Artificial intelligence is progressing rapidly, necessitating a reevaluation of how the energy-intensive servers driving this growth can coexist with — and utilize less from — the environment.

Data centers are fundamental to the internet, supporting nearly every digital service. However, these facilities demand vast amounts of energy and water, frequently viewed as undesirable and a strain on the communities that accommodate them. As more AI workloads are integrated into these centers, demands on power supply chains will escalate.

Simone Larsson, Lenovo’s head of enterprise AI, informed CNBC that a “tipping point” is approaching, beyond which current data center architecture will lose its efficacy.

Confronted with an impending digital infrastructure dilemma, technology giants and infrastructure developers are seeking sustainable and innovative solutions.

Conventional data centers are struggling to adequately support AI workloads and are not meeting sustainability objectives or regulatory requirements, as noted in the November report “Data Center of the Future”, conducted by Lenovo in collaboration with Opinium.

The report revealed that most IT decision-makers prioritize technology partners that minimize energy consumption, yet only 46% of respondents indicated that their existing data center designs aligned with sustainability targets.

To address these issues, Lenovo has partnered with architects from Mamou-Mani and engineers from AKT II to create data centers that better integrate with the environment and tackle energy constraints. The result: designs that place data centers underground in repurposed tunnels or bunkers, or elevate them to utilize around-the-clock solar energy.

In the proposed data villages, servers are arranged in a modular configuration close to urban centers, enabling excess heat from data centers to be redirected to supply local facilities such as schools or residences. Likewise, data center spas would repurpose surplus heat from data centers for wellness applications, with the heat produced by the spa potentially powering the data center’s cooling systems.

However, there’s a drawback: even Lenovo acknowledges that its designs may not be practical until 2055 or beyond.

The company stated that its study aims to provoke dialogue and recognized that substantial regulatory reforms would be essential before any designs could be implemented. Cost and engineering intricacies of certain concepts, along with legal and scalability issues, also present hurdles.

Adoption rates would differ significantly by region. For instance, the U.S. is more inclined to embrace large-scale, ultra-high-density campuses due to heightened demand, more available land, and a relatively accommodating regulatory landscape, according to Perkins Liu, senior research analyst at S&P Global’s 451 Research. Conversely, Europe is faced with a more restricted grid and stringent regulations, he noted.

However, it’s important to note that innovative data center designs are not entirely novel. In 2018, Microsoft launched an underwater, submarine-like data center at a depth of 117 feet below sea level to utilize the cooling advantages of seawater and tidal energy to ensure the project relied entirely on renewable power.

There are also numerous instances of operators repurposing heat from facilities to heat nearby housing. Last summer, excess heat from an Equinix data center was utilized to heat the Olympic swimming pools in Paris.

From Google’s “moonshot” Suncatcher initiative to Alibaba and Zhejiang Lab’s “Three-Body Computing Constellation” project, and to Nvidia‘s Starcloud — competition for orbital data centers is escalating. Smaller entities like Edge Aerospace and Loft Orbital are also investigating this technology.

This may sound like science fiction — indeed, Google refers to a short story by Isaac Asimov for inspiration regarding the concept of harnessing solar energy — but these ideas are being explored pragmatically by industry leaders.

The EU-supported ASCEND study, in conjunction with Thales Alenia Space, assessed the practicality of deploying centers into orbit using robotic technologies.

Thales Alenia Space is currently advancing the technology required for this endeavor, aiming to conduct an initial in-orbit demonstration mission by 2028. In November, Starcloud, the Nvidia-backed startup, launched a chip into space that boasts a performance level 100 times greater than any previously deployed GPU compute in space.

Since 2020, approximately 70 million euros ($82 million) of private investment has been poured into projects focused on space-based data centers, based on a report from the European Space Policy Institute (ESPI).

Nonetheless, in the short term, orbital data centers remain unattainable due to the substantial expenses associated with launching such equipment into space.

“Developing radiation-hardened hardware, managing cooling in the vacuum of space, and the exceedingly high cost of deploying large, power-efficient compute systems into orbit present significant challenges,” stated S&P Global’s Liu. Additional hurdles include maintaining reliable high-speed communication, mitigating space debris, and addressing maintenance challenges, he commented.

ESPI’s financial model for data centers relies on the successful reduction of launch costs by Starship to as low as $10 million.

“If you were to ask me currently, this seems unrealistic in the near term,” remarked Jermaine Gutierrez, research fellow at ESPI. “However, the long-term question pertains to whether innovations on Earth and the resulting cost reductions can outstrip the savings gained from establishing operations in space.”

