Ep 104: Data centers are misunderstood and are the ultimate dual-purpose warriors of the modern era

[00:00:05]Today I want to explain why data centers are good.

[00:00:10]I know this may sound surprising, but I'm afraid it's just facts. And I'm going to go through why they are the ultimate catalyst and financier and anchor tenants for a modern decentralized 24/7 clean energy infrastructure around the world. Because my advice on data centers is ignore the noise and focus on the facts.

[00:00:39]But first, we have to talk about global heating.

[00:00:45]As I think most of you would have seen, temperatures are soaring across Western Europe again due to a high pressure heat dome fueling wildfire dangers, straining water supplies across the European continent, testing power grids, and what people are watching in real time is heat waves that are getting longer, heat waves that are getting more frequent, heat waves that are more intense repeated instances of extreme temperatures and wild wildfire risk across the continent. So, we're only in early July. Wait to see how this wildfire risk is going to play out across Greece, Italy, Spain, Portugal, France, and who knows where else. And this heat is putting pressure on infrastructure which is critical.

[00:01:44]For example, water consumption in France is increasing by as much as 20%.

[00:01:50]The French power utility is limiting output from its nuclear plants because of low water levels and high temperatures.

[00:02:00]A data center housing the UK's Dawn supercomput, that's what it's called, suffered a heatwave related outage. I want to say that again. the data center suffered a heatwave related outage. It's not just us, it's our infrastructure across the board. So that's a supercomput shut down because of the heat. And you may have heard that Euroar, the operator of the train between the UK and France, changed its upcoming order for 50 trains, from one where the 50 trains had to withstand temperatures of 45° C, which is already humongously huge, to one where the trains have to live through temperatures of up to 55° C.

[00:02:50]And for my American friends, that's 131 degrees Fahrenheit.

[00:02:56]131. And of course, it's not just infrastructure. There's been over 5,000 heat related death in Germany so far this year. Another 2,700 minimum in France. Spain reported 150 heat related death in July this month alone. And that's on top of another thousand in June. And the same story is playing out in the US also where heat related deaths are multiplying and where as I'm sure a lot of you know multiple World Cup games were disturbed by the heat. Why? Because it turns out that the 2026 World Cup is being played in the middle of one of the most extreme heat waves in North America ever with temperatures and heat indices over 40° centigrade in some cities. And that's forced match adjustments. It's forced increased safety measures and so on. And the reason I want to talk about this is because we do not talk about it enough.

[00:04:02]Every day big oil keep dragging us down consuming more and more fossil fuels and every day politicians don't move to dramatically decrease the quantity of fossil fuels we consume is yet another day where we're just making sure all these heat related death are just going to go up and all these infrastructure strains are all going to get worse.

[00:04:33]And now we can get back to data centers.

[00:04:36]Welcome to episode 104 of the Angry Clean Energy Guy podcast with me, Assad Ruk. I am so happy you're here. Thank you.

[00:04:52]There's a lot of words and I mean a lot of words being printed to the effect that data centers are villains.

[00:05:02]Actually in some interpretations they are the ultimate villains of the energy transition. But that is wrong. I've read multiple articles and I've heard multiple people screaming about a global AI data center cover up or warning that the deployment of data centers and the electricity that they consume is just one more disaster in the making. and how supposedly this is going to trigger a backward dash to fossil fuels and keep dirty coal online just to power all these data centers. Then others attack data centers because they occupy too much land or consume too much water or they hide commercial secrets.

[00:05:54]They don't. They actually don't occupy too much land and they don't consume too much water. And they're not even ugly.

[00:06:03]Not if they're designed properly. I've been to some beautifully designed data centers in South Korea, for example, that were completely integrated with their surroundings. And all it takes is for the data center construction companies to make an effort and for the operators to force them to. And so I'm going to give you five big reasons why data centers are fundamentally misunderstood and why in fact they aren't even data centers. They are digital and physical substations for our clean energy future and they're very critical in that role.

[00:06:41]So what are these five reasons? First, it's the data center boom that is energizing our energy transformation.

[00:06:51]And many of the hyperscalers driving that boom actually have strict and in some cases legally binding commitments to 100% renewable energy and 24/7 carbon-f free energy. And if you look at the $6.7 trillion projected for AI and data centers by 2030, so we're supposed to be spending $6.7 trillion on data centers between now and then. $1.3 trillion or more of that number is actually for power generation and power transmission.

[00:07:27]So that's $1.3 trillion of private capital moving into our energy transformation to accelerate it. And so what data centers are effectively doing is they are subsidizing the modernization of our archaic 1950s60s7s era grid because the utilities that are in charge of this grid are either too slow or too broke to do it themselves.

[00:07:59]So thank you data centers.

