Challenges for Datacenters to Go Fully Green

Datacenters have made notable strides in reducing their carbon footprint over the past decade. Many hyperscalers now procure renewable energy through power purchase agreements, design energy-efficient campuses, and adopt advanced cooling solutions. Yet, the goal of becoming fully green remains a work in progress. The sector continues to navigate factors such as inconsistent access to clean power, reliance on diesel-based backup systems, increasing water usage for cooling, and supply chain challenges linked to sustainable hardware. 

Exponential Energy Demand from AI

One of the most pressing challenges is the sharp rise in energy demand driven by artificial intelligence workloads. Deloitte Global Predictions 2025 projects that datacenters could consume 4% of global electricity by 2030, compared to under 2% today. Generative AI is expected to significantly increase global electricity demand in the coming years, placing additional strain on datacenter power consumption and sustainability goals. This surge has the potential to outpace renewable integration, requiring operators to source power from conventional grids to maintain uptime and performance. Large operators such as Microsoft and Google have acknowledged an uptick in emissions in 2025 despite renewable energy purchases, highlighting the ongoing priority of aligning rapid innovation with sustainability.

However, securing 24/7 or hourly time-matched clean power tends to be significantly more expensive. Recent industry analysis indicates that power purchase agreements (PPAs) combining solar, wind, and storage often exceed USD 200 per MWh in many regions. This reflects the well-recognized ‘green premium’ attached to continuous clean energy. The higher price is attributed to storage costs, flexible dispatch requirements, firming reserves, transmission upgrades, and risk premiums tied to intermittency. While costs are trending downward with advances in long-duration storage, only large hyperscale operators are currently able to absorb or justify these expenses.

Dependence on Diesel Backup

Reliability is the lifeblood of datacenters, but today, most still rely on diesel generators as backup power. These systems are carbon-intensive and limit progress on sustainability gains. Alternatives such as hydrogen fuel cells, advanced battery storage, and on-site solar-plus-storage microgrids are being tested in markets like Europe and North America. Still, scaling remains constrained by cost, infrastructure readiness, and technology maturity. Some operators are piloting biofuels or hybrid systems, and the industry is still working towards a commercially viable, globally deployable alternative. Without viable substitutes, diesel remains a persistent part of the energy mix and a significant barrier to decarbonization.

Water-Intensive Cooling Models

Cooling accounts for a significant share of operational resource use, and many traditional methods depend heavily on water. Water use at hyperscale campuses is significant, and in some regions, this can pose sustainability concerns, especially where water scarcity exists. While liquid immersion cooling and closed-loop systems are gaining ground, broad adoption remains capital-intensive and uneven across regions. Operators in the Asia-Pacific region are exploring seawater-based cooling, while Nordic providers are increasingly utilizing naturally cold climates to reduce water and energy loads. However, scaling these region-specific solutions globally is difficult due to the varying climates, infrastructure, and costs.

Supply Chain and Scope 3 Emissions

Sustainability is not only about operations but also about the embodied carbon of equipment and construction materials. Frequent hardware refresh cycles generate significant e-waste, while emissions from steel, cement, and semiconductors used in construction add further complexity. Circular economy practices such as refurbishing hardware, recycling components, and repurposing older facilities into edge datacenters are in the early stages of adoption. A lack of standardized frameworks across global operators further slows adoption, making supply chain decarbonization one of the more complex areas to address.

Policy, Financing, and Reporting Gaps

Regulation and financing play a pivotal role in accelerating sustainability. However, gaps persist across various markets. While the EU has introduced stricter rules around energy efficiency and water reporting, other regions remain inconsistent in mandates, incentives, or clear enforcement. 

One major and often-overlooked bottleneck is land use and siting policy. Renewable projects large enough to supply datacenters continuously require substantial land parcels plus supporting infrastructure that includes roads, substations, and transmission lines. Converting or acquiring this land imposes significant costs, including permitting delays, and creates environmental or social trade-offs, as well as direct competition with agriculture, conservation, and urban development in some contexts.

Uneven green financing models also slow investment in renewable PPAs, advanced cooling systems, and retrofitting older facilities, especially in developing economies where capital costs are a significant constraint. The procurement of 24/7 or time-matched clean power is constrained not only by financing but also by the physical and regulatory limits of storage, grid flexibility, and site availability. Without policy incentives such as subsidies, tax breaks, and streamlined permitting, using clean energy continuously remains an ideal, not the norm.
The lack of common global reporting standards presents an additional challenge, limiting comparability and slowing collective progress.

Innovations and Industry Responses

Despite these challenges, promising innovations are reshaping the landscape. Direct-to-chip and immersion cooling technologies are reducing both energy and water intensity, with modular systems now helping datacenters achieve lower PUE. On-site power generation, often paired with battery and hydrogen storage systems, is enabling more resilient, grid-independent operations. Waste heat reuse projects in Europe are integrating datacenters into district heating networks, demonstrating how circular economy models can benefit communities. 

Meanwhile, new benchmarking tools are enhancing accountability by ranking operators on renewable adoption, transparency, and efficiency. A growing solution is the direct development of renewable assets, such as dedicated solar farms that supply clean energy exclusively to datacenters. Beyond ground-mounted installations, operators are also experimenting with solar-integrated building designs, including solar facades and rooftop arrays, to maximize on-site generation. These innovations, along with government incentives for colocation with renewable farms, signal how policy, design, and energy models are converging to shape sustainable growth.

The Collaborative Road Ahead

The road to green datacenters requires collective action across stakeholders. Datacenter operators must scale renewable integration and circular practices, governments need to streamline policies and offer financing incentives, and supply chains must adopt low-carbon design and recycling practices. With AI accelerating demand and sustainability imperatives tightening, the industry can reconcile its dual role as both digital backbone and environmental steward only through innovation, transparency, and cross-sector collaboration.