The rapid proliferation of data centers is transforming the energy landscape in the United States. As demand for artificial intelligence and digital services surges alongside the electrification of other sectors and a resurgence in domestic manufacturing, utilities are racing to expand their power generation capacity—frequently by proposing new natural gas power plants. Yet this conversation has largely overlooked a key opportunity to reduce data centers’ energy consumption: reusing the heat they produce.
By capturing and repurposing this waste heat in nearby factories and buildings—rather than using additional energy to cool data centers—facilities can reduce their power demand by 10 to 30%. This approach not only improves data center efficiency but also lowers costs and carbon emissions for those utilizing the recovered heat and reduces the overall demand for grid electricity.
Europe is far ahead of the United States in seizing this opportunity with dozens of heat reuse projects across the region, including a Google project in Finland, a Microsoft project in Denmark, and, perhaps the most widely publicized, an Equinix project to heat the Olympic swimming pool in France.
Part of what has held back development of heat reuse in the U.S. is an absence of policy to help drive development of these projects. Fortunately, this has begun to change recently.
During the final days of his administration, President Biden issued an Executive Order to spur the development of Artificial Intelligence, which included several proposals to accelerate data center heat reuse. For example, data centers interested in building on federal lands would be required submit a plan for maximizing energy, water, and other resource efficiency, and the Order specifically cites plans for “waste-heat utilization in constructing and operating the AI data center at the site” as a way to meet this efficiency goal. It further directed the Secretary of Energy to expand research and development efforts into the beneficial use cases for data center waste heat and established a “grand challenge” to solicit proposals for best practices in data center heat utilization.
While President Trump overturned the Biden Executive Order, these proposals on data center heat reuse deserve bipartisan support, as they contribute to making America more competitive and addressing the urgent challenges of delivering the power our data centers and factories will need.
Policies to accelerate data center heat reuse have gained traction among state policymakers, and there many ways that state and local leaders can take up these initiatives themselves.
Virginia—which has the highest concentration of data centers in the world—has also demonstrated interest in making data centers more efficient, including through waste heat utilization. In January 2025, Delegate Richard C. (“Rip”) Sullivan introduced legislation directing the Commonwealth’s Department of Energy to identify opportunities for data center waste heat reuse, create an interactive map of data centers and potential heat users, develop a strategic plan, and convene a stakeholder group. However, the legislation ultimately failed.
Other states are spurring investment in key enabling infrastructure for data center waste heat reuse with policies for thermal energy networks. In July 2022, New York passed the Utility Thermal Energy Network and Jobs Act, which sought to decarbonize buildings by directing utilities to pilot thermal energy networks—essentially district energy systems—under the regulation and authority of the Public Service Commission.
Con Edison’s thermal network pilot project demonstrates this; it will transport data center heat one block to a central heat pump plant that services a New York City Housing Authority community in the Chelsea neighborhood of Manhattan.
Eight other states— California, Colorado, Massachusetts, Maryland, Minnesota, Washington, and Vermont—have passed similar legislation and could use those tools to help accelerate data center heat reuse.
As data centers continue to expand, reusing their heat presents a promising opportunity to improve data center energy efficiency, cut power demand, and lower carbon emissions. State governments are beginning to see the opportunity here and all levels of government should step up their efforts to integrate data center heat reuse into their strategies to address rising power demand.
