Navigating Water Challenges in Data Center Development: Insights from Womble Bond Dickinson Partner Damian Georgino

An Interview of Damian Georgino, Womble Bond Dickinson Partner, by Barlow Keener, Womble Bond Dickinson Data Center Team Co-Chair

Damian Georgino discusses the critical role of water in data center development and the challenges of managing this vital resource. He highlights the intricate relationship between water and energy and offers strategies for sustainable and efficient water use in data centers.

Barlow Keener: Damian, thank you for sharing your insights with us today. As a Womble Bond Dickinson attorney who advises clients on water-related issues, can you give us an overview of water's role in data centers and its broader economic implications?

Damian Georgino: Certainly, Barlow. Water is a critical yet often overlooked, for those who do not regularly work in the space, component in the development and operation of data centers. It is a scarce resource with a fixed supply and ever increasing demand — the same amount of water exists today as it did at the beginning of time, but our demands on it continue to grow. Water is used in every industry and is estimated to be a $1.0 trillion global sector, with its demand increasing at triple GDP rates. Unlike energy, where more power plants can be built, more water cannot be created. Ninety-seven percent of the world's water is in the oceans, leaving only a small fraction available for use, which makes it a precious and overexploited resource. This is particularly true for data centers, which are among the top ten water-consuming users due to their cooling systems on-site but that amount does NOT included the amount of water used in connection with any power generation facility for each data center (think, for example, the amount of water used for cooling towers in a fossil fuel or nuclear fuel powered generating facility). It is interesting to note, just as a reference point, that new large data centers use, on average, 5.0 million gallons per day of clean water which is about the same water usage for a community of 10,000 people (without large industrial users). So with the estimate of 1,000 – 2,000 new data centers needed in the immediate near future, the water needs are enormous particularly in water short cities, regions and basins.

Barlow Keener: Given water's scarcity, what should data center developers consider when planning new projects?

Damian Georgino: Developers need to evaluate the availability and source of water in their location. Options include groundwater, local utilities, or reservoirs, but all of these require treatment before use. The largest use of water in data centers is for cooling and chilling systems. This involves transforming source water into a usable (treated) form for these systems. When choosing a location, consider how much water you will need and where it will come from. Just to note, most water systems, particularly is those desert or water stressed areas, are challenged when a new large-scale development such as a data center is proposed (same is true, by the way, for chip/wafer manufacturing plants). Also, developers/owners of data centers should consider recycling, recirculating, and reusing water to minimize the draw on local supplies. It is crucial to assess the capacity of local water infrastructures, much like assessing energy availability, at the very early stages of data center development and site selection.

Barlow Keener: Can the water used for cooling data centers serve any secondary purposes?

Damian Georgino: Typically, the water used in cooling systems heats up and heat is technically a “pollutant” under U.S. EPA rules, so it must be cooled again. While it can theoretically be used for secondary purposes, such as connecting to power sources for energy generation, the practical secondary uses on-site are limited. It is more efficient to keep the water within a closed-loop system, continuously recycling it rather than continually drawing from local supplies. This is particularly important in regions where water is scarce and other users depend on the same resources.

Barlow Keener: How do energy and water interconnect in the context of data centers?

Damian Georgino: There is a significant nexus between water and energy. Data centers require both, and they must be considered together in planning. Cooling towers and other systems that support thermal electric energy sources use substantial water. Approximately 20 percent of water used in data centers comes from stressed watersheds. This interdependence means that you cannot focus solely on energy without considering the water implications. For example, co-locating energy and water infrastructures can optimize resource use and efficiency.

Barlow Keener: Can ocean water be used for cooling purposes in data centers, especially in coastal cities like New York?

Damian Georgino: Ocean water can be used after desalination, which removes salt and other impurities. Desalination technology has advanced significantly, but it remains energy-intensive, with up to 55 percent of desalination costs attributed to power depending on location. Using ocean water is possible but requires careful consideration of the costs and logistics involved in desalination and the infrastructure necessary to transport the water to the data center location.

Barlow Keener: You mentioned the term "co-location" in the context of data centers. Could you explain what that means?

Damian Georgino: Co-location refers to placing key infrastructures, like energy and water systems, adjacent to or near data centers. This concept is similar to distributed energy concepts, where resources are generated close to their point of use, minimizing the costs and inefficiencies of transporting them over long distances. This is known as distributed water, which is currently attracting a lot of attention from operators and investors due to the efficiencies and related financial benefits. For water, this means having treatment and supply systems on-site or nearby, ensuring clean and usable water is readily available for the data center's needs. Developers should note that water transportation infrastructure costs and associated capital should be considered as part of the development and on-going expense of any data center.

Barlow Keener: How can data center developers manage the financial aspects of water infrastructure?

Damian Georgino: Many developers are outsourcing water infrastructure to keep capital expenditures in check. This involves transferring the ownership and operation of water assets to specialized third parties, who manage these systems under long-term contracts. This approach leverages the expertise of water O&M specialists but also allows for the participation by infrastructure investors and aligns with public-private partnerships, allowing municipalities and private entities to share the burden and benefits of water management. Such private entity investments and structures are increasingly necessary given the speed at which these data centers are being developed and the lack of funding available in most municipalities. Generally, it is estimated that there is currently a $1.0 trillion funding gap for U.S. water infrastructure.

Barlow Keener: Finally, what are some sustainability considerations data centers should keep in mind regarding water usage?

Damian Georgino: Sustainability initiatives focus on recycling, recirculating, and reusing water to reduce environmental impact. Adopting these practices not only helps meet regulatory requirements but also supports broader ESG goals. By managing water use efficiently, data centers can contribute to sustainable and resilient development while maintaining operational efficiency. The Womble Bond Dickinson (US) LLP Data Center Team is committed to helping clients navigate these complex challenges, ensuring their projects are both economically viable and environmentally responsible.

Damian Georgino advises U.S. and international corporations, including Fortune 50 companies, financial institutions, private equity funds, and other investors in complex cross-border and international transactions involving energy, industrial/manufacturing, infrastructure, technology, water and wastewater, and natural resource projects. Damian is a member of Womble Bond Dickinson's Corporate and Securities, Private Equity, and Energy & Natural Resources Sector Teams and is the Head of the Water Subsector.

Barlow Keener is a member of Womble Bond Dickinson’s Communications, Technology & Media team. He has represented Fortune 100 companies and startups in handling areas of regulatory, transactional and corporate law experience in the tech sector, with significant telecom, spectrum, Internet, and privacy law experience. Barlow provides in-depth FCC regulatory analysis and transactional counsel for clients involved in investments in innovative FCC-related internet issues, spectrum matter, FCC satellite issues, high-altitude platforms (HAPS), fixed and mobile technologies, small cell technologies, long-haul fiber networks, and data centers.