Larsson from Lenovo emphasized that the visionary data center concepts prioritize coexistence and “symbiosis.” This includes utilizing some heat from the data centers for community benefit and other stakeholders involved.

James Cheung, partner at Mamou-Mani, shared with CNBC that another aim is to enhance the aesthetics of the facilities, preventing them from being perceived as “faceless mega-juggernauts of boxes.”

He elaborated on how the architects employed techniques such as biomimicry to discover how natural algorithms can reveal the most efficient methods for heat dissipation.

“We engage with [data centers] on a daily basis, through our computers and smartphones. Yet this gentle giant, quietly operating, exerts massive pressure on water and our resources,” he stated.

For many of these advancements to materialize, experts informed CNBC that regulations must be revised and new policies enacted to tackle the escalating energy demands posed by AI and data centers.

“Data center operators might choose to adopt eco-friendly technologies at their discretion, but financial justification is necessary,” said Liu from S&P Global. He added that the power grid must be modernized and renewable energy infrastructure rapidly established for this to come to fruition.

Snow totals were lower than previously predicted in the region, though both New York’s John F. Kennedy International Airport and New Jersey’s Newark Liberty International Airport logged more than four inches of snowfall, as reported by the National Weather Service.

Over 136 flights, representing roughly a fifth of the planned departures from Kennedy Airport, were canceled according to FlightAware. Additionally, 87 flights were canceled from LaGuardia Airport, which is about 20% of that day’s planned departures, while 72 flights, or 12%, from Newark were also called off.

On Friday, airlines scrapped more than 1,700 flights, many ahead of the storm. Only 27 U.S. flights were reported as canceled for Sunday, according to FlightAware.

American Airlines, Delta Air Lines, United Airlines, Southwest Airlines, JetBlue Airways and other airlines eliminated change fees for restrictive basic economy fares. They announced that they would not impose fare differences for other travelers flying in and out of numerous airports in the Northeast U.S.

Passengers are required to complete their travel by the year’s end if they alter their flights, according to the airlines. Opting for early travel is likely the best option given the scarcity of available seats during the hectic Christmas week.

Airlines for America, the representing group for the industry, projects that airlines will accommodate a record 52.6 million individuals from December 19 to January 5, with this Friday and Sunday being some of the busiest days.

Generally, airlines preemptively cancel flights in anticipation of significant weather events such as blizzards or hurricanes to prevent aircraft, connecting travelers, and crews from being stranded, thus minimizing disruptions.

Europe finds itself at a pivotal moment: engage meaningfully in the AI competition or adhere to its leading climate objectives.

“This is akin to a fork in the road for Europe,” remarked Wedbush Securities’ Dan Ives during a CNBC discussion. The union faces the choice of either “investing in the future” or risking the chance of “missing a significant aspect of this technology surge.”

The challenge is exacerbated by the region’s green energy mandates.

Worldwide, energy represents the primary obstacle for developing AI-related data center initiatives. While the U.S. activates fossil fuel plants to support its expansion, Europe mandates that developers reveal how they manage energy and water efficiency, creating bureaucratic hurdles that may delay project implementations.

The European Union is regularly praised for its proactive environmental policies and recent advancements such as the upcoming carbon border tax. However, critics claim it hinders business. The region has gained a reputation as “anti-entrepreneur,” according to Ives, prompting tech firms and startups from Europe to relocate to the U.S., Middle East, or Asia in search of more advantageous regulations.

As Europe strives to accelerate its efforts in the AI sector, the necessity for power-intensive infrastructure grows, and the demand for electricity escalates — making this dilemma increasingly difficult to overlook. The additional renewable energy capacity was meant to substitute higher-emission sources, yet there are emerging worries that the reality may differ.

“You can observe in the U.K. that we are already retracting some of our commitments,” Paul Jackson, regional Global Market Strategist at Invesco, expressed to CNBC – and Europe is likely to follow a similar path.

“This is a somewhat standard process that when conditions are favorable, it’s straightforward to convince individuals, companies, and governments to move in the right direction regarding issues like climate change and absorb some of the costs involved,” Jackson stated. Conversely, deprioritizing climate initiatives is one of the simplest actions legislators can take in challenging circumstances with conflicting interests, he added.

The U.K.’s energy grid has no coal, which is much more polluting than gas — whereas Europe’s grid still includes it.

