Data centers guzzle Arizona's water and power. We calculated how much

xAI, a company owned by billionaire Elon Musk, about a year and a half ago established a supercomputer in Memphis, Tenn., where Vidales attended college. The facility, she said, brought "suffocating smog and pollution."

She didn't want it to happen again in Phoenix, her hometown. So, as city leaders considered whether to adopt a new zoning ordinance on data centers, she took to the podium to support it. She urged officials to protect the local power grid and water supply.

"Please pause the spread of data centers in our desert communities," Vidales said, adding that she was especially concerned about the industry's effect on neighborhoods largely populated by Black and Latino residents. "Arizona's future depends on it."

The facilities form the physical backbone of modern computing. Their owners are flocking to the desert, which they view as fertile ground for their digital infrastructure.

Their proliferation is tied to an artificial intelligence boom that some executives are calling a new industrial revolution. It's all poised to happen in Arizona — but it will use massive amounts of the state's water and power.

The Arizona Republic used air quality records to estimate exactly how much energy could be guzzled by data centers in Maricopa County, where The Republic identified 71 data center campuses planned or operating.

The Republic found that data centers already operating in the region have a combined capacity of at least 2.3 gigawatts. That's enough power to serve a medium-sized city composed of 300,000 to 500,000 homes.

Planned data centers could bring at least 8.5 additional gigawatts onto the local grid. That's roughly equivalent to the amount of power it takes to serve 1.3 million to 1.9 million homes. Phoenix has about 630,000 housing units; the broader metro area has a little over 2 million homes.

In total, the low-end estimates show the local data center industry is likely to gobble up nearly 11 gigawatts of grid capacity in coming years. That figure accounts for what's already on the grid, as well as new data centers identified by The Republic as under construction or planned for the area.

That suggests the state's largest utilities could see energy demand nearly double as a result of the sector. Arizona Public Service Co. reported an all-time high load of 8.5 gigawatts as daily temperatures hit 118 degrees last summer at Sky Harbor International Airport — a number that included energy demand from Flagstaff, Yuma and other areas of the state. Salt River Project delivered 8.3 gigawatts of energy on that same day. Both figures are inclusive of the data centers already on the grid.

Data centers' water use for cooling varies drastically; the facilities can range from water guzzlers to negligible water use. A large-scale data center using evaporative cooling can use as much as 4 million gallons a day; some data centers, using energy-intensive air-cooled systems with closed loop, claim to use less than 10 million gallons a year. Both have indirect water uses for their electricity needs.

In Maricopa County, according to two water market analysts estimates, data centers' water needs for cooling and power generation are similar to the annual use of 36,000 to 40,000 homes — or 20 Arizona golf courses.

“There is a misconception about data centers using so much water. Some use a ton of water, some don't. But it's hard for us to draw conclusions because of the (companies') lack of transparency,” said Amber Walsh, an analyst with Bluefield Research, a water market research company. Her research suggested that in 2025 data centers across the state took some 10,200 acre-feet from local water systems.

A different analysis by Ceres, a nonprofit informing investors of sustainability issues, estimated Phoenix area data centers' annual water needs alone require 10,078 acre-feet, including indirect water needs for power. That number could balloon in six years to nearly 56,000 acre-feet a year if all planned data centers go online, and add up to a 32% increase in annual water stress. An acre-foot of water is enough to supply three to four houses a year in the Southwest.

There are other big water users and sectors that contribute to water stress, said Kirsten James, Ceres' senior program director for water. "But the exponential growth of the data center industry really deserves a deeper dive into their water demand."

New technologies are on the horizon. The semiconductor industry is working to develop smaller, more energy-efficient chips with greater processing capacity. But it's unlikely to significantly affect data centers' overall energy use because the industry is growing so rapidly.

"We’re at this sort of bubble point, where you're seeing the technology use a lot more resources than it will in five years," said David Ebert, chief artificial intelligence and data science officer at the University of Arizona.

The Republic was not able to determine how many data centers use air-cooled systems, rely on evaporative cooling, water towers or chillers, or have closed-loop water systems. Some data center operators publicly disclose information about the cooling systems in their facilities, but most do not.

More advanced cooling technologies, such as direct-to-chip cooling, are becoming commercially viable. Meanwhile, many data center operators are swapping from open cooling systems that constantly use new water to closed-loop cooling systems that recirculate chilled water within a sealed pipe network, removing heat from servers with minimal evaporation.

Dan Diorio of the Data Center Coalition, a membership association for the industry, said operators have incentive to pursue sustainability. Electricity is a "top cost" for the facilities, he said, and they often face "external pressures" to minimize power and water use.

"I think the industry is moving really, really rapidly in its efficiency efforts," he said.

But the industry will still require vast power and water resources, utility officials, local leaders and experts anticipate. That has residents across the state concerned that the facilities could drive up their electricity rates, suck the desert dry and contribute to pollution and climate change.

"Everywhere these data centers go, there are huge rate spikes," said Lee Ziesche of Tucson, a vocal opponent of a controversial data center proposal in Pima County.

