Powering AI

August 01, 2025

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by Caitlin Scheresky (Biomass Magazine) ... The Data Center Coalition defines data centers as “physical locations that organizations use to house their critical applications and data,” including anything “in the cloud.”

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The Electric Power Research Institute, among other projects, tracks the number of data centers around the world. In a May 2024 report, the EPRI determined that of the 10,655 data centers around the globe, 5,381 of them are in the U.S. An outage of even a handful of these centers can have instant consequences.

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All this tech requires significant amounts of electricity to run. To remedy this growing need, more data centers have decided to invest in microgrids—miniature, localized power grids that support net-zero carbon goals without threatening broader power needs. Microgrids can operate off wind or solar power, among other fuel sources, when available, and the operator can switch between renewable and fossil fuels depending on cost and availability. And, on the off chance that an outage occurs, data centers can lean on their microgrids and backup generators to prevent large-scale disconnects. But while these backup generators provide near-constant connectivity, many rely on fossil fuels for power.

A data center’s used energy is not created or destroyed—it is transformed. When a data center utilizes 1 GW of electricity, it will produce 1 GW of heat. As a result, up to 50% of data center electricity goes to cooling systems alone. If left untreated, the tech would overheat, causing an outage. To avoid an outage, cooling becomes as important as the electricity producing the heat in the first place.

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Many data centers utilize lithium-ion (Li-ion) batteries to make up for the inconsistencies of solar and wind power. Li-ion batteries are leaders compared to alternative batteries in terms of their energy density, little maintenance requirements and lack of toxic metals like lead or cadmium, according to the Clean Energy Institute. However, Li-ion batteries can vary in cost and ability, reaching up as high as $150,000-$300,000 per 1 MW battery, and a battery management system with abilities to monitor and balance the battery’s various capabilities could cost $20,000-$50,000 per 1 MW battery, according to Ritar Power. Assembly and scaling can also add up, increasing the total receipt.

Hydrogen fuel cells are a promising solution but have their own pitfalls as well. The two types of hydrogen fuel cells used in data centers, Proton Exchange Membrane Fuel Cells and Solid Oxide Fuel Cells, significantly outweigh current batteries in their environmental benefits by only producing water and heat or, on the off chance of natural gas powering the SOFCs, fewer emissions than traditional generators, according to Plug Power. Hydrogen fuel cells also boast extreme efficiency and stability.

However, the significant costs of set-up and infrastructure, difficulties in storing and transporting the cells, current research limitations, and safety concerns all present barriers to their application. In late 2024, ECL, a California data center developer, announced its plan to build a hydrogen cell-fueled data center near Houston, Texas. The data center, reported to go live this summer, cost 50 MW of power and $450 million to develop; once live, the site will offer 1 GW of on-site capacity powered by hydrogen fuel cells and battery storage, costing $8 billion to supply.

Getting a Head Start
While many data centers are still powered by fossil fuel-based energy, some have made the wise transition into renewables—namely, biomass-based fuels—using renewable natural gas (RNG) and renewable diesel.

In 2022, Microsoft announced its plan for Enchanted Rock to provide backup power for its San Jose, California, data center, later stating that ER would purchase RNG made from food waste from U.S. Energy. Executive Vice President of Data Centers Pete DiSanto explains that “the RNG will be injected upstream in the pipeline to match natural gas usage at the site and reduce overall greenhouse gas emissions.”

ER’s on-site microgrid systems, according to DiSanto, offer scalability and flexibility. “Microgrids offer a powerful combination of energy resilience, sustainability and operational control...[and] help organizations manage peak demand, reduce energy costs and integrate lower-carbon or renewable fuels into their energy mix,” he says.

Similarly to Microsoft and Big Tech, Big Oil is also breaking into the clean data center market—for example, last year, Chevron and ExxonMobil announced their plans to utilize RNG to power data centers. Chevron looks to provide RNG for 1 GW-capacity data centers by 2027 or 2028.

