Artificial intelligence is fueling an unprecedented surge in data center development—and a growing backlash over the water and power those facilities consume. According to a 2024 McKinsey analysis, global demand for data center capacity could more than triple by 2030, driving continued investment into the massive server farms that power the digital economy.
That backlash is already shaping policy. During various 2025 state legislative sessions, lawmakers in 34 U.S. states introduced at least 149 bills targeting data centers’ energy, environmental, and economic effects.
The question facing the real estate industry now is how to meet demand for data centers in ways that mitigate harm to their host communities, especially when it comes to sharing limited fresh water.
To tackle this question, on February 11, 2026, ULI’s Water Wise Development Coalition convened land use and real estate professionals alongside public sector decision-makers. The panel explored best practices for data center water and energy use and compared sustainability standards currently in use and under development.
Speakers included Howard Neukrug, executive director of the University of Pennsylvania’s Water Center, and Brenton McCloskey, the Water Center’s director of strategic development and communications; Laura Meadors, senior manager of global sustainability programs for Apple; and Sarah Welton, director of the GRESB Foundation.
Neukrug framed the challenge bluntly: “What is the value of AI? What is the value of water? What is the value of energy? And how do you balance all that?”
Water Versus Power: The Tradeoff Data Center Developers Face
Water use by data centers is already substantial and rising rapidly. According to a projection in a 2024 report commissioned by the U.S. Department of Energy, the total annual on-site water consumption by U.S. data centers by 2028 could double—and potentially quadruple—from 2023 levels. Hyperscale data centers alone are projected to consume 16 billion to 33 billion gallons (61 billion to 125 billion liters) of water annually by that time. (Those figures do not include water used indirectly through electricity generation or semiconductor manufacturing.)
A separate analysis by Xylem, a water technology company, projects that water withdrawals tied to data centers, semiconductor fabrication, and associated power generation could grow 129 percent by 2050. Much of that increase is tied to cooling. AI chips generate far more heat than traditional processors, increasing the cooling demand for facilities that house them. A standard rack of servers draws 5–10 kilowatts (kw) of power, but an AI-optimized rack can exceed 100 kw, and the next-generation is projected to draw as much as 600 kw. All of that energy eventually becomes heat, which must be removed to protect the servers.
Water use and energy use in data centers are closely linked, but due to a lack of reporting and disclosure requirements, far less data exists for water use than for energy consumption.
According to the Western Resource Advocates in the report Data Center Impacts and the West: “There are clear tradeoffs between energy use and water use. Water-cooled data centers generally use less energy, while data centers that employ water-efficient, dry-cooling systems have higher energy demands. Given these tradeoffs, the type of cooling system should be evaluated and selected on a case-by-case basis.”
Meadors said that Apple resolves the tradeoff by going air-cooled in water-scarce areas and addressing its energy use with renewables. “Water and energy are not distinct from one another in this case,” she said, “and good water policy is good energy policy.”
Source: Nature: Data centres will use twice as much energy by 2030—driven by AI
Standards and Certifications Race to Keep Up with Data Center Boom
A key discussion of the convening focused on the growing ecosystem of standards and certifications that are now emerging to guide data centers toward greater sustainability. According to Welton of GRESB, setting codified standards serves three purposes: It creates a shared global language for constructive engagement; helps demonstrate opportunities to create value and mitigate risk; and gives stakeholders practical tools to assess, benchmark, and improve performance over time.
Leveraging standards and certifications can strengthen a project’s overall resilience and bottom line, according to ULI’s Returns on Resilience: The Business Case. Despite political headwinds around ESG, many investors use environmental certifications and sustainability data as core inputs in pricing risk and allocating capital.
Four Principles for Sustainable Data Center Water Use
The Water-AI Nexus Center of Excellence—a collaboration involving the Water Center at the University of Pennsylvania, Amazon, and other partners—released the report Principles for Sustainable Water Use by Data Centers at the end of 2025.
McCloskey at the Water Center said that the report “lays out a practical framework for how data centers and really large water- and energy-intensive developments can be better stewards of water as digital infrastructure scales.” He noted that “the four principles are not meant to be abstract sustainability goals but rather decision guides for siting, design, operations, and community engagement.”
The first principle urges developers to think holistically about where and how they build. McCloskey said that siting and cooling choices are “long-term climate and water and asset risk decisions that affect things like zoning, environmental permits, financing, and community acceptance.”
The question, he said, is not which land is cheapest. “It is what actually makes sense in this watershed and on this grid, and sometimes the right development decision is to shift intensity or phase differently or not build at all.”
The second principle focuses on reducing water consumption. McCloskey said operators should treat water as a core performance metric and “not a byproduct,” optimize how much water each unit of computing work requires, and set specific reduction targets.
The third principle pushes developers to reuse and sustainably source water by “protecting drinking water supplies, maximizing on-site and district-scale reuse, and leaning into drought-resilient sources like recycled water,” McCloskey said.
The fourth calls for genuine community engagement: planning “with communities and utilities, not around them,” McCloskey said.
The First Global Benchmark Built for Data Centers
Welton said that as demand for digital infrastructure accelerates, GRESB and Infrastructure Masons (iMasons) have joined forces to create the world’s first global sustainability benchmark specifically for data centers. It aims to help data centers around the world operate as sustainably as possible by setting and achieving concrete goals.