How could data centers affect Arizona's water, power resources?

Experts generally agree that power is a more immediate concern than water when it comes to data centers in the desert.

That might seem counterintuitive. But Sarah Porter, director of Arizona State University's Kyl Center for Water Policy, said most data centers are setting up shop within urban areas, served by designated water providers.

Those utilities have to periodically prove to state regulators that they have sufficient water supplies to meet long-term demand. That's a very different standard than simply digging a well and pumping out water.

"You're fitting these data centers into your existing systems and making sure that there's no negative impact on any other customers," said Frank Metzler of Epcor, a designated water provider that serves several large data centers.

Porter said the trend means that data centers are unlikely to affect the long-term water resilience of the state anytime soon.

"We don't see an uptick in well permits so far," she said. "Could they start doing it? Sure. But right now, we're not seeing that."

The industry's impact on the power grid is somewhat more complicated. Serving up the amount of energy that data centers require will entail a complete overhaul of the transmission system and adding lots more power generation.

That's led to long waitlists for service in the Phoenix area — much to the frustration of data center operators, who see growing demand for their facilities.

At times, some have discussed building off-grid natural gas plants, solar arrays and battery systems by their facilities. A data center currently proposed in Surprise would build an adjacent gas-fired power plant, and another potential project in Eloy would include solar power, battery storage and a gas plant. But so far, no operating data center has taken that step.

There are also questions around what types of resources utilities should add to the grid. Some data center operators have pledged to back renewable generation projects, but utility experts say those technologies are not yet capable of providing all of their power.

Solar fields can't produce electricity overnight, and batteries are not yet powerful enough to deploy large amounts of energy for more than a few hours — but a data center needs power around the clock.

Instead, the state's largest utilities are investing in a mixed generation portfolio. That includes renewables, but also natural gas plants and other resources that use fossil fuels, which are linked to climate change.

The utilities have reduced their overall emissions by retiring coal-fired power plants, which produce significantly more pollution than gas turbines. Still, the trend has concerned environmentalists, who see the generation facilities as long-term investments that will belch contaminants for decades.

Some facilities can claim to be entirely green — at least, on paper. Often, those operators are funding the development of new solar, wind or hydropower resources, which add clean power to the grid to offset their usage of other generation types.

But Dan Dreiling, senior director of customer strategy at Salt River Project, said it's "impossible" for others to be entirely clean.

"It's really unique customer by customer," he said, adding that the utility doesn't always have enough renewable sources available to provide the amount of power that a data center demands. "Sometimes we're able to accommodate that, and sometimes we're not."

Down the road, that could have implications for the industry's water use. The two resources are widely considered intertwined. While some of a data centers' water use is direct, much of it also comes from power generation — and renewables use far less water than other generation methods.

Porter, of the Kyl Center, said it's worth keeping an eye on utilities' water intensity. That metric tracks the amount of water used relative to energy output at power plants.

But she said it isn't currently a worry. For years, the metric been moving downward for the state's large utilities — partly driven by the retirement of water-intensive coal plants. Plus, power generation is a relatively small water user in Arizona. It currently represents just 3% of total water demand.

On the energy side, some see promise in nuclear power. Arizona is home to Palo Verde Nuclear Generating Station, which provides about 30% of the state's energy.

But new nuclear generation is expensive and heavily regulated. The state's largest utilities — Arizona Public Service Co., SRP and Tucson Electric Power Co. — are exploring adding such resources to the grid, but it likely will take decades for those efforts to come to fruition.

"Nobody has come to us and offered to pay for a new nuclear plant," said Jacob Tetlow, executive vice president and chief operating officer at APS.

Who pays for what?

The statewide energy transformation required for data centers stands to be costly, and government and utility officials are increasingly concerned with who might end up holding the bill.

Dreiling said three types of infrastructure make up most of the expenses associated with serving the facilities.

The process of serving power begins with generating it at a plant. Then transmission equipment carries the energy from its source to its approximate destination. Finally, substations regulate power flow to safely deliver electricity to each customer. Most substations can serve many customers, but some data centers are so large they require their own.

At SRP, officials are conducting studies on how much new transmission and substation infrastructure to serve data centers will cost. It's then hitting operators stuck on its waitlist with estimates for the full cost of installing that equipment. They must pay that bill to move forward.

Last year, SRP also updated its rates for so-called "large load customers." It adjusted the charges to ensure it was recovering the costs of building new energy plants and began imposing energy minimums, meaning certain customers are now charged for a minimum amount of power that they commit to using monthly, even if they actually use less.

Meanwhile, APS is asking utility regulators to greenlight new charges for large power-hungry customers in its upcoming rate case.

Like SRP, it has begun imposing energy minimums. Plus, it recently unveiled a new subscription model for the second phase of a new natural gas plant near Gila Bend. Large users would pay for that phase of the project in its entirety, signing long-term contracts covering construction costs and absorbing financial risks associated with building new power generation.

