Rapid expansion of data centers is placing unprecedented demand on electricity, water, land and other resources to operate reliably. As computing intensity rises, energy supply, cooling requirements, and resource efficiency have emerged as critical constraints to sustained growth.
Without innovation, this growth trajectory risks increasing operating costs, straining the grid, and raising environmental impacts. However, a new generation of technologies is transforming how data centers are designed, powered, and managed. Advances in cooling, power systems, digital optimisation, and efficient computing hardware are enabling operators to reduce resource consumption and minimise environmental impact while maintaining performance and reliability.
Innovation landscape in data centers
The technologies outlined below represent important innovation pathways to address the operational and environmental challenges associated with data centers. These solutions target key pressure points, including high energy and water consumption, increasing power demand, and the integration of renewable energy sources.
The Net Zero Insights Market Compass showcases these technological advancements in a structured, multi-layered framework that brings clarity to the evolving data center landscape.
Data center cooling efficiency
Cooling represents one of the most resource-intensive functions in data centers, accounting for a substantial share of both energy and water consumption. Conventional facilities rely on evaporative cooling where water evaporation removes heat from equipment consuming a significant volume of water. Some of the emerging solutions to curb water use are:
Solutions reducing data center water consumption
These solutions focus on improving water usage efficiency in cooling servers. They include advanced cooling systems, water reuse and recycling, and monitoring tools.
Liquid cooling
Liquid cooling removes heat by circulating liquids close to servers and chips, enabling more efficient heat transfer than air-based systems. Because liquids absorb heat more effectively, these systems reduce reliance on evaporative cooling and enable heat rejection through dry cooling..
- Direct-to-chip (D2C) cooling: Direct-to-chip cooling uses a closed-loop liquid circuit connected directly to server components, removing heat at its source. The heated liquid is cooled using dry cooling, eliminating evaporative water loss.
- Immersion cooling: Immersion cooling submerges servers in a non-conductive fluid that absorbs heat directly from components. The heated fluid transfers heat through a secondary loop, which can use dry cooling to avoid evaporative water use.
Dry cooling
Dry cooling rejects heat using air-cooled heat exchangers, eliminating the need for evaporative water loss. Heated liquid passes through external radiators, where ambient air removes heat. This makes dry cooling one of the most water-efficient options available, though performance can vary depending on environmental conditions.
Hybrid cooling towers
Hybrid cooling towers combine dry and evaporative cooling to balance water savings and operational reliability. These systems rely on dry cooling in cooler conditions and use evaporative cooling during high temperatures to maintain performance.
Data center cooling energy consumption
These technologies reduce the electricity required to maintain safe operating temperatures. These solutions improve heat transfer efficiency, optimise airflow, and reduce reliance on energy-intensive mechanical refrigeration. Some of the solutions focused on reducing cooling energy consumption are:
- Liquid cooling: Liquid cooling removes heat by circulating fluids close to servers and chips, enabling more efficient heat transfer than air cooling. This reduces the energy required to maintain optimal operating temperatures in high-density computing environments. Technologies include direct-to-chip cooling, immersion cooling, and cold plate systems.
- Air cooling: Air cooling uses fans, chillers, and airflow management systems to dissipate heat from IT equipment. It remains the most widely deployed cooling method due to its maturity and lower installation cost.
- Free cooling: Free cooling uses cool external air or water to reduce dependence on mechanical refrigeration, significantly lowering electricity consumption. One of the latest technologies is underwater data centers extend this concept by using seawater as a natural heat sink.
- Aisle containment: Aisle containment separates hot exhaust air and cold intake air using physical barriers, preventing mixing and improving cooling efficiency. Both hot aisle and cold aisle containment improve airflow control, increase available power capacity for computing equipment, and extend hardware lifespan.
- Thermal energy storage: Thermal energy storage captures and stores cooling capacity during periods of low electricity demand for use during peak periods. Technologies include chilled water systems, ice storage, and phase change materials.
Data center energy systems
Data center energy systems include technologies that generate, supply, and store electricity to ensure continuous operations. These systems help meet rising power demand while improving reliability, reducing emissions, and enabling integration with variable renewable energy.