“I’m concerned that, at some point, the closure of coal power plants might actually be delayed,” Jags Walia, head of global listed infrastructure at Van Lanschot Kempen, told CNBC.

Transitioning away from fossil fuels as renewables become available is viable when energy demand remains stable, but that is no longer the situation, he noted. Data centers also necessitate continuous connection, which means the variability of wind and solar could present challenges.

“In terms of electricity, we may not have the capacity to shut down coal power plants, which could pose significant difficulties for the energy transition and energy security as well,” Walia mentioned.

Throughout the year, Europe has reversed several environmental commitments.

On December 16, the EU diluted its effective ban on new combustion-engine vehicles set for 2035. On December 9, it allowed a one-year delay in the rollout of a new EU emissions trading system for buildings, road transportation, and small industries — while simultaneously vowing to reduce emissions by 90% by 2040.

Earlier this year, the Corporate Sustainability Due Diligence (CSDDD) and Corporate Sustainability Reporting (CSRD) directives were also limited and postponed.

A ‘pragmatic’ strategy

Some view these adjustments as necessary pragmatism rather than a withdrawal.

“We constantly find ourselves at the brink of reaching a point where it becomes so unappealing to operate in Europe that it is no longer justifiable. On the flip side, much of the regulation is critically needed,” stated Nick de la Forge, a general partner at the venture capital firm Planet A Ventures, which supports climate-focused technology startups, during a CNBC’s “Europe Early Edition” on December 11.

“Fortunately, what we observe is a fairly substantial revamping.”

The reform of directives, including the Sustainable Finance Disclosure Regulation (SFDR), which is currently under review, is remarkable, and we view this as a positive change,” De la Forge commented.

Proponents of AI advocate for the technology’s potential to enhance energy efficiency and promote sustainability, portraying it as both a challenge and a solution to the rising demands on the grid, and potentially justifying the investment.

“As AI evolves swiftly, its capacity to bolster Europe’s energy resilience and hasten the clean transition becomes increasingly evident. Concurrently, the escalating electricity requirements of AI technologies necessitate strategic, future-oriented planning,” stated a European Commission spokesperson to CNBC.

They indicated that the economic bloc “is fully poised to capitalize on these prospects while ensuring the stability and reliability of Europe’s energy framework.”

The Commission did not specifically respond to inquiries posed by CNBC regarding a rollback of sustainability legislation due to its AI initiatives or how it plans to achieve the new legally binding target. 

Instead, a spokesperson for the bloc made reference to the region’s preparations for a roadmap for employing AI in the energy sector, in sync with its broader Apply AI Strategy, which aims to expedite the technology’s deployment.

‘We’re somewhat in trouble’

If policymakers maintain stringent sustainability standards, AI infrastructure developers may instead counterbalance their emissions with carbon credits or renewable energy certificates. One credit signifies the removal of one metric ton of carbon dioxide or the prevention of one metric ton from entering the atmosphere.

AI hyperscalers “do still have their primary decarbonization objectives” but are reverting to measures such as these to reach them, noted Jim Wright, manager of the Premier Miton Global Infrastructure Income Fund. “Because, in reality, they will utilize certain gas, and may even rely on some coal,” he stated, referring to variations in energy grid compositions.

In January, when the U.K. revealed its AI Opportunities Action Plan — an ambitious framework to integrate the technology throughout society — Prime Minister Keir Starmer asserted that the strategy aims to transform the nation into an “AI superpower.”

A significant element of this initiative was the swift establishment of data centers equipped to handle the extensive computational demands associated with AI deployment. This would be facilitated by “AI growth zones” — specified areas where planning permissions are eased and power access is enhanced.

Almost a year later, Nvidia, Microsoft, and Google have pledged billions toward AI infrastructure in the nation. Four AI growth zones have been announced, and local startups like Nscale are rising as important figures in the field.

However, detractors highlight heavily restricted energy access through the national grid and sluggish development as indicators that the country may fall behind its global competitors in the AI competition.

“There’s a disconnect between aspiration and execution,” remarked Ben Pritchard, CEO of data center power provider AVK, in an interview with CNBC.

“Expansion has been stunted mainly due to limitations on power accessibility. Grid congestion, in particular, has decelerated development and means the U.K. isn’t rolling out infrastructure swiftly enough to match global contenders.”

The journey of developing AI infrastructure in the U.K. is still in its early stages, as AI growth zones are presently in initial development stages.

