Part of a new industry series Digitizing the Future™: Climate Risk Intelligence™ for Data Center Infrastructure
Data Centers at a Crossroads
Executive Summary
Data center growth is accelerating and becoming more capital- and resource-intensive, driven by rising demand for compute and higher-density AI workloads. Electricity use from data centers (plus AI and crypto) was about 460 TWh in 2022 and could exceed 1,000 TWh by 2026, while development costs are forecast near $11.3M per MW in 2026, putting a 100 MW campus near ~$1.1B (International Energy Agency, 2024; JLL, 2026). As the footprint expands across more metros—under sovereignty and localization pressures—exposure to climate hazards and infrastructure constraints increases, especially for cooling and water, where a 100 MW IT load can require ~1.6–1.7B liters of water annually at ~1.8–1.9 L/kWh and consume 876 GWh/year of IT energy before overhead (UNCTAD, 2025; EESI, 2025). Without outages already costly—54% above $100,000 and 16% above $1M, the core risk is that climate extremes and stressed utility systems make power, cooling, and water supply less predictable, precisely as operational margins tighten (Uptime Institute, 2024; MSCI, 2025).
Scaling Demand And Capital Intensity
Data center infrastructure is scaling quickly as demand for compute, storage, and network capacity rises across nearly every sector. Electricity demand illustrates the pace: data centers (plus AI and crypto) consumed about 460 TWh in 2022 and could exceed 1,000 TWh by 2026 (International Energy Agency, 2024). Capital intensity is equally stark. Average development costs were about $10.7M per MW in 2025 and are forecast near $11.3M per MW in 2026, so a 100 MW campus can approach ~$1.1B (JLL, 2026). AI is the accelerant because it increases power density and cooling complexity: traditional racks typically operate at < 8 kW, whereas AI designs target 30–80 kW for inference and 100–250 kW for training clusters (Uptime Institute, 2024). Growth is also diversified. Hyperscalers continue to add capacity at scale—global hyperscale fleets reached roughly 1,297 large facilities by Q3 2025—while colocation and regional edge sites expand to meet latency-sensitive demand and distribute resilience (Synergy Research Group, 2025). Data localization and sovereignty pressures expand the footprint; approximately 79% of countries have data protection and privacy laws, thereby increasing the number of metros that require local hosting (UNCTAD, 2025).
Climate Exposure And Operational Constraints At Scale
This expansion broadens the geographic area exposed to climate hazards and infrastructure limitations, and increases dependence on reliable electricity, cooling, water, access routes, and workforce continuity across more regions. Cooling often accounts for about 20%–40% of total facility energy consumption, so extreme heat and humidity can reduce thermal margins, increase peak demand, and raise operating costs, including demand charges during peak events (MSCI, 2025). Water can become a constraint in water-stressed areas: using a water-use efficiency (WUE) benchmark of roughly 1.8–1.9 L/kWh, a continuously operated 100 MW IT deployment would require about 1.6–1.7 billion liters of water annually (EESI, 2025). At that scale, IT energy alone amounts to 876 GWh per year (100 MW × 8,760 hours), before considering facility overhead. The financial impact of disruptions remains substantial: 54% of operators report their most recent major outage cost more than $100,000, and 16% report costs exceeding $1 million (Uptime Institute, 2024). The strategic challenge is growing: the world is building more digital infrastructure—and concentrating higher-density AI workloads—while climate extremes and stressed utility systems make power, cooling, and water supply less predictable.
Frequently Asked Questions (FAQs)
- What is driving the rapid scale-up of data center infrastructure? Demand for compute, storage, and network capacity is rising across most sectors, and AI is increasing power density and cooling complexity, which accelerates new builds and retrofits (International Energy Agency, 2024; Uptime Institute, 2024).
- How large is the electricity growth implied by current forecasts? Electricity use from data centers (including AI and crypto) was approximately 460 TWh in 2022 and could exceed 1,000 TWh by 2026, implying a rapid increase in grid demand concentrated in specific regions and in interconnection queues (International Energy Agency, 2024).
- Why are capital costs such a major constraint for new capacity? Average development costs were approximately $10.7M per MW in 2025 and are forecast to be near $11.3M per MW in 2026, implying that a 100 MW campus could approach $1.1B, making schedule risk, financing costs, and “speed-to-power” constraints financially material (JLL, 2026).
- How do heat and water risks translate into operational exposure? Cooling can represent ~20%–40% of facility energy, so extreme heat and humidity can raise peak demand and operating costs, while water-use efficiency benchmarks (~1.8–1.9 L/kWh) imply a continuously operated 100 MW IT load could require ~1.6–1.7B liters of water annually in water-stressed regions (MSCI, 2025; EESI, 2025).
- What do outage statistics suggest about financial risk? Operators report substantial disruption costs: 54% report that their most recent major outage exceeded $100,000, and 16% exceeded $1M, underscoring the growing importance of resilience planning as workloads densify (Uptime Institute, 2024).
More in the next post on Digitizing the Future™: Climate Risk Intelligence™ for Data Center Infrastructure…
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