Material Insights · Understanding the Material World

Data centres and Heat pumps, air conditioning and refrigeration

Almost every watt a server draws becomes heat, so cooling machinery (chillers, compressors and air handlers) uses a large share of a data centre's power: 30 to 55% of energy by some estimates. As data centre demand heads towards about 945 TWh by 2030, cooling efficiency and the reuse of waste heat through heat pumps become central to both industries.

Data centres (energy) and Heat pumps, air conditioning and refrigeration (energy): 4 relationships.

How they are linked

1. Cooling the server halls

Physical flow · Strong · Heat pumps, air conditioning and refrigeration → Data centres

Chips turn their electricity into heat, and chillers, compressors and fans must move that heat outdoors to keep the equipment within its temperature limits.

  • 30 to 55% share of data centre energy used for cooling, range of estimates
  • 1.54 average power usage effectiveness (PUE), 2025, little changed for six years
  • 3% share of cooling equipment's energy flow going to data centres in the site's data

A PUE of 1.54 means about 0.54 kWh of overhead, mostly cooling, for every kWh reaching the IT equipment; modern sites range from about 1.1 to 1.8. Air-cooled chillers are the most common heat rejection system (35% of surveyed sites in 2025), servers take about 60% of data centre energy, and liquid cooling could roughly halve the sector's energy use, but direct liquid cooling adoption is still gradual.

Sources: International Institute of Refrigeration; Uptime Institute; Uptime Institute; Down To Earth (IEA Energy and AI); Material Insights (Energy Institute, IEA data)

2. AI load lifts cooling demand

Transition · Rising · Data centre growth → demand for cooling equipment

Every megawatt of new computing needs matching heat rejection, so the build-out of data centres is a fast-growing market for chillers and cooling systems.

  • 415 TWh data centre electricity use in 2024
  • about 945 TWh IEA projection for 2030
  • over 4 GW IT India's data centre capacity expected by 2030, from 1.5 GW at end-2025

Denser AI racks push operators from air to liquid cooling, which changes what cooling suppliers sell rather than removing the need for heat rejection. Mumbai and Chennai took 70% of India's data centre absorption in 2025, and their hot, humid climates tend to raise the cooling load per megawatt.

Sources: Down To Earth (IEA Energy and AI); The Tribune (Savills India)

3. Waste heat into heat pumps

Joint production · Weak · Data centre waste heat → heat pumps → district heating

Data centre heat is low grade, but heat pumps can raise its temperature enough to feed district heating networks, turning a cost into a product.

  • about 40% share of Espoo's yearly district heat demand of 2 TWh planned from Microsoft data centre heat
  • 250,000 heat users in the Fortum network area

The Espoo scheme pairs data centres with Fortum heat pump plants and electric boilers. Liquid-cooled halls give warmer return water and so more potential for heat recovery, but the model needs a nearby heat network, which most data centre locations, including India's, lack.

Sources: International Institute of Refrigeration; DatacenterDynamics; City of Espoo

4. Price link: cooling

Cost and price · Strong · Both ways

The site tracks data centres through the US commercial electricity price and cooling through the US price index for air-conditioning and refrigeration equipment, and both respond to the same US cost cycle.

  • 0.18 monthly change correlation, US commercial power price and cooling equipment price index
  • 0.72 12-month change correlation
  • 0.62 fitted elasticity

The yearly link is mostly a shared US price trend rather than a direct pass-through, and month to month the two barely move together. It would weaken if cooling equipment costs diverged, for example through refrigerant rules or compressor supply.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. Cooling is the largest overhead in data centre energy use and average PUE has barely moved from about 1.54 for six years, so gains now depend on liquid cooling and new designs rather than incremental tuning.
  2. Data centre electricity is projected to more than double to about 945 TWh by 2030, a large and growing market for chillers, heat rejection and liquid cooling systems.
  3. Waste heat sales through heat pumps can earn revenue only where a heat network exists nearby, so they suit northern Europe far more than most other markets.

What to track

  • Average data centre PUE: A falling PUE signals cooling efficiency gains and lower energy cost per unit of compute (Annual · Uptime Institute Global Data Center Survey)
  • Liquid cooling share of new capacity: Shows the shift from air chillers to liquid systems (Quarterly · supplier results (e.g. Vertiv), industry surveys)
  • Data centre electricity demand: Sets the scale of the cooling market (Annual · IEA)

For policymakers

Key learnings

  1. In hot countries cooling makes data centres more power-hungry, so efficiency standards for cooling matter for India's grid as its capacity heads to over 4 GW IT by 2030.
  2. Reporting PUE and water use as conditions for new sites would reward efficient cooling designs.
  3. Requiring heat recovery where heat networks exist, as in Espoo, turns data centre waste heat into a local heat supply.

What to track

  • India data centre capacity and power draw: Shows the growth of a new peak load for state grids (Half-yearly · Savills, JLL, state utilities)
  • PUE disclosures by operators: Low reported PUE signals efficient cooling (Annual · company sustainability reports)

India

India's data centre capacity reached about 1.5 GW IT at the end of 2025 and is projected to pass 4 GW by 2030, mostly in Mumbai and Chennai, where hot humid climates make cooling a large part of power use.

Sources

  1. AI set to drive doubling of electricity demand from data centres, International Institute of Refrigeration (2025)
  2. Data center cooling (field survey results), Uptime Institute (2025)
  3. Uptime Institute Global Data Center Survey 2025, Uptime Institute (2025)
  4. Energy demand for data centres to double by 2030, AI biggest driver: IEA, Down To Earth (IEA Energy and AI) (2025)
  5. India data centre capacity more than doubled to 387 MW in 2025, projected to triple by 2030: report, The Tribune (Savills India) (2026)
  6. Fortum starts operations at two heat pump plants tied to Microsoft district heating scheme, DatacenterDynamics
  7. Using waste heat from a new data center to cover 40% of Espoo's district heating needs, City of Espoo (2024)
  8. Energy flows, Material Insights, Material Insights (Energy Institute, IEA data)
  9. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)