. The project required four hectares of land for the solar panel installation. The photovoltaic panels and associated infrastructure were installed on-site.
Despite the regulation, efforts to integrate renewable energy sources into data centre operations face several obstacles. The effectiveness of renewable energy sources such as solar and wind power is highly dependent on geographic conditions. For instance, solar power generation is most efficient in regions with high solar irradiance, while wind power requires areas with consistent and strong wind patterns. Data centres situated in locations lacking these natural resources may find it challenging to generate sufficient renewable energy on-site. Moreover, solar panels or wind turbines require substantial physical space and supportive infrastructure. Urban data centres are often constrained by limited real estate and space for large-scale installations. The structural capacity of existing buildings may not support the weight or design requirements of renewable energy equipment.
The challenges associated with renewable energy integration pose significant financial barriers for data centre operators, especially when serving emerging tech startups that have yet to achieve substantial profitability. Only 44% of traditional small and medium-sized businesses (SMBs) utilize hosting and infrastructure services, compared to 74% of enterprises and 66% of tech-focused small companies. The cost of renewable energy technologies has indeed decreased, with the average global price ranging from US$ 0.049 to 0.14/kWh, matching fossil fuels. However, the initial capital investment for large-scale integration remains a problem.
Even when renewable energy can be harnessed, challenges persist in terms of grid connectivity and energy storage. The intermittent nature of renewable sources necessitates robust energy storage solutions to ensure a consistent power supply. However, advanced storage technologies such as large-scale battery systems may involve major capital investment and may not be viable for all data centre operators. The initial capital expenditure for renewable energy infrastructure and storage solutions can be prohibitive in the short term.
Lack of energy reduction measures
The EU has acknowledged the growing energy consumption of data centres, but current policies focus more on tracking energy use rather than implementing concrete reduction measures. Article 4 of the EED sets a binding target to reduce the EU’s final energy consumption by at least 11.7% by 2030, compared to projections based on the 2020 Reference Scenario, and mandates that each Member State establishes an indicative national energy efficiency contribution. However, it lacks clear steps to ensure these reductions occur effectively. Addressing this issue requires a proactive approach that prioritizes energy efficiency at the operational level rather than merely collecting data on consumption trends. Two of the most effective strategies in this regard are virtualization and server consolidation.
Virtualization enables multiple virtual machines to run on a single physical server, optimizing hardware utilization, and reducing the number of active servers in a data centre. Virtualization has been implemented by OpenNebula, a cloud computing company from Spain, to enhance resource efficiency within its managed cloud infrastructures. A 2012 study showed that the strategy led to an average reduction of 15.6% in energy consumption compared to OpenNebula’s default system. This approach significantly cuts down energy consumption by lowering the power required for both computing and cooling. Server consolidation follows a similar principle by reallocating workloads onto fewer, high-efficiency servers, minimizing redundant hardware operations.
Another step is the deployment of advanced power management systems, such as Data Centre Infrastructure Management (DCIM) tools. DCIM tools can dynamically adjust power allocation based on server workloads, shutting down idle servers, and scaling energy use according to demand rather than maintaining peak operational levels at all times. Many modern data centres, such as Vodafone, have implemented dynamic voltage and frequency scaling (DVFS) which allows processors to operate at lower energy levels when full capacity is not required. Furthermore, periodic energy audits and benchmarking could ensure compliance with efficiency targets while encouraging continuous improvement in energy-saving technologies.
Another cost for waste heat reutilization
Beyond the issue of energy consumption, another major concern is the waste generated by digital infrastructure. Article 26 of the EED has set specific percentages of waste heat that must be used, starting from 50% in 2027 and increasing gradually until 2050. As the final goal by 2050, all district heating and cooling systems must rely entirely on renewable energy, waste heat, or a combination of both, eliminating fossil fuels. After the reutilization of data centres’ excess heat in the Paris Olympics pool, critics argued that excess heat recycling projects are only a distraction from the real environmental costs of AI. The EU has indeed implemented strategies to enhance data centre sustainability, such as through the reuse of waste heat.
The upfront costs for Waste Heat Recovery (WHR) equipment such as heat exchangers and heat pumps are substantial. These capital expenditures often lead to extended payback periods. Industrial firms generally seek quick returns (1–7 years, with 2–3 years being the most common), whereas district heating (DH) operators, particularly those owned by municipalities, can accept much longer payback periods (10–20+ years) due to their long-term planning nature. Additionally, low heat sales revenues in summer reduce profitability since demand for heating is lower, the same goes for warmer EU countries.
Investing in waste heat recovery (WHR) systems involves not only the initial capital expenditure but also ongoing operational costs, particularly when incorporating thermal energy storage (TES). The capital expenditure for TES systems is estimated to be $350 per kWh of storage capacity. To achieve a 10% internal rate of return, these systems require a storage spread of about 13.5 cents per kWh of thermal energy. The number is still considered higher than the 5-10 cents per kWh achievable number.
The likelihood of waste heat recovery not being implemented increases as the flexibility to disregard regulations if financial feasibility is not met. This creates a loophole where companies can justify non-compliance by citing high costs. Moreover, this opens the door for manipulation of financial reports to exaggerate cost burdens or downplay potential savings.
Misleading data consumption reports
Some of the world’s largest tech companies have misrepresented their resource usage and carbon emissions. In 2022, Microsoft’s data centre in the Netherlands was found to have consumed over four times the amount of water initially reported by the company, reaching 84 million liters in a single year. Additionally, further investigations by The Guardian between 2020 and 2022 revealed that the actual carbon emissions from company-owned data centres operated by Google, Microsoft, Meta, and Apple were likely 7.62 times higher than what had been officially reported.
Currently, Article 32 of the EED provides only a general framework for penalties, leaving Member States with considerable discretion to implement their own rules. The article states that penalties should be ‘effective, proportionate, and dissuasive,’ but it does not establish clear and uniform guidelines on how these penalties should be structured or enforced. The lack of specificity creates inconsistencies across the EU, where some countries impose strict penalties while others lag in implementation. Additionally, there is no explicit mention of mandatory corrective actions, such as environmental reparations, which would ensure that companies address the harm caused by excessive energy consumption.
Currently, there is a divide among EU Member States in how they handle penalties for energy reporting violations. Some, like Germany, have already incorporated strict penalties into national law. Under the Energy Efficiency Act (EnEfG), Germany imposes significant fines—ranging from €50,000 to €100,000—on companies that fail to comply with energy reporting standards. Notably, these fines also apply in cases of negligence, ensuring that companies cannot evade accountability due to carelessness. The law explicitly penalizes missing, incorrect, untimely, or incomplete reports, as well as failures to implement energy-saving measures. In contrast, Ireland has yet to integrate these penalties into its national legal framework, despite 28% of national electricity demand expected to come from data centres and as the biggest EU country for data centre demand per capita (US$150.000).
Conclusion
The EU’s current approach to data centre energy consumption risks becoming a zero-sum game if it only focuses on reporting energy use without enforcing reductions. To move forward, the EU should consider implementing stricter regulations that mandate the adoption of energy-efficient practices. The current situation shows that the advancement of data centre capabilities often leads to increased environmental impact. Operators must navigate the complex interplay between expanding their infrastructure to meet growing digital demands and implementing sustainable practices to minimize ecological harm.