A location in Oxfordshire, the first to be disclosed in February, has not yet commenced construction and is still evaluating proposals from delivery partners. Preliminary site preparation has started in one area in the North East of England, revealed in September, with formal construction expected to kick off in early 2026.

Two additional sites in North and South Wales were introduced in November. The North Wales site is in search of an investment partner, which the Department of Science, Technology and Innovation (DSIT) indicated to CNBC is anticipated to be confirmed in the coming months. The South Wales site consists of several locations, some operational while others are slated for further development, according to DSIT.

The U.K. government stated in July that it aimed to establish a core set of AI growth zones catering to a minimum demand of 500 megawatts by 2030, with at least one growing to over one gigawatt during that period.

Yet the most significant obstacle in achieving those goals is the U.K.’s constrained grid capacity, Pritchard asserted.

“Developers anticipate grid connection delays between eight to ten years, and the number of pending connection applications, particularly around London, is unprecedented,” he informed CNBC.

AI workloads are also “significantly escalating energy requirements” as businesses and consumers increasingly utilize the technology, adding further strain to an already stretched energy framework, Pritchard noted. “These are no longer isolated threats; they are actively hindering or obstructing developments nationwide.”

The outreach for applications for the AI growth zone initiative created a scenario where landowners with transmission lines or power cables running through their properties sought designation, commented Spencer Lamb from Kao Data.

“This led to the national grid being overwhelmed by power grid applications from speculative entities,” with little chance of actual success, he stated to CNBC.

The National Energy System Operator (Neso) — the U.K.’s agency in charge of overseeing the national grid — has taken steps to address the issue.

This month, it disclosed intentions to fast-track numerous projects to gain quicker access to the grid. Neso refrained from commenting on whether AI infrastructure projects are included in those prioritized when questioned by CNBC but stated a significant portion involved data centers.

Considerable financial commitments have also come from technology giants, many of which were highlighted by the U.K. government in September.

Microsoft, Nvidia, Google, OpenAI, CoreWeave, and others proclaimed multi-billion dollar investments in AI during U.S. President Donald Trump’s state visit, including plans to deploy the newest chips in the nation and set up new data centers.

The homegrown startup Nscale, which facilitates access to AI computing and is constructing data centers, also revealed agreements to implement tens of thousands of Nvidia chips at an AI facility just outside London by early 2027.

“Investment from leading private entities has established crucial groundwork,” stated Puneet Gupta, general manager for the U.K. and Ireland at data infrastructure firm NetApp, in an interview with CNBC. “There is also growing momentum regarding national research supercomputers and plans for additional computing capacity, with pledges to create AI ‘gigafactories’ in the U.K.”

However, the “real challenge” will be the speed at which these plans convert into usable computing resources for U.K. businesses, Gupta remarked.

The long-term success of the nation’s AI infrastructure development will necessitate investing in the “full stack,” encompassing data pipelines, storage, energy procurement, security, talent, and skills, according to Stuart Abbott, U.K. and Ireland’s managing director at AI infrastructure company VAST Data, in his comments to CNBC.

This requires “creating an operational network that allows genuine institutions to implement AI securely on a large scale,” he continued. “If the UK aspires for sustainability over a fleeting surge, it must regard AI infrastructure as akin to economic infrastructure.”

The hurdles are considerable. The financial figures for data center deals in Europe pale in contrast to the amounts funneled into U.S. initiatives. The U.K. also currently endures the highest energy costs in Europe, which are approximately 75% higher than pre-Russia invasion of Ukraine levels, alongside an aging grid infrastructure that may take many years to connect to new sites.

A potential answer for projects unable to secure access to the national grid involves microgrids, according to AVK’s Pritchard. Microgrids are self-sufficient power networks drawing energy from sources such as engines, renewables, and batteries.

AVK is in the process of designing two microgrids for collaborators constructing cloud computing facilities, although not for AI, within the U.K. These can take around three years to establish and typically cost about 10% more than energy supplied from the grid at this point, Pritchard explained.

Locating computing resources where power is already available, instead of “relying solely on undeveloped sites,” is another method to expedite the establishment of AI infrastructure, remarked VAST Data’s Abbott.

The speed of execution will be essential, Lamb from Kao Data warned CNBC. “Unless fundamental issues around energy accessibility and pricing, AI copyright, and funding for AI initiatives are addressed swiftly, the U.K. will forfeit one of the most extraordinary economic chances of our era and ultimately risk becoming a global AI backwater.”