The data center buildout is converging with an underfunded, yet critical input to operations: municipal water and wastewater services. Hundreds of billions in hyperscale investments from Amazon Web Services, Microsoft, Meta, and Google are landing at the doorstep of aging municipal water systems and infrastructure—not designed to serve customers at this scale, speed, or complexity.
The dependency runs deeper than most realize, with data center operators sourcing close to 100% of their water from public utilities. This makes municipal systems an unavoidable bottleneck in the data center infrastructure buildout for sites using water-dependent cooling systems. While this symbiotic relationship can create real leverage for utilities willing to use it, others are facing real risk if unprepared.
In the rapidly changing landscape, utilities often have little visibility into the water-related choices being made by data center developers. Cooling technology choices are in flux, with stakes increasing. A new campus can drive significant water demand or nearly none, based on design decisions made in the early development stages. This includes liquid cooling paired with dry heat rejection and “zero water consumption” facilities moving from concept to reality.
This report examines how utilities are navigating this uncertainty, including where opportunities lie, where risks are concentrated, and which strategies are emerging as the sector adapts to a customer segment that is moving faster and spending more.
Table of Contents
Section 1 – Framing the U.S. Data Center Market Landscape
- Mapping U.S. Data Center Existing Capacity
- Capacity Additions Put Data Centers in Focus for Utilities
- Zooming into the Data Center Project Pipeline
- Heavy Reliance on Municipal Water Supplies and Infrastructure
- Proposed State Bills to Impact Data Center Water Use with Utility Implications
Section 2 – Data Center Decisions & Impact on Water Utilities
- Data Center Decisions Impact Water Utilities
- Evolving Cooling Technology Selection Altering Utility Strategies
- Water Scarcity Complicates Planning; Cooling Tech Selection Implications
- Growing Use of Alternative Water Sources Supports Utility Planning
- Chemical Selection Hinges on Utility Water Supply and Discharge Permits
Section 3 – Opportunities & Challenges Facing Water Utilities
- Benefits & Challenges
- Revenue Source for Water Utilities
- Funding Opportunities for Water Utilities—Private-Public Partnerships
- Sustainability Funding for Utility Leak Mitigation
- Challenges Facing Water Utilities from Data Centers
- Seasonal Planning for Peak Water Demand
- High Variation in Supply & Cooling Technology
- Looking Ahead—Key Variables to Watch
