AI data centers face heatwave and severe weather climate risks
As Europeans scramble to stay cool amid a record-breaking heatwave, Big Tech faces its own battle to keep the powerful chips in AI data centers running.
Temperatures this week have underscored the impact the weather can have on infrastructure like factories, nuclear power plants and data centers. Extra demand from air conditioning units can overload power grids, causing blackouts that can disrupt infrastructure. And it’s not just in Europe.
Over the past three years, severe weather has become the leading cause of loss in Zurich‘s U.S. data center builders’ risk portfolio. It now drives a third of the company’s losses, Zurich’s Head of International Construction Patrick McBride, told CNBC.
Severe weather is no longer something that can be treated as a background exposure.
Patrick McBride
Head of International Construction at Zurich
Many data centers are moving to suburban or rural areas where land is cheaper and records of extreme weather were often limited because the areas were largely underdeveloped, he said. “Now we have $3 billion worth of assets with over a mile worth of exposure to these events.”
Why insurers are watching climate risk
A recent study by climate risk analytics firm First Street found that 79% of global data center capacity faces elevated risks from acute climate hazards such as flooding, extreme winds, and wildfires that can disrupt operations, increase downtime and drive insurance and repair costs.
“It’s not a matter of ‘if’ climate risks will impact the digital infrastructure revolution,” Joe Macejak, U.S. property digital infrastructure leader at Marsh Risk, told CNBC. “But rather how clients and stakeholders in the digital infrastructure industry identify, quantify, and manage these climate risks within their respective tolerances.”
If they don’t manage these risks, businesses could face higher costs and operational shortfalls —which “pose a threat to the capital stacks that are fueling the AI-driven data center revolution,” Macejak added.
Where new data centers face severe weather risks
This year, 64% of data center capacity under construction is outside traditional hubs such as Northern Virginia and moving into so-called frontier markets, such as West Texas, Tennessee, Wisconsin and Ohio, Zurich’s McBride said. He added that facilities in these areas can face heightened risk of “tornadoes, hail and high winds wreaking havoc on vast roofs that have exposed HVAC [heating and cooling systems], cooling towers and energy installations like solar.”
McBride gave Brazil as an example of an emerging data center market that might face heat challenges. Meanwhile, in Europe, data centers are migrating to areas like the Iberian Peninsula, where temperatures are also rising.
“Severe weather is no longer something that can be treated as a background exposure,” McBride said. “It is one of the first things we and the owners we work with…
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