Patrick Bogle, director of data center strategy at APS, said that would allow the utility to accelerate new infrastructure and serve data centers without shifting costs to residential customers. It would offer the owners and developers of such facilities an opportunity to get served faster and lock in electric rates for decades.

At times, the changes from utilities have drawn complaints from operators. Some believe data centers are being singled out from other large customers. Other data center operators say the large construction bills coming from utilities make it virtually impossible for them to set up shop if they aren't being backed by a large technology company.

Diorio, of the Data Center Coalition, said the industry was committed to "paying our full cost of service for electricity," but that costs should be "allocated and isolated appropriately." He added that data centers could help lower rates for everyone by ensuring other customers aren't paying for unused infrastructure.

"When you get new large users onto the system, you're able to spread the fixed costs out onto higher energy users," he said. "So, you are able to see downward pressure on rates. We've seen utilities throughout the country acknowledge that."

But Kelly Barr, associate vice president at Arizona State University's Global Futures Laboratory, said advanced manufacturing plants, big box stores and other commercial enterprises have markedly different energy use patterns than data centers. Those facilities don't suck large amounts of power at all hours of the day.

She said data centers can cause electricity rates to drop, but only when there is excess overhead in the system. Right now, APS and SRP don't have enough room to bring new large data centers onto the power grid. She said that creates a "reasonable question" about whether adequate protections are in place to protect residential ratepayers from the costs of the data center boom.

"You may have a problem for existing customer bases," said Barr, who spent decades working for SRP. "So that's why you now see the utilities saying, 'Hey, you're going to upfront all the costs.'"

Several entities are intervening in APS' rate case. Those include Microsoft, which is one of its largest customers. Bobby Hollis, vice president of energy for the company, said in a statement it would advocate for rates that ensure it "pays its fair share" during the upcoming case.

Attorney General Kris Mayes is also among the intervenors. She is arguing that the utility isn't doing enough to prevent data centers from driving up Arizonans' energy bills.

"Their proposal they made is not adequate to do the job," said Mayes, a Democrat, at a town hall last year in Sun City West. "Those rates and the share that they are asking data centers to cover should be increased to minimize the impact on consumers."

Tetlow, of APS, said the utility is "aligned philosophically" with Mayes. He said commercial growth should pay for its own infrastructure.

"We would be open to dialogue around how you get that right," he said.

How do data centers' sustainability promises stack up?

How much water or energy data centers use varies wildly across the industry.

Some data centers have operated for decades using water-intensive evaporative cooling, while others are investing in air-cooled systems. The former requires new water to be added frequently, the latter uses more power. However all cooling systems require a second loop to take the heat out of the air or water running by the servers. Some do it with chillers, some with cooling towers or both.

But tech giants are competing in an artificial intelligence race that will grow more resource-intensive. Future data centers will use more advanced chips, require more power and generate more heat.

Closed-loop and air-cooled systems won't be able to keep up with future data center needs, said Renkun Chen, who researches heat transfer and cooling at the University of California San Diego.

Instead, Chen said future data centers are likely to run on "direct-to-chip" liquid cooling systems. The term refers to a cooling technique in which specialized liquids flow through conductive plates attached directly to hot computer chips, absorbing heat at the source before returning to a chiller and recirculating.

The technology is mostly used in national labs and government facilities, not commercial data centers. It can make cooling systems up to 70% more energy-efficient.

Chen is working on developing a porous membrane that could boost that figure. As the liquid moves through conductive plates and heats up, it evaporates inside the membrane. The vapor is then routed to a condenser, turned back to liquid and recirculated.

His team expects they can have a commercial product in two to three years.

The developing technology goes hand in hand with tech companies' plans for expansion and chip advancement. The industry would get more efficient, but with projected growth, it wouldn't use less resources.

"Less resources is not their business goal. Their business goal is to make more money," said Masheika Allgood, founder of AllAI Consulting, a group that promotes the ethical use of artificial intelligence and tracks environmental impact of data centers.

In 2019, the city of Mesa approved a deal to provide 1 million gallons a day to a Google data center, with the option to scale to 4 million gallons a day. Google considered water cooling the planned center until it concluded the water source in Mesa was "at high risk of depletion and scarcity." and opted for air-cooling technology. A Google spokesperson said they won't use the full amount of water under the agreement but "can’t speculate on future water use." The site is not operating yet.

Microsoft, which owns several data center campuses in the West Valley, has committed to installing closed-loop cooling systems in future facilities. About half of the company's data centers in Arizona already have such technology, but others are running on systems that continuously use new water when outdoor temperatures are over 85 degrees.

It also aims to replenish more water than it uses for its facilities. It already works with local utilities to provide leak detection software that helps prevent water loss in communities with its data centers. In Arizona, it also recharges much of the water used at its facilities into the aquifer it came from via a program with Epcor, its water utility.

Hanna, of Microsoft, said technology giants have a duty to push forward on sustainability. He said the companies have enormous buying power.

"This is the first time we’ve had the hubris to declare that we’re in the midst of the fourth industrial revolution," he said during his 2021 webinar. "And if we can’t look back in 50 years and say we did it right, then shame on us."