The two organizations plan to release the GRESB Data Center Assessment later in 2026. It will score data center sustainability across core areas: grid interaction, community benefits/impacts, greenhouse gas emissions, energy efficiency, health and safety, and water-use efficiency.
It will also cover both design and operations in considering water use. For new construction, it asks whether designs incorporate water conservation, reuse, reclamation, and recycling. The assessment will also evaluate whether developers protect surface water and aquatic ecosystems. For existing operations, it asks how operators manage water resources and tracks performance metrics such as reuse and replenishment rates.
In an initial pilot to develop the standards, Welton said that community perception emerged as an important factor. “Local stakeholders deserve transparency and accountability,” she said. “It is not enough for a data center owner or operator to just say that they are doing the right thing. It is critical to demonstrate to the community that the asset is being a good steward of the local resources. You can be doing all the right things, but if there is not a transparent and constructive dialogue, the social license to operate will not be given.”
The Certification Apple Chose (Before the Others Existed)
The Alliance for Water Stewardship (AWS) standard takes a fundamentally local approach to water. Rather than setting universal targets, it requires watershed assessment on a site-by-site basis: how much water is available, who else depends on it, and what governance structures exist.
The standard then walks operators through five steps—gather data, plan, implement, evaluate, and disclose—tailored to that specific context.
That local focus matters for data centers, which often sit in water-stressed regions. According to AWS, about 20 percent of U.S. data centers currently rely on watersheds that are under moderate to high stress. Right now, a typical midsized data center uses roughly as much water daily as 1,000 U.S. households—about 300,000 gallons (1,136,000 liters)—much of it lost to evaporation and never returned to the watershed.
The AWS standard pushes operators beyond efficiency measures to engage with the communities and utilities that share those resources. Certification, earned through a third-party audit, signals to local governments, regulators, and neighbors that a company understands its local water context and has a plan to address it.
AWS targets five outcomes: good water governance; a sustainable water balance; good water quality; protection of important water-related areas; and safe water, sanitation, and hygiene for all.
Apple was the first company in the world to certify a data center to the AWS standard, starting with its Prineville, Oregon facility in 2021. Although AWS does not target data centers specifically, Apple saw positive results applying it to its data center properties. By June 2025, all eight of its owned and operated data centers had earned certification.
“The overarching goal is really to improve water security in the places that we operate,” Meadors said. “We landed on AWS as really the most robust, holistic, internationally recognized certification standard.”
Case Study: Apple’s Playbook for Water-Wise Data Centers
Apple began its corporate water program more than a decade ago, building on previous efforts to improve water efficiency at its corporate offices and in its supply chains.
“Having a successful holistic water strategy [meant] starting with a water risk evaluation,” Meadors said. “Are you going to be a significant portion of a basin or a municipality’s water demand, and is that going to cause other issues? Is that going to put a target on your back or be an outsized use? Those are the types of things that we consider at that early stage.”
Apple organizes its water strategy around three elements: freshwater availability, water quality, and community access.
“We have a strategy where we invest significantly in a location, in a community, and then grow on that site for many years,” Meadors said, adding that Apple is not a hyperscaler.
The company has set three public water goals: certify 100 percent of its owned and operated data centers to the AWS standard by 2025, replenish 100 percent of freshwater withdrawals in high-stress locations by 2030, and achieve a 50 percent reuse rate among supply chain partners.
Having developed replicable materials and procedures through its initial certification at Prineville, Apple worked through the rest of its portfolio over the next five years.
Meadors pointed to Apple’s North Carolina data center as a particularly instructive example. It is one of the company’s oldest facilities, so the focus was not on site selection but instead was on improving operations and deepening ties to the community. Through stakeholder outreach, Apple connected with the Catawba-Wateree Water Management Group, a regional organization that coordinates water efforts across the basin. Apple now runs all of its replenishment projects in the area through the group to make sure that the company aligns with broader basin goals. The company also joined the group’s advisory committee and invested in its Source Water Protection Program, which identifies water challenges and land protection opportunities across the region.
Balancing Water, Energy, and Cost
The data center industry is at an inflection point. Demand for digital infrastructure is surging, as is community scrutiny of the resources these facilities consume. The tradeoffs between water and energy are site-specific and real. Addressing those tradeoffs requires transparent reporting and genuine community engagement.
The standards emerging from the Water-AI Nexus Center of Excellence, the Alliance for Water Stewardship, and GRESB-iMasons give developers, operators, and investors the practical tools to measure, improve, and communicate performance. The challenge that remains is one of priorities—and cost.
“It is not just about energy and water; it is also about money,” Neukrug said. “How do you balance those three? The technology is there. But it is expensive. It is really a site-by-site issue with a lot of different variables at stake.”
The big question facing society as we look ahead is, what do we value, and is it worth the cost?
Related Resources
Join the Water Wise Development Coalition’s quarterly virtual events by signing up here.
To learn more about ULI’s Water Wise Initiative, visit the Urban Resilience Program’s Drought Resilience webpage.
Check out more Water Wise Resourceson ULI’s Knowledge Finder.
Read the GRESB report: Navigating Data Center Sustainability with GRESB in 2025.