The RNG Coalition’s Sr. Manager of Communications, Dylan Chase, sees this growth in RNG-fueled data centers as a given. “This AI wave promises to lift emerging forms of alternative energy like RNG,” he says. “RNG is unique [from] all forms of alternative energy for its dispatchability, compatibility with existing infrastructure, and diverse array of potential feedstocks. AI is just one of many reasons why, as the IEA recently pointed out, global RNG/biogas demand is expected to someday meet up to one quarter of global gas demand.”

Meanwhile, renewable diesel is becoming an increasingly popular choice to power data center microgrids. Neste, a global leader in sustainable aviation fuel (SAF) and renewable diesel, has spent the past few years forming partnerships with and supplying their Neste MY Renewable Diesel, or HVO100, to various global data center providers. In 2022, Neste worked with LCL, a Belgian data center company, to become the first in Belgium to use HVO100 to power emergency generators for its data centers.

Two years later, Neste worked with ST Telemedia Global Data Centres to become the first data center company in Singapore to use renewable diesel to power their backup generators, and later partnered with Verne—a data center company with centers in Iceland, Finland and the United Kingdom—to transition their backups from fossil to renewable diesel as well.

Back in the states, Digital Realty, a real estate investment trust that owns, operates and invests in carrier-neutral data centers across the world., last year announced the deployment of renewable diesel at two sites in California and one in Oregon, adding to its existing use at 20-plus sites in Europe. In France alone, the company said, the use of RD has reduced the company’s fuel-related life-cycle carbon emissions by 90%.

Reverse Engineering
The increasing burden on current power grids is forcing data centers to think sustainably, which could speed up the transition to carbon-neutral and carbon-negative energy exponentially. Despite the Trump administration’s Inauguration Day withdrawal from the Paris Agreement, many U.S.-based energy companies are still upholding the goal to keep the increase in the global temperature below 1.5 degrees Celsius.

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Placing data centers strategically in different climates can influence the level of carbon emissions produced and water needed for cooling. Building data centers in places with cooler climates and cold winters can significantly lower the amount of water needed for cooling the centers, but this can also lead to a spike in carbon emissions to produce and transport the energy needed. By building data centers near areas where energy can be produced and transported locally, data centers might face lower emissions but higher water consumption.

Meanwhile, in Sweden, EcoDataCenter is piping its captured waste heat to a nearby factory, where it is used to dry wood chips used for wood pellet production. The resulting pellets are then used for residential building heat. A nearby combined heat and power district heating system also utilizes some of the data center’s waste heat.

The U.S. Industrial Pellet Association (USIPA)’s Executive Director, Darrell Smith, notes USIPA’s interest in becoming involved in the AI conversation. In a recent interview with Anna Simet, Smith said USIPA members “see tremendous potential for biomass to play a role in the growing demand for renewable energy to power data centers,” and shared that several are exploring this possibility.

One example of this is wood pellet manufacturer and biomass energy producer Drax, which has been evaluating the potential to use two generating units at its North Yorkshire, England, biomass plant—the largest in the United Kingdom—to power data centers, aligning with the government’s focus on growing AI infrastructure. In its recently released annual report, Drax stated, “We have received positive engagement with data center providers in relation to the potential to colocate a data center with biomass generation, and Drax continues to explore such opportunities.”

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Cooling, an electricity and water burden for data centers, is also likely to face repercussions, though for different reasons. A University of Tulsa op-ed states that “a single data center can consume up to 5 million gallons of drinking water per day.” To prevent corrosion, the potable, or safe to drink, water used in cooling systems is often treated with chemicals which make the water unpotable, or unsafe to drink. Broadly, the amount of potable water data centers use is unknown but estimated to be in the billions of gallons annually. This is an issue of critical importance; the United Nations World Water Development Report 2024 states that by 2050, more than half of the world’s population will suffer severe water insecurity. READ MORE