The Hidden Resource: Data Center Water Consumption in Drought-Prone Regions

As power dominates the data center conversation, water — the other critical resource — is increasingly constraining site selection and operations.

When stakeholders evaluate data center feasibility, power capacity dominates the discussion. But there is a second resource constraint that is quietly becoming a deal-breaker in drought-prone regions: water.

A 100 MW data center using evaporative cooling consumes approximately 1–5 million gallons of water per day — comparable to a small city of 5,000–15,000 residents. In regions like Arizona, California, Nevada, and Texas, where drought cycles are intensifying and groundwater is being depleted, securing a reliable water supply for a hyperscale campus can be as difficult as securing grid interconnection.

How Much Water Does a Data Center Actually Use?

Data center water consumption varies dramatically by cooling technology and climate. The industry standard metric is water usage effectiveness (WUE), measured in liters of water per kilowatt-hour of IT energy consumed (L/kWh).

Note: WUE varies by ambient temperature and humidity. Warm, dry climates require more evaporative cooling water. Source: Uptime Institute, US DOE.

The critical insight: a 100 MW facility using evaporative cooling in Arizona might consume 4–5 million gallons per day during summer months. The same facility using advanced liquid cooling might use 10–20x less water, but requires more capital investment and different facility design.

The Southwest Water Crisis and Data Centers

Several major data center markets overlap with drought-prone regions facing structural water scarcity:

Phoenix, Arizona

Maricopa County, home to Phoenix and the surrounding metro area, has become one of the fastest-growing data center markets in the US. But the region also faces a fundamental water challenge: the Colorado River — which supplies about 36% of Arizona's water — is in a structural deficit, with total reservoir storage at the lowest levels since Lake Powell and Lake Mead were filled.

Arizona's 1980 Groundwater Management Act requires that new developments in Active Management Areas (which include Phoenix) demonstrate a 100-year assured water supply. This requirement is now being tested by data center projects seeking multi-million gallon per day water allocations. The Arizona Department of Water Resources has begun scrutinizing data center water applications more closely, with several projects facing delayed approvals or being required to shift to dry cooling technologies.

Las Vegas, Nevada

The Southern Nevada Water Authority (SNWA), which supplies Las Vegas, has had considerable success in reducing per-capita water consumption through conservation mandates. But data center growth is putting pressure on the system. SNWA requires data center projects to demonstrate that their water use will not exceed the "reasonable" standards of conservation. Several large projects have been encouraged or required to adopt closed-loop or dry cooling systems.

California (Bay Area and Los Angeles)

While California data centers have increasingly shifted toward water-efficient cooling, the state's multi-year drought cycles create ongoing regulatory risk. A data center operating with evaporative cooling during a wet year may face mandatory water use restrictions during drought years. This regulatory uncertainty complicates long-term capacity planning.

Texas

Texas data center growth in Dallas/Fort Worth, Austin, and San Antonio — tracked extensively on our markets page — has raised water concerns in several regions. The 2024–2025 drought in Texas led to voluntary water restrictions in several municipalities. A 500 MW data center campus in the Permian Basin or West Texas faces both power and water constraints.

Water vs. Cooling Technology Tradeoffs

The choice of cooling technology involves complex tradeoffs between water consumption, energy efficiency, capital cost, and density:

• Evaporative cooling is the cheapest to install and most energy-efficient for cooling, but consumes large volumes of water. Best suited for humid climates where less evaporation is needed, or in regions with abundant, low-cost water.
• Chilled water systems consume less water but more electricity (for chillers and pumps). They are the standard in most commercial data centers and offer a reasonable balance of cost and water efficiency.
• Direct-to-chip liquid cooling reduces facility-level water consumption significantly and enables higher rack densities (40–60 kW/rack vs. 15–25 kW/rack for air cooling). However, it increases capital cost and requires different facility design.
• Immersion cooling essentially eliminates facility water consumption and supports the highest densities (100+ kW/rack). It is the most expensive option and remains relatively niche, but is gaining traction for GPU-heavy AI workloads.

Water Recycling and Zero Liquid Discharge

An emerging trend is the adoption of water recycling systems and zero liquid discharge (ZLD) technologies. Several hyperscale operators are now installing on-site water treatment systems that treat and reuse cooling water multiple times, reducing makeup water requirements by 50–80%.

Google, for example, reported that 82% of its water use in 2024 came from non-potable sources (reclaimed water, brackish groundwater, or harvested rainwater). Microsoft has committed to replenishing more water than it consumes by 2030, including through watershed restoration and water efficiency projects.

Regulatory Trends

Water regulation of data centers is tightening across drought-prone regions:

• Arizona: Loaded with a 100-year assured water supply requirement that is being enforced for data center projects
• Nevada: Conservation plans required for data center water connections
• California: Mandatory water use reporting for large industrial facilities, including data centers
• New Mexico: Growing scrutiny of groundwater extraction for data center cooling in the Albuquerque area
• Oregon: The data center-heavy Dalles region has water rights disputes between agricultural users and tech companies

Key Takeaways

• A 100 MW evaporative-cooled data center consumes 1–5 million gallons of water per day
• Water availability is a growing constraint in Arizona, Nevada, Texas, and California
• Advanced liquid cooling can reduce water consumption 10–20x compared to evaporative cooling
• Water recycling and ZLD systems are being adopted but add capital cost
• Regulatory scrutiny of data center water use is increasing in drought-prone states
• Water rights can take years to secure — equal to power interconnection in timeline