When Finnish engineer Ari Kurvi takes a hot shower or turns up the thermostat in his apartment, he’s tapping into waste heat generated by a 75-megawatt data center 5 kilometers away. As its computer servers churn through terabytes of digital information to support video calls, car navigation systems and web searches, an elaborate system of pipes and pumps harvests the cast-off energy and feeds it to homes in the town of Mantsala in southern Finland.

Since it began operation about a decade ago, the data center has provided heat for the town. Last year, it heated the equivalent of 2,500 homes, about two-thirds of Mantsala’s needs, cutting energy costs for residents and helping to blunt the environmental downsides associated with power-hungry computing infrastructure. Some of the world’s biggest tech companies are now embracing heat recovery from data centers in an effort to become more sustainable.

Kurvi is one of the pioneers of this emerging technology: As an engineer and project manager for Hewlett Packard starting in the 1980s, he spent years working with humming stacks of hardware in hot server rooms during the freezing Finnish winters. That made him think that there must be a good way to put that wasted heat to use.

“Initially, I was focused on the health of the server,” Kurvi said. “I had this understanding that the heat inside was harmful, but when I myself went outside the building, I needed that warmth because it was cold. I came to this simple understanding: There is warmth, there is cold, and maybe we can exchange something here.”

He first applied the concept back in 2009, at a center in Kuopio in central Finland, where the waste heat was sold back to the building’s landlord. Five years later, he scaled up and led the work at the Nebius Group NV facility, which heats his home. The project for Nebius, he says, marked a significant step up — the first time the technology was applied at such a large scale in Finland, and maybe even globally.

Now the biggest project with heat recovery technology anywhere in the world is underway just outside Helsinki. Microsoft Corp. is building a cluster of data centers that, when completed, should supply heating to 40% of Espoo, Finland’s second-largest city. That’s about 100,000 homes. A local coal-fired heating plant has already shut as it’s no longer needed.

More major Finnish data center projects using heat recovery have been announced in May and March; other examples are already running in Sweden.

Read more: AI Is Already Wreaking Havoc on Global Power Systems

No data center is good for the environment, but projects like this can help alleviate their negative effects as the demand for computing power surges globally. The largest commercial data centers — so-called hyperscale facilities — can consume a city’s worth of electricity, the vast majority produced from polluting fossil fuels. And with the growing uptake of artificial intelligence, they’ll need even more. Electricity consumption from the industry globally is set to increase by 50% by 2027 from 2023, according to Goldman Sachs Group Inc., and a report published by the International Energy Agency in April projects power demand from data centers to double by 2030.

“If we take it as a given that data centers need to exist, that we need them for our Zoom calls, then we need to find the best locations for them,” said Veera Lyytikainen, senior officer at the local authority that assessed the Microsoft facility’s environmental impacts. “The best place is one where waste heat can be utilized and the data center can be run on renewable energy.”

Cool Tech

With a frigid climate and a power grid dominated by renewable sources — largely hydroelectric, wind and nuclear — the Nordic region has become a magnet for technology companies planting server farms. Here, data centers can often be cooled with just normal outside air, reducing their power usage. Another boon is that regional electricity prices are among the lowest in the world — about half of the rate in Germany, one of the top countries for data centers.

But the real value of the region is found underground, in the tens of thousands of miles of insulated pipes that snake beneath homes and offices. Many towns and cities in Finland rely on district energy systems, in which a central generation plant distributes steam or superheated water to individual buildings, campuses or whole neighborhoods. It’s a principle that dates back to ancient Rome, but the first commercial systems emerged in the 19th century; hundreds of cities in North America, including New York City, Boston and Philadelphia, have “steam districts” in active use. (They’re the source of those evocative plumes of vapor that billow up from city streets, often after rainfalls.) District energy is common in Europe and Asia as well.

Swedish and Finnish Power Mix

Electricity is already mostly carbon free in the two Nordic countries

A well-maintained district heating network can be extremely energy efficient, especially if paired with infrastructure that’s already generating a lot of waste heat, like a subway system or a big data center.

Here’s how it’s going to work at the Microsoft campus: Lukewarm water, about 25 to 35 degrees Celsius (77 to 65 degrees Fahrenheit), is fed from data centers to a waste heat recovery facility fitted with three dozen water-to-water heat pumps. The pumps extract the heat, sending cool water back to the data center and 86C water to two large electric boilers. Those then heat the water to 115C — hot enough to be sent to the district heating system.

The promise of tapping into district energy system is what attracted Microsoft to build its flagship facility in a forested area just outside of Helsinki. The site, sandwiched between two major highways, is set to host as much as 150 megawatts of IT capacity and employ as many as 240 people tending to stacks of servers.

Heat Recovery Process

While all that is now just a busy construction site the size of 70 soccer pitches, the heat recovery facility of local utility Fortum Oyj is already built and will be ready for use come winter. “These data centers are actually big fans, allowing electricity to be converted cheaply into heat,” said Kai Mykkanen, mayor of Espoo and a former Finland climate minister. That’s rare — “it’s easier to produce emissions-free electricity than emissions-free heat,” he said.

Reusing waste heat also means not having to invest in power generation facilities that burn biomass or wood. Currently, around a quarter of the town’s heat comes from gas and a fifth from renewable sources. Heat pumps and heat recovery account for about a third, and the rest is generated using electricity.

Once the Microsoft data center is connected to the city’s district heating network, it will help eliminate carbon emissions in the system by 2030.

“It’s the main solution to carbon neutrality for our energy,” Mykkanen says.

