Water intensity forces power sector to advanced cooling technologies as 31% of global GDP enters high-stress zone by 2050

Water stress is forcing the global energy sector to redesign cooling infrastructure. Recent episodes across Europe where high river temperatures and low flows forced nuclear output cuts and temporary reactor curtailments have exposed a systemic vulnerability. By 2050, 31% of global GDP will be exposed to high water stress, up from 24% in 2010, threatening the thermal power plants and data centres that underpin modern economies, according to research published today by Wood Mackenzie.

The research examines the adoption of new cooling technologies to manage declining water availability. Thermoelectric, nuclear, and hydro plants produced 80% of global power in 2025, and all depend on water for cooling. Meanwhile, the explosion of AI computing is pushing data centres toward liquid cooling systems that can handle 250 kilowatts per rack; 10 times what air cooling can manage and creating a parallel demand spike just as water availability becomes volatile.

Key Findings:

• 31% of global GDP faces high water stress by 2050 versus 24% in 2010
• India, Mexico, Egypt, and Turkey account for over half of exposed GDP
• Dry cooling systems eliminate water use but cut efficiency by 7 percentage points and add $160/kW in capex
• Thermal power uses 10-20 times more water than data centre on-site cooling
• Wood Mackenzie tracks 250 GW of data centre projects globally; average PUE expected to hit 1.2 by 2028

The power sector’s efficiency trade-offs

Agriculture claims 70% of global water withdrawals. Power generation and industry use 22%. But while farm irrigation can be scheduled around seasonal availability, thermal plants need continuous cooling to maintain dispatch reliability. Competition for resources is intensifying across South Asia, the Middle East, North Africa, and the western United States, where aquifers are being drawn down faster than natural recharge rates.

Traditional once-through cooling systems withdraw 132.5 cubic meters per megawatt-hour but consume only 0.9 cubic meters. Wet recirculating towers (now the industry standard) reduce withdrawals to 4.6 cubic meters per megawatt-hour but triple consumption to 3.1 cubic meters through evaporation. Dry cooling eliminates water use entirely but carries a 7-percentage-point efficiency penalty and adds $160 per kilowatt in capital costs.

Europe's recent experience with high river temperatures and low flows leading to reactor curtailments has accelerated a shift toward hybrid cooling, dry systems, and low-risk catchment sitting. New power plant builds are increasingly favouring wind and solar, which require far less water to operate.

AI pushes data centres past air cooling's limit

Air cooling is limited to 15-20 kilowatts per rack. Modern AI training nodes exceed 120-200 kilowatts per rack. That gap cannot be bridged with more fans and pushes data centres toward liquid cooling systems.

Hyperscalers are standardising single-phase direct-to-chip liquid cooling, which circulates warm water (30-45°C versus 15-25°C for air systems) through cold plates attached to GPUs and CPUs. The approach handles 60-150 kilowatts per rack. Two-phase systems using refrigerants can exceed 250 kilowatts per rack. Vertiv, CoolIT, and Asetek are producing manifold and coolant distribution skids aligned to NVIDIA's H100, GB200, and GB300 platforms.

Liquid cooling is far more energy-efficient than air, and higher operating temperatures improve heat rejection. Enterprise facilities historically split power 60/40 between IT equipment and cooling; hyperscalers have pushed that to 90/10, meaning nearly all energy now goes to compute rather than facility overhead. Power usage effectiveness is expected to drop to 1.2 by 2028.

But improved efficiency often comes at the cost of higher water use. Average water usage effectiveness is projected to rise 20% in the same period as operators use evaporative cooling to minimize power demand.

Water intensity flows back upstream

"AI clusters generate heat loads that air simply cannot handle at scale," said Jom Madan, Principal Analyst, Scenarios and Technologies at Wood Mackenzie. "Liquid cooling isn't optional anymore, it's the foundation for next-generation compute.”

Madan adds: “The water question hasn't gone away; it's moved from the data hall to the power plant and that's where the real exposure sits. Thermal power generation remains 10 to 20 times more water-intensive than data centre on-site cooling. As water stress intensifies, the case for wind, solar, and dry cooling becomes operational, not just environmental. The technology exists. The pressure is mounting. What's missing is the policy framework to accelerate deployment at the speed the market demands.”