Thirst Principles: An Algorithm to Derive the Water-Energy Exchange Rate that Every Data Center Planner Should Know By Heart
An exchange rate, a break-even tariff, and a correction term: the data center water fight settled in three equations
The power generation and grid capacity bottleneck in data center construction is a well-known fact, and I’ve written about it many times in other articles; but there’s a second constraint, which is increasing in momentum, especially as liquid cooling is being favoured over air for most new modern builds.
Moratoriums or restrictions on new data centers are under discussion in more than twenty US states; more than $130 billion of projects were delayed or abandoned in the first quarter of 2026 alone; and by one analysis roughly two-thirds of planned American sites sit in areas that experienced drought in the past year. It would appear that water is at the centre of nearly every fight, from Arizona to Aragón.
There’s also a second narrative that seems to keep cropping up, and it’s a battle pertaining to the water demand of a hyperscale facility. One side says data centres drink millions of litres; the other says dry cooling exists and the problem is solved. Both are technically right, but both are just shouting in response to each other, and neither has really costed it. But there is a trade-off, and it’s brutally mechanical: dry cooling saves litres of water; but only by spending kilowatt-hours of electricity to do so. Water and energy are two currencies, and the row over which one a data centre should burn is a currency dispute where no one has bothered to publish the exchange rate.
So let’s publish it. But first we need to untangle what “water cooling” actually means, because half of the shouting match arguably rests on a conflation.
Getting the plumbing straight
The industry is moving to liquid cooling at the chip, and for AI workloads the move is seems to be compulsory rather than fashionable. Air cooling runs out of physics somewhere between 20 and 50kW per rack; direct-to-chip cold plates carry racks to 80–120kW, and immersion beyond 100–250kW. With the industry now debating megawatt racks, the chips will be liquid-cooled, full stop.
The reason is unglamorous: a litre of water can carry on the order of 350 times more heat than a litre of air at the same flow rate. I’ll be critical of the industry’s own press releases here: you’ll increasingly read that this shift is powered by exotic thermodynamics, supercritical CO2 loops and two-phase dielectric fluids that boil off the chip. Those technologies are real, and two-phase change does buy you an order of magnitude again in heat flux; but nearly everything actually deployed at significant scale today is single-phase water or water-glycol in a sealed loop. The liquid revolution is nineteenth-century thermophysics arriving in the server hall, not a materials-science breakthrough; the supercritical and two-phase kit remains mostly vendor demos and patents rather than fleets. There is future scope, but for now – it appears to be fairly hypothetical.
For the noisy bunch who shout loudest about the amount of water required to cool these racks, they often omit one hugely critical fact: that chip-level liquid loop is closed. The same water goes round and round, topped up or replaced periodically, consuming next to nothing of fresh water supply. Liquid cooling at the chip is not what drinks the river. All the water politics live at one specific boundary: the point where the site’s accumulated heat is finally rejected to the outside world. Evaporate water there (cooling towers, at 2 to 4 litres per kWh of IT load, most of it leaving as vapour) and you’re cheap on electricity but heavy on water. Refuse to evaporate (dry coolers, sealed loops and fan walls) and site water use falls to roughly zero, but you surrender something like 0.15 to 0.25 of PUE, because pushing heat into dry air is thermodynamically harder work.
So the honest framing of every one of these planning fights: the chips will be liquid-cooled either way; the argument, for now, is only really about the last metre, where the heat leaves.
Doing the exchange maths
Economists have already solved this class of problem with the shadow price: the true value of a resource that its market price fails to carry.
Start with the exchange rate between the two currencies. The extra electricity per cubic metre of water saved by rejecting heat dry rather than wet is:
Established engineering quantities, my illustrative figures.
Illustrative numbers: a PUE penalty of 0.2 against an evaporative WUE of 2 L/kWh gives X = 100. One hundred kilowatt-hours of extra electricity for every cubic metre of water saved.
Take our example campus, 100MW of IT load in a hot, dry market: evaporative rejection drinks about 1.75 million cubic metres a year; going dry hands that back at a cost of roughly 175 GWh a year of additional electricity.
The break-even water price follows immediately: dry cooling wins on money when the water saved is worth more than the electricity spent.
At 10 cents per kWh, W* is about $10 per cubic metre; at British industrial rates nearer 25p, it’s £25.
Now compare with what water actually costs:
Google’s much-criticised Mesa, Arizona deal priced water at $6.08 per thousand gallons, roughly $2.16 per cubic metre;
UK non-domestic supply typically lands between £1 and £2.
Water is trading at a fifth to a twentieth of the price at which a rational operator would stop evaporating it. The operators evaporate because the price tells them to; but the campaigners are furious because the price is wrong. A moratorium is a price correction that is being expressed as a ban.
The grid puts its thumb on the scale
The electricity side of the equation carries a distortion of its own, and in 2026 it’s often the bigger one. P_elec in that break-even should really be the shadow price of power, not the tariff, and in grid-constrained markets the two are nowhere near each other.
If your campus is capped by its grid connection, and most are, then every megawatt spent on fans is a potential megawatt of compute you can’t sell. The opportunity cost of the dry-cooling penalty isn’t 10 cents a kWh; it’s the margin on the compute those kilowatt-hours would otherwise have earned, which can run to an order of magnitude more. Price power that way and W* doesn’t sit at $10 per cubic metre; it climbs towards $100.
In a power-starved hub, the maths screams evaporate, which is precisely what operators do, and why the thirstiest sites keep appearing in the sunniest, driest, most power-constrained places. The two bottlenecks compound each other.
