Data centers are proliferating, leaving a substantial environmental footprint. Data centers require large quantities of energy, water, and land, making them a growing environmental concern.
In response, pressure is intensifying from regulators, policymakers, and the public. Accountability and transparency are now expected, and several regions have begun enforcing stricter sustainability standards for new data center facilities. Tech companies are under greater scrutiny to align with their climate targets and operate more responsibly.
Following our article on the environmental impact of data centers, this piece explores how startups are developing technologies to accelerate the transition to green data centers.
Renewable-powered data centers
The rise of AI, cloud computing, and blockchain is pushing data center energy demand to unprecedented levels. Scaling these technologies requires vast amounts of power, placing immense pressure on existing grids. Tech companies are starting to rely on renewable energy to stay aligned with climate commitments.
Investors are following this shift. According to the State of Climate Tech Q1 ’25 report, funding for renewable-powered data centers is projected to grow by 24% year-on-year. This surge is fueled by the decarbonization efforts of major tech firms and the influx of large-scale capital from infrastructure and climate-focused venture funds.
Renewable energy integration is becoming a critical focus to meet the rise in demand without putting strain on the environment. Startups are working on solutions that enable direct on-site power generation, and hybrid renewable systems to electrify data centers at scale.
Below are some of the companies leveraging renewable energy to power data centers:
- IREN (Australia): The company runs its data centers on 100% renewable energy, supporting high-density workloads such as bitcoin mining, AI cloud services, and GPU infrastructure, including NVIDIA H100s.
- Soluna (USA): They build renewable-powered data centers co-located with renewable energy plants. By harnessing surplus energy that would otherwise go to waste due to grid limitations, Soluna enables sustainable computing for energy-intensive applications like AI and blockchain.
Data center cooling efficiency
Efficient cooling is crucial for data centers. It ensures that equipment operates at optimal temperatures while minimizing energy use. Cooling accounts for about 40% of a data center’s energy consumption. Several innovative cooling solutions are now driving progress in the industry, including liquid cooling, air cooling, and aisle containment strategies.
Climate Tech solutions are being actively promoted to drive the development of efficient cooling technologies for data centers.. Initiatives like the US Department of Energy’s (DoE) investment of $40 million into liquid cooling research play a key role. Called the COOLERCHIPS program, the research aims to reduce data center cooling energy consumption to just 5% of their total energy use.
Here are some companies pioneering sustainable cooling solutions:
- Submer (Spain): Specializes in immersion cooling, submerging servers in non-conductive liquids to dissipate heat. This method reduces energy consumption, increases hardware density, and minimizes water use. Submer raised $55M in Series C funding, led by M&G Investments.
- ZutaCore (USA): Offers a waterless direct-on-chip cooling solution. Its HyperCool® technology reduces cooling energy consumption by up to 50% and enables 10x more compute in the same space, without sacrificing performance. ZutaCore raised an undisclosed amount in Series A funding from Wiwynn in June 2024.
- CoolestDC (Singapore): A spin-off from NUS, CoolestDC designs custom liquid cooling systems for servers. Its solutions improve server performance, reduce energy use, and cut CO2 emissions. The company’s oblique-fin liquid cooling technology achieves Power Usage Effectiveness (PUE) < 1.06, saving 25–50% in energy. It reduces CO2 emissions by 25–50%, and boosts server performance by 15–80%.
Curious how these innovations are making an impact? Discover which commercial agreements companies like ZutaCore and Submer have signed with data center operators to reduce their environmental footprint. Find out how these partnerships are empowering companies to meet their climate goals while encouraging the shift to green data centers.
Waste management
As data centers grow in scale and complexity, managing waste effectively is becoming critical. Climate Tech startups are working on practical solutions to reduce the environmental footprint of data center operations through waste heat recovery and secure disposal of outdated IT assets.
Waste Heat Recovery
Data centers generate vast amounts of waste heat, most of which comes from cooling systems used to maintain optimal server temperatures. According to MIT’s Lincoln Laboratory, the GPUs used to train GPT-3 consumed approximately 1,300 MWh of electricity, equivalent to the monthly usage of 1,450 U.S. households on average.
Instead of letting this energy go unused, companies are repurposing waste heat as part of a circular energy system. Waste heat recovery improves data center energy efficiency and reduces operating costs. Recovered heat can also be redirected to nearby buildings, integrated into district heating systems or even repurposed within the facility to cool the servers.
Here are a few companies leading the way in data center waste heat recovery:
- Phasic Energy (USA): Converts excess heat into usable electricity to power critical systems, reducing reliance on grid power. This improves the Power Usage Effectiveness and eases the load on chillers and air conditioning units, lowering overall electricity costs.
- EcoDataCenter (Sweden): Operates high-efficiency data centers equipped with heat recovery systems that repurpose waste heat in pellet production, greenhouse heating, and residential heating. EcoDataCenter earned a Platinum EcoVadis rating, placing it in the top 1% of sustainable businesses worldwide.
