The Rise of Liquid Cooling Technology and Its Impact on Data Center Leases

In the rapidly evolving data center industry, efficiency, scalability, and sustainability are paramount. As the demand for data processing power continues to surge, driven mainly by AI, traditional cooling methods are being stretched to their limits. Enter liquid cooling technology — a game-changer that promises to reshape the landscape of data center operations.

What Is Liquid Cooling?

Liquid cooling refers to the use of liquid as a coolant to dissipate heat generated by servers and other IT equipment. Unlike conventional air cooling, which relies on fans to circulate air, liquid cooling systems utilize liquids — often water or specialized coolant mixtures — to absorb and transfer heat away from critical components.

Advantages of Liquid Cooling

There are many advantages to using liquid cooling solutions over traditional air cooling. These include:

• Efficiency and Reduced Energy Consumption: Liquid cooling systems can achieve much lower temperature levels than air cooling. This efficiency translates to better performance and can lead to substantial energy savings for operators and end-users. Traditional air cooling requires significant power to operate fans and air conditioning units. Liquid cooling systems consume less energy, contributing to lower operational costs and a smaller carbon footprint.

• Enhanced Performance: As processors become more powerful, they generate more heat. Liquid cooling can keep temperatures stable under heavy loads, ensuring that performance doesn’t degrade due to “thermal throttling.”

• Space Optimization: With the ability to cool more effectively, data centers can pack more servers into a smaller footprint. This density reduces the physical space required for data center operations, allowing for more efficient use of real estate.

• Sustainability: As organizations strive to meet environmental, social, and corporate governance (ESG) goals, liquid cooling presents an environmentally friendly alternative. By lowering energy consumption and improving cooling efficiency, data centers can significantly reduce their overall environmental impact.

Implications of Liquid Cooling on Data Center Leases and Services Agreements

As liquid cooling technology becomes increasingly adopted in data centers around the world, it will inevitably influence the structure and content of data center leases and services agreements. Developers, operators, and customers will need to consider the drafting of several key provisions to ensure that the unique requirements and benefits of liquid cooling are adequately addressed in legal agreements:

1. Cooling Infrastructure Specification
   Leases should include a detailed specification regarding the cooling infrastructure. This includes: (1) type of cooling systems – clearly outline the type of cooling systems implemented, whether it’s direct-to-chip, immersion, or chilled liquid cooling; and (2) maintenance responsibilities –define who is responsible for the maintenance and operation of the cooling systems, including any specialized training or expertise required.

2. Power and Energy Efficiency Clauses
   Given that liquid cooling can greatly reduce energy consumption, it’s important to include provisions that address: (1) energy performance metrics – leases may introduce performance metrics related to energy usage effectiveness (PUE) and other efficiency benchmarks, incentivizing customers to optimize their operations; and (2) utility costs – clearly define how energy costs will be allocated, especially if liquid cooling systems lead to reduced energy expenses.

3. Space Utilization and Density Specifications
   Liquid cooling allows for higher server density, which may require: (1) space allocation clauses – leases should address how much space will be allocated for cooling systems versus server racks, ensuring that both parties understand the implications for physical layout; and (2) expansion rights – given the potential for increased density, clauses that allow for future expansion or reconfiguration of space may be necessary.

4. Environmental and Sustainability Goals
   As organizations increasingly focus on sustainability, leases might include: (1) sustainability commitments – provisions that commit operators to provide infrastructure that supports sustainability initiatives, such as high-efficiency cooling systems or renewable energy sources; and (2) reporting requirements – provisions for regular reporting on energy consumption and environmental impact, allowing customers to meet their corporate ESG goals.

5. Local Water Supply
   Liquid cooling can put a burden on the local water supply. Due diligence is performed to determine the amount of water that can be supplied to the data center facility, and agreements with the local water authority for the supply and reservation of water are required. Often additional infrastructure is needed requiring development agreements with the water authority. In order to address the burden on the water supply and to reduce water consumption costs, developers or users of data centers may partner with the water authority to develop reclaimed water systems.

6. Insurance and Liability Provisions
   The introduction of liquid cooling systems can introduce new risks and require: (1) insurance coverage – leases should specify insurance requirements for potential risks associated with liquid cooling, such as leaks or equipment failure; and (2) liability clauses – clearly define liability in the event of cooling system failures, including damage to equipment or loss of data.

7. Compliance and Regulatory Considerations
   As data regulations evolve, it is essential to include clauses that address: (1) regulatory compliance – ensure that cooling systems comply with local and national regulations regarding safety, energy efficiency, and environmental standards; and (2) adaptability – allow flexibility for future technological advancements or regulatory changes that may impact cooling requirements.

8. Exit Strategies and Decommissioning
   Finally, leases should address the end-of-term implications: (1) decommissioning responsibilities – define responsibilities for decommissioning liquid cooling systems, including safe disposal of fluids and equipment; and (2) reinstatement obligations – specify conditions under which the premises must be returned, considering the state of the cooling infrastructure.

As liquid cooling technology continues to gain traction in data centers, the implications for leases and similar agreements will be significant. By proactively addressing the unique requirements and benefits of liquid cooling through carefully drafted provisions, both operators and customers can create agreements that support efficient, sustainable, and scalable data center operations. This foresight will not only facilitate smoother operations but also foster a collaborative partnership that adapts to the evolving needs of the industry.