Data center construction is a high-stakes endeavor, requiring meticulous planning to ensure facilities are operational by their intended launch dates. As demand for data centers grows, developers and contractors face mounting risks tied to power and water availability, which are critical to successful project delivery.
What Happened
The U.S. Department of Energy projects that electricity consumption by data centers will rise significantly, from 4.4% of the national grid in 2023 to nearly 12% by 2028. This surge underscores the importance of securing reliable power sources early in the project timeline. Developers must integrate power infrastructure components like substations and generators into their project schedules, setting clear milestones for construction, energization, and operational readiness.
Water usage is another pressing concern. In 2023, data centers consumed approximately 17 billion gallons of water, with projections suggesting this could more than quadruple by 2028. Developers need to verify municipal water capacity and ensure that service timelines and permitting requirements align with project needs. These factors necessitate rigorous preconstruction risk assessments and the establishment of clear contractual obligations regarding utility capacity and delivery timelines.
What This Means for Your Business
For AECM professionals, the implications are profound. Contracts should explicitly address potential delays due to power and water constraints, incorporating provisions for time extensions, additional compensation, and liquidated damages. Developers and contractors must negotiate clear terms regarding utility capacity commitments and integrate these into their delivery timelines. This approach not only mitigates risk but also preserves financial stability by avoiding unexpected costs and delays.
Additionally, data center projects may require various surety bonds to fulfill obligations to stakeholders, including utilities and government entities. Utility payment bonds can help secure payment obligations, preserving liquidity amid large-load tariffs. Early identification of these requirements can prevent financial security obligations from becoming constraints on project delivery.
What US Operators Should Watch
Operators should closely monitor regulatory developments and community concerns that could impact data center projects. For instance, New York's Executive Order in July 2026 paused state environmental permitting for certain projects, pending a statewide environmental review. Such regulatory actions can necessitate changes in design or delivery strategies.
Staying informed about federal deadlines and procurement windows is crucial. As electricity and water demand increase, aligning project timelines with utility infrastructure development will be key to maintaining competitive positioning and maximizing ROI.
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Source: https://www.constructiondive.com/spons/guidelines-for-identifying-key-data-center-risk/873533/. Read the original story ->
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