Renewable energy integration
Renewable integration enables data centers to directly generate and use low-carbon electricity through on-site solar, wind, and geothermal energy. These systems reduce reliance on grid electricity, lower emissions, and improve energy security.
Small modular reactors (SMRs)
Small modular reactors are an emerging nuclear energy technology designed to provide reliable, continuous power for energy-intensive facilities such as data centers. Their modular design allows scalable deployment across different facility sizes, while closer proximity to data centers can reduce transmission losses.
Energy storage systems
Energy storage systems, particularly battery energy storage solutions (BESS), store excess electricity for use during periods of high demand or limited renewable generation. This ensures uninterrupted operations and improves renewable energy utilisation. Storage systems also reduce reliance on diesel generators, lower operating costs, and enhance grid flexibility.
Data center digitalisation
Data center digitalisation applies advanced software, sensors, and analytics to improve operational efficiency, reliability, and resource management. These technologies provide real-time visibility into infrastructure performance, environmental conditions, and computing workloads.
- Data Center Infrastructure Management (DCIM): DCIM platforms provide real-time visibility into power consumption, cooling performance, and equipment health across the facility. Integrated sensors track temperature, humidity, and airflow, enabling early fault detection and more precise energy management.
- Digital twin for data centers: Digital twins create virtual replicas of physical infrastructure, allowing operators to simulate layouts, cooling strategies, and operational scenarios before implementation. This enables more efficient facility design, predictive maintenance, and improved resource allocation.
- Workload management platforms: Workload management platforms optimize computing efficiency by intelligently distributing tasks across servers, time periods, or locations. This improves server utilisation, reduces idle capacity, and lowers overall energy consumption.
Data center IT infrastructure efficiency
Data center IT infrastructure efficiency focuses on improving the performance and energy use of computing hardware and power delivery systems within data centers.
At the rack level, Smart Power Distribution Units (PDUs) supply electricity to servers while providing real-time monitoring and control of rack-level power usage. They help operators track consumption, prevent overloads, and remotely manage equipment to reduce downtime.
At the server level, efficiency gains focus on improving the performance and energy efficiency of computing hardware responsible for processing and transferring data.
- Data center microelectronics form the foundation of computing infrastructure. These components manage power delivery, data processing, and communication between servers.
- AI chip accelerators improve efficiency by executing artificial intelligence workloads more effectively than general-purpose processors. These specialised chips reduce wasted computation, improve processing speed, and lower electricity consumption for AI training and inference.
- Silicon photonic chips integrate optical and electronic functions on a single chip, enabling faster and more efficient data transmission compared with traditional copper wiring. These chips reduce latency, improve bandwidth, and lower energy consumption associated with data transfer.
Data center waste heat recovery
Data center waste heat recovery captures excess thermal energy generated during server operations and repurposes it for productive use. Recovered heat can supply nearby buildings, support district heating networks, or power combined heat and power systems. It can also be reused within the facility to reduce cooling demand.
Data center modular design
Data center modular design involves constructing data centers using prefabricated, self-contained units that can be rapidly deployed, expanded, or reconfigured as demand evolves. These modules integrate power, cooling, and IT infrastructure into standardised components, enabling faster deployment compared with traditional site-built facilities. Prefabricated modules are engineered for compatibility with existing infrastructure, ensuring seamless integration.
Data center waste management
Data center waste management focuses on the secure decommissioning, refurbishment, and recycling of IT and electronic equipment to minimise environmental impact and recover valuable materials. It includes specialised processes for data destruction, component recovery, equipment refurbishment, and material recycling, ensuring responsible handling of infrastructure at end of life. Recovering valuable components such as processors, memory, and networking equipment reduces waste and lowers demand for new raw materials.
Enabling sustainable growth of AI through data center innovation
Data centers have become critical infrastructure for artificial intelligence, cloud computing, and the broader digital economy. However, their rapid expansion has intensified pressure on energy systems, water resources, and physical infrastructure. Addressing these challenges requires innovation across cooling, computing hardware, energy systems, digital optimisation, and infrastructure design.
To overcome operational and environmental challenges, sustained investment, technology deployment from startups, and collaboration will be essential to scale these solutions globally. As these innovation pathways mature, they will enable data centers to support accelerating digital demand while reducing emissions, improving resource efficiency, and strengthening the resilience of energy and digital systems.
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