[00:08:03]The second reason they're misunderstood is that data centers are driving an overbuild of renewables to the benefit of all of us and to the grid, which is critical to a clean energy powered future for all. Now, how do they do that? They do that because if you want to run a data center 24/7 on clean energy, so around the clock, you can't just buy enough solar panels to match your daytime electricity use. What you have to do because the sun doesn't shine at night, is you have to overbuild your solar power, sometimes three times or four times, to generate excess power when the sun is shining. store it and then use it when it's not and therefore you build massive batteries next to your solar power plant. But the interesting question is what happens to that massive overbuilt clean energy capacity when the data center doesn't need it and it wouldn't need it most of the time because there's too much of it. And the answer is it floods into the local grid and it brings your electricity bills down.

[00:09:25]And so data centers in fact are acting as a giant clean energy generation hub that's injecting cheap and zerocarbon electrons into the grid. It's actually cleaning up the grid as well as bringing down bills.

[00:09:45]The third reason they're misunderstood is that they are forcing the deployment of anytime solar and best to stabilize the grid. So, not only bringing prices down and not only decarbonizing but also stabilizing the grid. And let me explain this one right this second. The biggest bottleneck to 100% clean energy fueled lifestyles is the grid. And what that means is that solar power projects and wind power projects and batteries need sometimes to wait 5 to 10 years to connect to the grid because the interconnection cues are out of control in the US, in Europe, in Asia, everywhere.

[00:10:32]But data centers only take one to two years, maybe three maximum to build. And they can't sit and wait for a decade to plug in. So what are they going to do?

[00:10:42]The only actual thing that they can do at scale is to deploy solar and batteries near them because we can build solar and batteries on the same clip as we can build digital infrastructure and over the same time frame. And that's how you get a lot more anytime solar firm solar.

[00:11:08]And what sometimes critics miss, and I'm being generous, is the fact that an AI computer system is really a very fastm moving digital animal that can cause sudden power jumps or drops in a split second. So, it may suddenly require a lot more power and then suddenly require a lot less power.

[00:11:32]And so when you combine them with giant on-site batteries that can regulate that and smart software, you are turning a data center into an automated grid savior.

[00:11:47]It's literally a substation that can intervene to stabilize the grid. At that point, the data center becomes localized miniigrid. Basically, instantly smoothing out electricity fluctuations, instantly balancing grid frequency and keeping the system steady when the sun goes down or the wind drops.

[00:12:14]And so these data centers are almost single-handedly today creating the storage scale that we need to make a renewable energy grid safe as well as ubiquitous.

[00:12:29]And I know this is very conceptual, so I've been racking my brain for some real life examples. Here's a couple. One from Ireland and one from Belgium.

[00:12:40]In Ireland, Microsoft partnered with renewable energy developers to connect its batteries directly to the wind dominated Irish network. And for those of you who didn't know, Dublin hosts something like 5% of global hypers scale facility, which is enormous. And in Ireland, data centers consume something like 22% of the country's electricity, vastly more than almost anywhere else I can think of and more than every single residential home in Ireland combined.

[00:13:16]And so this gives you severe transmission bottlenecks. And the Irish therefore introduced a stop on new connections in the Dublin region back in 2022.

[00:13:28]And in 2025, the regulator mandated a bring your own power framework to data centers. So they have to data centers have to legally bring their own generation and provide on-site the generation or the storage for grid stability and match 80% of their annual demand with additional and local renewable energy projects. And so by reprogramming its batteries to participate in the ancillary services market in Ireland, Microsoft's Dublin facility became like a dynamic frequency response engine. It became part of the grid because it was able to absorb and discharge power automatically to stabilize the grid as wind speeds fluctuated. And so you can see how in this case data center became actually not just a consumer of electricity but a participant in the actual grid of the country. The same thing happened in Belgium in a Google facility in Sanislan where the batteries were aggregated into a virtual power plant also allowing the ability to dynamically bid the capacity of the battery into the Belgian transmission demand response system. And so you get the same thing that you got in Ireland because what you then do is you eliminate the need to have any backup diesel generators anywhere. Why would you need them if the data centers are providing a service that is then just eliminating them? And this is a big deal because you have 20 gawatt of incredibly polluting backup diesel generators across the global data center fleet. And so you can zero these out and replace them with zero emission grid balancing storage assets. It's a win for [snorts] the planet. It's a win for citizens. And it's a win for the grid and the data center operators. Everybody wins.

[00:15:34]Now the fourth reason data centers are misunderstood is because a lot of the conversation around them accuses them of using too much water. And I've read a lot of uninformed articles about this.

[00:15:48]Allegedly data centers guzzling water like small cities and draining local aquifers and what have you. That is not correct. First of all, modern data center facilities are shifting to a closed loop system. So you recycle water continuously instead of evaporating it away. And what is I think almost always missed in the conversation about water and data centers is that a massive chunk of the alleged water footprint is actually indirect water which is consumed upstream by fossil fuel power plants generating electricity. So the moment you have a data center that hooks up to solar and wind, the upstream water footprint completely vanishes. And we're not talking small numbers. According to estimates by the Lawrence Berkeley National Laboratory in the US, the data centers in the US directly consumed something like 17 billion gallons of water in 2023. 17 billion. Keep that number in mind for a second. But their indirect water footprint, so the water consumed upstream by fossil fuel power plants to generate the electricity to power those data centers was 12 times bigger at 211 billion gallons of water.