The weighting isn’t universal, though. In markets where power is abundant and water genuinely scarce, the shadow prices flip, and dry cooling becomes obviously right. And there’s a third option worth taking seriously: generating the penalty yourself. Cooling load peaks on hot afternoons, which is exactly when solar produces; the fan penalty is one of the rare industrial loads whose profile matches photovoltaics almost perfectly. Our campus’s 175 GWh a year is roughly a 90MW solar farm in the Arizona sun, several hundred acres [with a yield assumption of ~2,000 kWh/kWp]. ¬I’m not being naïve that this is real land and real capex, but it converts dry cooling from a raid on a constrained grid into a self-funded, water-free heat rejection system. Where land is cheap and sun is reliable, solar-backed dry cooling deserves a place in the comparison rather than a footnote.
The sound barrier
There’s a second constraint on dry cooling that the spreadsheets ignore, but the neighbours won’t: noise. Rejecting 100MW of heat into air with no help from evaporation takes an enormous amount of airflow, which means fan walls, which means a noisy sustained hum that carries. Facilities routinely measure 60 to 80 dB at the property line, against typical night-time planning limits of 45 to 55 dB at the nearest home, and the WHO flags sustained night noise above 55 dB as a health risk [EESI / local ordinance ranges].
Sound from a compact source decays at roughly 6 dB per doubling of distance, which gives us a feasibility gate (established acoustics, first-order, ignoring the low-frequency component that makes data centre noise notoriously hard to regulate):
Feed in an aggregate sound power of, say, 110 dB(A) for a full dry-cooling fan estate and a 45 dB night limit, and d_min comes out around half a kilometre. Inside that radius, full dry cooling is not an engineering option regardless of what the exchange rate says; you derate it, screen it, or go hybrid. Which means air-based heat rejection has a ceiling on its applications: it is a rural and edge-of-town technology, and the denser the neighbourhood, the more the maths is forced back towards water, whose rejection plant is far quieter per megawatt. Urban compute is wet almost by definition; the equations that follow only apply where the noise gate is passed.
Water from a stone
The water side of the ledger has its own overlooked lever: where the water comes from. The fights almost always stem from concern about strain on mains supply, but a data centre with the right hydrogeology can sink boreholes into the aquifer beneath it. At scale, this is cheap; groundwater from 100 to 150 metres down arrives at a constant 10 to 12°C, which is itself a cooling asset, and the treatment plant required for cooling-grade water is little more tham a rounding error against a multi-billion build. So the tariff isn’t the real water price either; and the planners should be comparing against the cheapest licensed source:
Two caveats though:.
A borehole bypasses the mains price, not the scarcity: Mesa’s grievance is precisely groundwater depletion, so in a stressed aquifer the shadow price applies underground just as hard, and the abstraction licence, not the drilling cost, is the true constraint.
This makes hydrogeology a siting criterion: proximity and depth to a healthy, recharging aquifer belongs in the site-selection matrix alongside power and fibre, because it can swing W_eff by an order of magnitude.
And wherever heat is rejected by evaporation, the netting from before still applies: the extra grid electricity that dry cooling demands is itself made with water at the power station (the grid’s energy-water intensity, EWIF), so savings must always be quoted net:
On a thermal-heavy grid, a fifth of the water “saved” by dry cooling re-evaporates in a cooling tower the planning committee will never see. Dry cooling in the wrong grid relocates consumption upstream rather than eliminating it; sometimes relocation is exactly the point, out of a stressed basin and into a wetter one, but it should be claimed as such.
Pricing the river
Put it together and you get a planner’s rule that fits on an index card:
Separate the loops. The chip-level liquid loop is closed and consumes next to nothing; strike it from the argument. Every question below applies only to heat rejection.
Run the noise gate. If the nearest home is inside d_min, dry cooling is capped or out, whatever the prices say.
Compute X and W for the site, using the shadow price of power: tariff if the grid is slack, opportunity cost of displaced compute if it’s constrained, solar LCOE if you’re prepared to build your own fans’ power supply.
Compute W_eff from the cheapest licensed water source, borehole included, scarcity-adjusted; and net any dry-cooling saving against the grid’s EWIF.
Compare. If the scarcity-adjusted water value exceeds W,* dry (or solar-backed dry) cooling should be a condition of consent. If it doesn’t, evaporative rejection is the right engineering answer and the community’s quarrel is with the water pricing, not the data centre.
What I like about this rule is that it takes the heat out of both arguments. It tells operators that “we comply with the tariff” is an accounting statement, not an engineering defence, in any basin where the tariff is fiction. And it tells campaigners that forcing dry cooling onto a wet, cheap-power, noise-constrained site burns energy, carbon and sleep to save water that wasn’t scarce. The formula doesn’t have a side – and I suppose that’s rather the point of formulas.
Where the water gets muddy
Some pushback on this may be reasonable. WUE and PUE penalties are ranges, not constants; climate moves both, and hybrid systems that evaporate only on the hottest hours can scramble the neat binary, usually in a good way. Shadow prices are estimated, not observed, and handing a number that political to whoever performs the estimate is its own fight. Withdrawal and consumption aren’t the same thing, and I’ve used consumption throughout; a campaigner armed with withdrawal figures will produce numbers five times scarier for the same power station. The noise model is first-order and data centre noise is notoriously low-frequency, which carries further and regulates worse than the formula suggests. And the closed-loop caveat has its own caveat: loops leak, get flushed and get replaced, so “near zero” consumption is near zero, not zero.
But none of that rescues the status quo, in which the loudest infrastructure argument of 2026 is being conducted between one side quoting litres and another quoting kilowatt-hours, with no exchange rate on the table. Engineering disputes get solved when someone prices the trade. This one prices at a hundred kilowatt-hours per cubic metre before the shadow prices move it; everything after that is negotiation.
TH