What power source should be used for Data Centers?

The global investment boom in data centers continues unabated, driving energy demand to new heights. Power grids in many metropolitan areas are increasingly reaching their limits, and grid expansion often cannot keep pace with the growth in continuous loads. Providing a reliable, economical, and sustainable power supply to data centers is a challenge and at the same time offers opportunities, such as the use of waste heat for district heating networks.

Worldwide, data centers currently require approximately 100 GW of continuous electrical power, around the clock, 365 days a year - comparable to the power demand of entire steel mills. Forecasts predict that this figure will rise to about 200 GW by 2030. In the U.S., data centers already account for about 7% of total electricity consumption, and the trend is rising. In Germany, the current connected load is about 3 GW, with annual consumption at around 20 TWh, which corresponds to about 5% of national electricity consumption. For 2030, 5 GW of connected capacity and 35 TWh of consumption are projected. With an average utilization factor of 76%, this means that about a quarter of the capacity remains unused but must still be maintained - entailing corresponding investment and infrastructure costs. 

At the same time, Germany generated approximately 450 TWh of electricity in 2025, while consumption stood at around 500 to 520 TWh; the remainder was covered by imports. The expectation is that the available import quotas will no longer be available to the same extent in the foreseeable future, as the expansion of data centers in the countries of origin for energy imports is booming just as strongly as in Germany. These figures illustrate the scale of the challenge: Data centers generate not only electricity loads on the scale of large power plants, but also infrastructure and planning issues that go far beyond traditional grid operations. The enormous energy flows make it clear that the electricity consumption of data centers is inextricably linked to heat generation, which can be utilized economically and ecologically through targeted combined heat and power (CHP) generation.

Electricity Becomes Heat: Harnessing the Potential of Combined Heat and Power

Nearly every kilowatt-hour of electricity consumed in a data center is converted into heat. On top of that, there is an additional 20 to 40% of energy required for cooling and peripheral systems, meaning a 100-MW data center emits approximately 130 MW of thermal power. This heat must be continuously dissipated or put to good use. The Energy Efficiency Act (EnEfG, 09/2023) takes this system reality into account and implicitly classifies data centers as combined heat and (cooling) power applications.

By integrating waste heat into municipal heating networks, it is possible not only to increase energy efficiency but also to significantly improve the carbon footprint. This opens up new opportunities for municipal utilities and energy suppliers: Data centers are becoming systemically important energy hubs whose heat loads can be actively integrated into local supply concepts.

Grid availability and decentralized supply

The continuous use of electricity and the resulting heat place high demands on grid availability. In hotspots such as Frankfurt, Berlin, or London, the provision of sufficient power capacity is often limited. Public grids typically achieve availability of around 99.9%, while data centers must compensate for power outages using emergency generators and battery energy storage systems to meet the standard requirement of 99.999%.

This discrepancy shows that decentralized supply concepts are becoming increasingly necessary. In parts of the U.S., particularly in Texas, regulatory frameworks have already led to large data centers meeting their own electricity needs. Photovoltaics and wind energy can be integrated into the energy balance, but they do not meet the continuous
load requirements. Storage solutions on the required scale are currently still limited by economic and regulatory constraints. Against this backdrop, it becomes clear that a strategic combination of grid connection, emergency power supply, and on-site generation is essential.

Modularity and container solutions

Gas engine-based CHP systems, in particular, offer a decisive advantage here: their modularity. Individual units can be installed in standardized containers, allowing large power blocks to be erected in a very short time. Multiple modules can be flexibly combined to provide total capacities ranging from several tens to hundreds of megawatts.
German manufacturers have the capacity to supply these containers in large quantities, enabling new data centers or short-term peak loads to be met within a few months.

The advantages are clear: rapid responsiveness to local needs, high system stability, and the ability to plan modular power plant capacity on a decentralized basis. Especially in
the context of the volatile feed-in of wind and solar energy, it becomes clear that conventional capacity remains indispensable despite the expansion of renewable energy sources. The upcoming amendment to the Combined Heat and Power Act can support this trend by promoting the economic and regulatory integration of modular CHP plants.

Data Centers in an International Context

While Germany debates the energy needs of its data centers, a similar picture is emerging internationally. Major cities such as London, Paris, Singapore, and New York are investing heavily in new data centers, while existing facilities are expanding their capacity. In the U.S., data centers already account for about 7% of total electricity consumption; in Asia and the Middle East, that share is rising rapidly. Here, too, it is clear that public grids alone are not sufficient to ensure a continuous supply.

Against this backdrop, decentralized, modular energy supply concepts are gaining importance internationally. Containerized gas-engine cogeneration plants enable the rapid deployment of large amounts of power and, through heat recovery, actively contribute to decarbonization and energy efficiency. Numerous projects across several continents have successfully demonstrated the flexibility, scalability, and resilience of these concepts.

Multinational operators are increasingly recognizing that strategic planning for energy supply must be carried out in a modular and decentralized manner in order to efficiently integrate renewable sources while ensuring security of supply.

Technological options: CHP, combined cycle power plants, and fuel cells

In general, several technologies are available for decentralized power generation, each of which places different demands on land use, flexibility, investment volume, and operational reliability. Gas engine combined heat and power (CHP) plants require a total installed capacity of approximately 114 MW, which corresponds to a capacity factor of 14%. Combined cycle gas turbine (CCGT) plants require up to 200% capacity factor, while high-temperature fuel cells require approximately 123 MW. Electrical efficiency ranges from 43 to 48% for gas engines, 50 to 55% for CCGT plants, and 50 to 54% for fuel cells.

The key factor for investors is the total cost of ownership (TCO): Assuming a natural gas price of 3.74 cents/kWh, a CO2 tax of €80/t, and market-standard operating and capital costs, the levelized cost of electricity amounts to 14.5 to 16.5 cents/kWh for CHP plants, 15.1 to 16.1 cents/kWh for combined cycle gas turbine (CCGT) plants, and 19.8 to 21.08 cents/kWh for fuel cells. For a 100-MW data center, the annual difference between CHP and the alternatives amounts to approx. 35 to 40 million €, while CO2 emissions remain comparable.

Heat Utilization and Hydrogen Compatibility

Utilizing waste heat significantly increases the economic efficiency of CHP plants. A 100-MW data center generates approximately 120 MW of thermal output, which can be utilized via heat pumps or by feeding directly into local grids. This increases the overall efficiency to approx. 90%, reduces the levelized cost of electricity to 13.1 to 14.3 cents/kWh, and significantly reduces CO2 emissions. These synergies make data centers strategic partners for municipal utilities and highlight the advantages of decentralized CHP solutions.

Gas engines are robust and flexible: They can be operated with various types of gas, including LNG, CNG, or LPG. Furthermore, hydrogen-powered engines are already fully available and ready for mass production today, unlike many turbine solutions.

Conclusion: CHP and decentralized supply are crucial

Choosing the right technology for data centers goes far beyond electrical efficiency. Gas engines and combined cycle power plants offer regulatory certainty, load flexibility, and operational reliability. CHP systems significantly improve overall efficiency and cost-effectiveness through the utilization of waste heat. High-temperature fuel cells are currently not competitive. Data centers are systemically important energy hubs whose integration into combined heat and power (and cooling) systems unlocks economic and environmental benefits, strengthens supply security, and drives the decarbonization of municipal heating networks.