[00:17:10]So that's because fossil fuel power plants rely on boiling water to produce steam to spin turbines and are very large users of water. for that reason.

[00:17:23]But when you stop using them to power data centers and instead use solar and wind, you need, you guessed it, virtually zero water. And so all that massive upstream indirect water footprint disappears. And so what happens is that netnet, a data center, actually saves an enormous amount of water. They are the opposite of a water consumer. And I wish that fact was more broadly understood especially by the regulators of the electricity industry and by the politicians in those neighborhoods where data centers are being built. Explain to your own constituents please how much water the data centers are actually saving, not the other way around.

[00:18:14]And there is one more thing to do with water and data centers. In a world where we are overbuilding solar and wind and where we have near zero marginal cost clean energy at least some of the time because of that overbuilt solar and wind and storage capacity.

[00:18:33]Guess what? Water scarcity becomes an engineering problem. It's no longer an existential crisis because with cheap daytime solar power, we can build and run all the desalination plants we need to create effectively an endless decentralized supply of fresh water. And that is just what is going to happen in the next few years. We're going to power desalination plants with abundant [snorts] solar, wind, and batteries. And in that process, we're going to bring their marginal cost down to a level where water becomes not only overabundant everywhere, but also cheap per I don't want to spend too much time on this, but it's probably enough to say that seawater desalination using reverse osmosis is something that's very energy intensive and electricity represents 50 to 60% % of its total cost. So most of the expense we incur to desalinate water is actually electricity.

[00:19:46]And so you can see how a desalination plant is actually a perfectly logical demand sync. So you send there your excess solar power for example because it's so energy intensive. In other words, if you operate diesel pumps dynamically when you have surplus solar power, you bring down the marginal cost of electricity for water purification to near zero. Isn't that just a dream outcome?

[00:20:18]And the fifth and final point that I wanted to make on data centers is that the narrative that says that they are some form of industrial land grab eating up global agriculture for example is completely wrong. Nothing could be further from the truth and you can see it just by looking at the numbers. So right now if you aggregate all the land that all the data centers use worldwide, you come up with 8,000 and 100 hectares.

[00:20:56]That's something like 20,000 acres.

[00:20:59]That's also just 81 square kilmters.

[00:21:03]And the way you get to that number is this. Back of the envelope, every 10 megawatt of modern data center power capacity needs one hectare of land. And if you look at this another way and you look at all the land we're going to need by 2030 to build all the data center fleet that's been announced, you come up with 242 square kilm. So that's 60,000 acres roughly. 242 km is also about three times Manhattan or 1 and a half times Paris. That's it. That's all the land you need globally to build all the data centers that we are projecting that we need. But think about what that means. So the full global physical footprint we need by 2030 to anchor what is basically the next generation of human intelligence is just one and a half times the size of Paris. And you can look at that number in a slightly different way.

[00:22:08]We use 48.5 million square kilometers of land for agriculture.

[00:22:16]The entire global data center sector is going to occupy 0.00005% of our arable land. That is not even a rounding error of a rounding error. And of course, we're not going to use arable land either.

[00:22:36]I would encourage you to think of data centers slightly differently. They are the most hyperefficient and the best use of land possibly in economic history because they deliver super intelligence on a physical footprint which is basically smaller than just a few farms put together.

[00:23:05]I want to close by taking you to Texas to see how this is probably going to play out everywhere. The Texas grid is forecasting an incredible 367 gaw demand by 2032, which is something like a 500% increase in electricity demand driven largely by data centers. and conventional wisdom would say that this is going to break the Texas grid. Instead, what we've seen is that the interconnection queue in Texas has become 95% or more filled with just solar and wind and batteries. Gas and coal are nowhere to be found. And that is how you're going to get to the overabundance that I was talking about earlier of solar, wind, and batteries and therefore of green electrons, which would then lead to all the benefits that I've already listed. So data centers, they're not passive consumers that are breaking our grid.

[00:24:15]They're actually highly capitalized, aggressive 24/7 anchor tenants that are literally forcing an outdated energy system and utilities that can't cope.

[00:24:29]They're forcing them to modernize, to decentralize, and to clean up their act.

[00:24:34]And the utilities would not have been able to do it without the data centers and all the financial power and immediacy that they bring to the problem. And so that's why I think of them as both digitally substations that connect the global economy and then physically substations that function as decentralized electrical substations stabilizing grids everywhere and allowing them to become more resilient and much much bigger.

[00:25:07]And on that note, thank you very much for listening to this episode 104 of The Angry Clean Energy Guy with me, Assad Ruk. And have a great couple of weeks.