The data center buildout is converging with an underfunded, yet critical input to operations: municipal water and wastewater services. Hundreds of billions in hyperscale investments from Amazon Web Services, Microsoft, Meta, and Google are landing at the doorstep of aging municipal water systems and infrastructure—not designed to serve customers at this scale, speed, or complexity.

The dependency runs deeper than most realize, with data center operators sourcing close to 100% of their water from public utilities. This makes municipal systems an unavoidable bottleneck in the data center infrastructure buildout for sites using water-dependent cooling systems. While this symbiotic relationship can create real leverage for utilities willing to use it, others are facing real risk if unprepared.

In the rapidly changing landscape, utilities often have little visibility into the water-related choices being made by data center developers. Cooling technology choices are in flux, with stakes increasing. A new campus can drive significant water demand or nearly none, based on design decisions made in the early development stages. This includes liquid cooling paired with dry heat rejection and “zero water consumption” facilities moving from concept to reality.

This report examines how utilities are navigating this uncertainty, including where opportunities lie, where risks are concentrated, and which strategies are emerging as the sector adapts to a customer segment that is moving faster and spending more.