Is the German Energy Efficiency Act aligned to data centre growth?

Germany has always set the pace when it comes to environmental regulation and the data centre industry is no exception. When the Germany Energy Efficiency Act (EnEfG_ was brought into action at the start of 2024, it brought some of the most demanding energy efficiency requirements the sector has seen. 

The Act focuses on how data centres are designed, built, and operated, with the aim of cutting emissions and speeding up the shift to renewable energy. But over a year on, there’s still a lot of uncertainty about how these rules will work in practice. The industry is questioning if these targets are truly aligned to the future requirements of data centres, particularly those built for AI and liquid cooling, which Germany has the potential to be a hub for. 

Looking closer at the Act

The goal of the EnEfG is simple enough on paper. It says to cut down energy usage and find better ways to deal with waste heat. This is mainly by improving how data centres are designed and run. The targets themselves are unambiguous in their language, clearly stating the metrics that must be achieved: 

• Data centres that commence operations before 1 July 2026 must achieve a power usage effectiveness (PUE) of 1.5 or lower by 1 July 2027 and 1.3 by 1 July 2030. 

• Data centres that commence operations after 1 July 2026 must have an annualised PUE of 1.2. 

In addition, the Act mandates the reduction of residual heat produced. Data centres with annual energy consumption exceeding 2.5GWh must reduce heat production to the minimum technically and reasonably feasible – as it is known in German ‘zumutbar’. Again, the targets seem clear: 

• Data centres that start operating on or after 1 July 2026 must achieve an energy reuse factor (ERF) of at least 10%

• Data centres that start operating on or after 1 July 2027 must achieve a projected ERF of 15%.

• Data centres that start operating on or after 1 July 2028 must achieve a projected ERF of 20%. 

However, there are exceptions built into the legislation. If a municipality or energy supplier agrees to develop a heat network within 10 years of the data centre’ operational date, they may be exempt from immediate ERF requirements. Similarly, if a local heat network is unwilling to accept the residual heat, the operator only needs to install the necessary infrastructure, typically a heat transfer station. 

This flexibility indicates that the Act knows some of the technical and financial limitations the legislation could impose on data centre operators. However, given the rise in AI and high-performance computing, which can lower PUE metrics faster than new technologies can raise them, these targets are a concern. 

The AI of it all

The timing of the EnEfG Act’s release coincided with a huge shift in how data centres are designed. The release of ChatGPT in 2022 and its subsequent introduction into every industry has meant more data centres need to be designed with AI and high-performance computing in mind. As this demand grows, so does the need for computing power. With this comes higher rack densities and therefore, more heat. 

It’s a trend being driven by hyperscale and enterprise customers, both in Germany and around the world. These days, rack loads of 25kW are standard, and it’s not unusual to see peaks hitting 75kW per rack. Data halls are getting bigger too, with many of the latest facilities being built to support 10MW data halls featuring 20x24 rack configurations. 

These changes have made it harder for traditional air-cooled systems to keep pace. To account for this, the industry is shifting toward liquid cooling. While this change is needed to deliver the performance that AI workloads demand, it introduces added complexity for operators to meet the Energy Efficiency Act. By lowering the temperatures of chilled water systems, which are necessary for liquid cooling, there is a negative impact on chiller efficiency. In turn, the ambitious targets set by the legislation are harder to achieve. 

Is waste heat easier? 

In short, no. The Act’s requirements for heat reuse present other challenges. Data centres generate large amounts of heat, but finding economically viable uses for it isn’t simple. 

Across the campus, some heat can be repurposed to heat ancillary or administrative spaces. It could even be used to power equipment like, in the case of generator crankcase heating. But in practice, that only accounts for a small portion of the heat a modern data centre produces, particularly facilities built to handle AI workloads. 

Some operators in other countries have been successful by transferring the leftover heat to nearby municipalities or commercial heat networks. This can be a economically beneficial and sustainable solution. However, this only works if the local infrastructure is in place and third parties are willing to invest in making it happen. Even when those pieces are in place, the lower water temperatures that come with liquid cooling can make heat recovery far less effective. 

Without viable off-site heat reuse options, operators are left with very few ways to hit the targets set out in the legislation. And even if they plan to rely on one of the exceptions written into the law, those often depend on timelines and decisions made by external parties that are beyond their control.  

Managing ambition

As an industry, we need to decarbonise, and the goals of the German Energy Efficiency Act are aligned. They have set clear targets for decarbonisation which is a valuable step toward reaching the industry’s goals. However, given the latest developments in AI and the required speed of its adoption, the legislation is creating real technical and operational challenges. 

Achieving these low PUE figures and meeting ERF targets whilst still being financially viable is a tightrope. This tightrope needs to be questioned by the industry to see if the Act, in its current form, is well-balanced. Regardless of the Act, if Germany is to achieve its goals, more investment is needed in heat networks. This is not a task just for the government; it will require operators, municipalities, and technology providers to come together to recognise the impact AI will have on how heat can be reused. 

Germany has made ambitious targets for the industry, which is a positive thing. In the coming years, more countries will look to Germany’s data centre market to see the results the legislation has had. It will set the tone for the next decade, so we need to make sure it is the right one.