Microsoft, Meta and others face rising drought risk to their data centers

Drought conditions are worsening in the U.S., and that is having an outsized impact on the real estate that houses the internet.

Data centers generate massive amounts of heat through their servers because of the enormous amount of power they use. Water is the cheapest and most common method used to cool the centers.

In just one day, the average data center could use 300,000 gallons of water to cool itself — the same water consumption as 100,000 homes, according to researchers at Virginia Tech who also estimated that one in five data centers draws water from stressed watersheds mostly in the west.

“There is, without a doubt, risk if you’re dependent on water,” said Kyle Myers, vice president of environmental health, safety & sustainability at CyrusOne, which owns and operates over 40 data centers in North America, Europe, and South America. “These data centers are set up to operate 20 years, so what is it going to look like in 2040 here, right?”

CyrusOne is formerly a REIT, but was purchased this year by investment firms KKR and Global Infrastructure Partners. When the company moved into the drought-stricken Phoenix area, it used a different, albeit more expensive method of cooling.

“That was sort of our ‘aha moment.’ where we had to make a decision. We changed our design to go to zero consumption water, so that we didn’t have that sort of risk,” said Myers.

 Realizing the water risk in New Mexico, Meta, formerly known as Facebook, ran a pilot program on its Los Lunas data center to reduce relative humidity from 20% to 13%, lowering water consumption. It has since implemented this in all of its center.

But Meta’s overall water consumption is still rising steadily, with one fifth of that water last year coming from areas deemed to have “water stress,” according to its website. It does actively restore water and set a goal last year to restore more water than it consumes by 2030, starting in the west.

Microsoft has also set a goal to be “water positive” by 2030.

 “The good news is we’ve been investing for years in ongoing innovation in this space so that fundamentally we can recycle almost all of the water we use in our data centers,” said Brad Smith, president of Microsoft. “In places where it rains, like the Pacific Northwest where we’re headquartered in Seattle, we collect rain from the roof. In places where it doesn’t rain like Arizona, we develop condensation techniques.”

While companies with their own data centers can do that, so-called co-location data centers that lease to multiple clients are increasingly being bought by private equity firms in search of high-growth real estate.

There are currently about ,1800 co-location data centers in the U.S., and that number is growing, as data centers are some of the hottest real estate around, offering big returns to investors. But the risk from drought is only getting worse. Just over half (50.46%) of the nation is in drought conditions, and over 60% of the lower 48 states, according to the latest reading from the U.S. Drought Monitor. That is a 9% increase from just one month ago. Much of the west and Midwest in ‘severe’ drought.

“We need to innovate our way out of the climate crisis. The better we innovate the cheaper it becomes, and the faster we’ll move to reaching these climate goals,” added Smith.