Introduction

In recent years, the number of data centers in the United States and worldwide has grown rapidly, driven by the expansion of cloud computing, digital services, and artificial intelligence applications. These facilities consume substantial amounts of electricity. Projections indicate that data centers could account for about 4 – 5 % of total U.S. electricity demand by 2026 – a share that is expected to increase as digitalization continues to accelerate. This growing energy demand poses challenges for sustainability and climate protection efforts.

Debates on how to regulate energy-intensive data centers are in full swing worldwide, particularly in the United States. Policymakers, environmental agencies, and industry stakeholders are tackling how to balance the economic importance of digital infrastructure with the need to reduce energy consumption and emissions. Energy efficiency measures can play a crucial role in aligning digitalization with sustainability goals.

Against this background, this blog post examines how European and German regulatory frameworks are governing the growing energy demand of data centers. It focuses on Germany’s particularly ambitious approach to implementing the European Union’s energy efficiency objectives into national law.

EU Regulation of Energy Use in Data Centers

The cornerstone of the European Union’s current energy efficiency framework is the Energy Efficiency Directive (Directive (EU) 2023/1791, hereinafter ‘EED’), which entered into force in October 2023. The Directive sets out overarching targets for reducing primary and final energy consumption across Member States, reflecting the EU’s commitment to climate neutrality by 2050 (read more here).

The EED explicitly acknowledges the growing relevance of data centers for achieving the Union’s climate and energy objectives. Its Recitals recognize that data centers play a pivotal role in the digital economy and are simultaneously significant contributors to electricity demand. Article 12 of the EED thus requires Member States to ensure that data centers with a power demand of the installed information technology of at least 500 kilowatts (kW) monitor and report key performance indicators, including energy consumption, power utilization, temperature set points, waste heat utilization, water usage and use of renewable energy. This data is collected in a centralized EU database, which makes aggregated results publicly available to improve transparency and facilitate sector-wide benchmarking. However, the Directive itself does not establish binding minimum efficiency requirements or technical performance standards for data centers, leaving specific efficiency measures to the discretion of the Member States. This regulatory restraint has created space for divergent national implementation strategies.

The German Energy Efficiency Act and its Application to Data Centers

Germany has taken a proactive approach to close the regulatory gap left by the absence of specific efficiency requirements at the EU level. With the Energy Efficiency Act (Energieeffizienzgesetz, hereinafter ‘EnEfG’), which entered into force in November 2023, the German legislature established the country’s first comprehensive cross-sectoral framework for improving energy efficiency.

According to Section 1 EnEfG, the purpose of the Act is ”to increase energy efficiency and thereby contribute to reducing primary and final energy consumption as well as the import and consumption of fossil fuels, to improving security of supply, and to mitigating global climate change.” To achieve these objectives, the EnEfG introduces binding standards aimed at reducing energy consumption, promotes the use of renewable electricity, requires the reuse of waste heat, and mandates continuous monitoring, documentation, and reporting. These measures are designed to improve energy efficiency across key sectors, with particular attention to energy-intensive industries, including the digital infrastructure sector.

A particularly noteworthy innovation of the EnEfG is the explicit inclusion of data centers within its scope. Sections 11 to 15 EnEfG introduce detailed, sector-specific requirements designed to reduce energy consumption and enhance operational efficiency at data centers. The provisions apply to data centers with a non-redundant rated electrical capacity of at least 300 kW, regardless of whether they are publicly or privately operated. Smaller facilities, however, are not covered by the EnEfG.

The key obligations imposed on data centers are set out in Section 11. That section establishes binding efficiency standards for both existing and newly constructed data centers. Under Section 11(1)–(2), data center operators are required to comply with specific target values for energy consumption efficiency. These target values vary depending on the commissioning date of the facility, with newer data centers expected to meet stricter standards. The targets are measured using the Power Usage Effectiveness (PUE) metric, which is defined as the ratio of a data center’s total energy consumption – including energy usage in cooling, lighting, and other facility systems – to the energy consumed by its IT equipment alone. A lower PUE indicates a more efficient facility, as a larger share of the total energy is directly used for computing operations rather than ancillary functions. By setting these targets, the legislation aims to encourage operators to optimize energy use across all aspects of data center operation, from server utilization to cooling infrastructure.

In addition, Section 11(2) stipulates that data centers commissioned after July 1, 2026 must make effective use of the waste heat they generate, either by reusing it on-site or by feeding it into existing or newly established district heating networks. Data centers commissioned from July 1, 2026 must achieve a planned minimum share of 15 % reused waste heat, while those starting operation from July 1, 2028 must reach at least 20 %. The intention is to replace fossil fuel-based heat generation with the utilization of residual heat, thereby contributing to Germany’s broader transition in the heating sector. Section 11(3) provides exemptions from compliance with the minimum share of reused energy, targeting data centers that do not currently meet the requirements but are expected to do so in the foreseeable future. This applies, for example, if external circumstances beyond the operator’s control prevent immediate compliance, or if integration into municipal heating planning has already been agreed with the local authorities.

Section 11(5) further introduces a gradual transition to renewable electricity use in data centers: beginning January 1, 2024, at least 50 percent of the electricity consumed by each data center must come from renewable sources, rising to 100 percent by January 1, 2027. In effect, these provisions create a legally binding pathway for the decarbonization of the digital infrastructure sector.

Beyond these technical standards, the EnEfG introduces comprehensive documentation, reporting, and transparency obligations. Section 12 requires operators to establish energy or environmental management systems capable of continuously monitoring and optimizing energy performance. Pursuant to Section 13(1), operators must periodically submit detailed reports on total energy consumption, renewable energy use, and waste heat recovery. This data will feed into a European database on data centers (Section 14), enabling an EU-wide benchmarking and assessment of efficiency performance. Finally, Section 15 obliges operators to provide customers and other third parties with information on the energy performance of the data center, thereby fostering market transparency and allowing users to include sustainability criteria in their choice of service provider.

Conclusion

While the EU Energy Efficiency Directive recognizes the relevance of data centers for achieving climate and energy targets, it does not impose any binding minimum requirements or technical standards on them. Germany has decided to take a more proactive approach. With the Energy Efficiency Act, the German legislature introduced comprehensive and legally enforceable provisions specifically aimed at improving the energy efficiency of data centers. These measures include binding targets for energy consumption, mandatory use of renewable energy, and requirements for the reuse of waste heat.

By doing so, Germany addresses the regulatory gap left by the EED and exemplifies a case of national regulation exceeding EU minimum requirements. This approach underscores Germany’s ambition to align the rapidly growing energy consumption in the digital infrastructure sector with its broader energy and climate policy goals.