Microsoft estimates that the waste heat recovery will correspond to about 1% of emissions reductions required to meet Finland’s carbon neutrality target.

The US company won’t be giving up this excess heat up for free, but Microsoft declined to disclose details on the contracts. For consumers, getting heat from a constant source like a data center tends to keep prices more stable, according to Fortum.

Recovering waste heat from a data center is “the best you can do” in terms of green credentials, said Jon Summers, a scientist at Sweden’s RISE research institute who has published articles on data centers since 2010.

“It’s a project that puts on the map — in Brussels and Europe — the possibility of data centers to do waste-heat reuse,” said Gilda Amorosi, Microsoft’s EMEA Energy Team Lead, in an interview at the site. “Innovations like this can get spread out and can inspire other companies.”

Heat available from data centers in Europe is forecast be at least 200 terawatt hours per year by 2050, maybe even sooner, four times what it is today, according to Brian Vad Mathiesen, a professor of sustainable energy planning at Aalborg University in Denmark. “Of course not all of this heat will be used,” he said. “You need to put demands on data centers, ideally from when they are built.”

An Imperfect Marriage

But for all the technology’s potential, there are also limitations. The vast amount of electricity consumed by new data centers in the Nordics is hugely controversial, and with the electrification of everything from heavy industry to private vehicles, the scramble for power will get even fiercer. In Ireland, where many US operators have set up shop, data centers are devouring about 20% of the nation’s electricity, and are drawing pushback from local leaders. Thinly staffed data centers also compete for electricity with factories that provide a more substantial economic boost by the number of people they employ.

“The data center industry speaks of this as if they are a power supplier because they are supplying heat, but they consume power we could use for other things. They are shameless about asking for power,” said Sofie Marhaug, a member of the Norwegian Parliament who represents the left-leaning Red Party. “They may offer a few jobs, but not that many.”

Finland’s policymakers are also noticing. In March, the Finance Ministry proposed eliminating a tax benefit for data centers, a move set to cost the industry €30 million ($33.5 million) a year. That led to one project being shelved in Pello, Finnish Lapland, after the developer, TLS Energy Oy, balked at the potential 40-fold increase in its power tax bill.

There can also be a geographic mismatch between data centers and district heating systems, which tend to be located in central cities, where land prices are higher. In Norway, the placement of data centers deep in the woods — such as a giant one planned by Google south of Oslo — has created hurdles due to lack of nearby consumers, according to Petter Egil Rokke, who heads up the thermal energy department at Norwegian research institute Sintef.

There are examples that show adoption of heat recovery technology isn’t straightforward. When it comes to the Microsoft project in Finland, “one of the three sites, Vihti, has no waste heat recovery, and our assessment from a climate point of view was considerably more negative because of that,” said Lyytikainen from the local environmental authority.

That said, adding heat capture technology to data centers doesn’t make the projects good for the climate — it just makes them less bad. In that vein, for the two facilities where waste heat will be recovered, the environmental impact assessment “did not find a significant benefit to the climate,” Reetta Suni, senior officer from the local authority, said in an interview. “A data center is no boon to the climate.”

And elsewhere in Scandinavia, the marriage of data centers and district heating has been slower to take off.

Meta Platforms Inc.’s plans for expansion at its Danish Odense data center, which provides heating for about 7,000 homes, were put on ice in 2022 while the company reexamined its development plans. Elsewhere in Denmark, Apple Inc. announced in 2015 that heat from the servers of its $1 billion facility in Viborg would benefit the local community through district heating. This has yet to materialize, though the local heating company now says that the service is scheduled to start by 2027.

Efficiency Rules

In southern Stockholm, tucked behind a four-meter fence, Conapto AB opened its fourth and biggest data center last year. The 20MW facility feeds its excess thermal energy to the city’s district heating system, which distributes it to 10,000 homes.

“We, as an industry, have to raise our game,” said Stefan Nilsson, Conapto’s chief commercial officer. Going forward, sustainability “will be a requirement when serving our clients,” both because “customers are now asking for higher standards and there are more regulatory demands from the EU,” he said, adding that the firm won’t build any new facilities in Stockholm without the technology.

Edward Galvin, founder of the market intelligence firm DC Byte, says that a new efficiency law in Germany is likely to have even more of an impact than the European Union regulations. The rule requires larger data centers opening in 2026 to use 10% of their waste heat, while those opening in 2028 must collect 20%. An earlier target of 30% was watered down due to objections from the industry.

While the initial target is a fairly light one, “the advantage of legislation is that it creates a completely level playing field,” said Galvin.

Heat Sources

Households’ energy mix for space heating

The EU has now set member states a binding goal to collectively reduce their final energy consumption by almost 12% by the end of the decade, compared with projections made in 2020. Under the rules, data centers of at least 500 kilowatts have to publicly share key information, including energy consumption and water usage.

On May 15, the European Commission is due to submit a report assessing whether measures to further tackle energy consumption in the sector will be needed, including minimum performance standards.

While Conapto’s Nilsson says the firm “won’t get rich” from selling its excess heat, “it’s a win-win for us, our clients and the community,” he said.

Back in Finland, more heat recovery projects are in the pipeline. On March 25, Polarnode announced plans to build a 150MW data center in the east of the country that will also be connected to the district heating grid. The firm will pick a customer by August in a tender process that will start next quarter, said Mika Suomi, head of operations.

While the technology remains very much a work-in-progress, Kurvi, who’s current role is chief development officer at a data center-focused real estate company Hyperco, is pleased that his persistence has so far paid off.

“There is a word in Finnish: sisu. It’s a difficult word to translate, it means stubbornness, your desire to get something done.”