- NovoPower (Canada): Converts low-temperature industrial waste heat into clean electricity. Its proprietary technology supports circular energy practices and helps operators achieve an impressive PUE of 0.94.
- heata (UK): Turns server heat into free hot water for households. Servers are installed directly next to hot water tanks, where waste heat warms the water. Each household saves up to £340 annually and cuts up to 750 kg of CO₂e. This approach tackles both environmental and social issues such as energy poverty.
Data Center IT Asset Disposal
As IT infrastructure evolves, proper disposal of end-of-life equipment is essential for both environmental and cybersecurity reasons. Climate Tech solutions in this space focus on secure data destruction, recycling of valuable materials, and safe handling of hazardous components.
- Sims Lifecycle Services (USA): Specializes in recycling and repurposing decommissioned data center equipment. In addition to secure data erasure and equipment dismantling, Sims resells usable assets and responsibly recycles obsolete components. Sims supports a circular economy by scientifically reducing e-waste.
Thermal Energy Storage
Continuous cooling is essential for data center operations. Traditionally, data centers use large steel buffer tanks filled with chilled water to maintain cooling during power outages. However, these tanks are costly, occupy significant space, and often go unused for long periods.
By integrating thermal energy storage (TES) actively into daily operations, data centers can shift cooling loads, reduce peak energy usage, and cut operational costs. Instead of relying on these systems only in emergencies, operators can use them for load shifting, off-grid cooling, or free cooling, increasing the overall efficiency and flexibility of the system.
Here are two startups innovating in the thermal energy storage space:
- Exowatt (USA): Exowatt provides modular thermal energy storage solutions for high-demand industries like data centers. Their system captures solar energy, stores it as heat in thermal batteries, and converts it into electricity on demand. The modular design allows for flexible deployment and scale. Exowatt recently raised $20M in Seed funding, backed by investors including Sam Altman, Andreessen Horowitz, and Felicis.
- Energy Plug (Canada): Energy Plug develops advanced battery storage systems and AI-driven software that optimize energy use and strengthen grid resilience. Their technology supports smarter energy management and boosts operational efficiency in data centers by stabilizing power supply and reducing dependency on external grids.
Waste water recovery
Cooling systems require large volumes of water to prevent servers from overheating. This has raised concerns, especially in drought-prone regions where local communities already face water shortages.
To put the scale in context, a single AI Chatbot conversation of 20-50 questions consumes 500ml of water. As tensions rise between tech companies and affected communities, governments have begun introducing regulations to limit where data centers can be built and how they manage their water use.
These pressures are accelerating the adoption of on-site water recycling technologies. These systems reduce dependence on freshwater, lower utility costs, and contribute to long-term sustainability.
Epic Cleantec (USA): Epic Cleantec provides advanced water recycling systems designed specifically for data centers. Their technology can process up to one million gallons of water per day and recycle up to 95 percent of wastewater. By enabling data centers to reuse water for cooling, Epic helps reduce both operational costs and environmental impact.
Data Center Infrastructure Management (DCIM)
Digitalisation is reshaping how data centers are operated, integrating intelligent technologies to improve sustainability, resource efficiency, and system reliability. At the center of this transformation is Data Center Infrastructure Management, a critical tool that provides data center operators with centralized visibility and control over both IT and non-IT infrastructure.
DCIM initiatives offer administrators a holistic view of a data center’s performance, enabling smarter decisions around energy use, equipment deployment, and floor space optimization. With the help of data-driven analytics and AI, DCIM enables predictive maintenance, load balancing, and energy-saving automation, all of which contribute to a more sustainable and cost-effective operation.
Here are some of the leading startups in DCIM innovation:
- RiT Technologies (Israel): A leader in intelligent infrastructure management, RiT’s XpedITe platform uses AI to automate equipment provisioning, reduce downtime, and improve environmental performance by maximizing resource utilization.
- Modius (USA): Its OpenData platform delivers real-time analytics and visibility into critical facility operations, enabling data centers to reclaim stranded capacity, reduce power usage, and optimize performance across distributed infrastructure.
- Hyperview: A modern cloud-based DCIM solution that simplifies infrastructure management while cutting energy consumption, minimizing downtime, and enhancing operational efficiency. Hyperview’s intuitive interface and predictive analytics support greener data center operations at scale.
Empowering the Next Generation of Green Data Centers
The data center industry stands at a pivotal moment. With growing demand, stricter regulations, and increasing pressure to reduce environmental impact, sustainability has become a business necessity. Climate tech startups are at the forefront of this transformation, providing technologies that improve data center operations while helping reach their climate goals.
Through innovations in energy storage, waste heat recovery, water reuse, and digital infrastructure management, these startups offer scalable solutions that reduce environmental impact and lower operational costs. Companies embracing these technologies are setting the foundation for future success by improving efficiency and aligning with global sustainability standards.
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