Digitalization Meets Climate Protection: Legal Framework for

Energy-Efficient Data Centres

Michael Denk

and Marie-Theres Holzleitner-Senck

Energieinstitut an der Johannes Kepler Universität Linz, Altenberger Straße 6, 4040 Linz, Austria

Keywords: Data Centres, Decarbonization, Digitization, Energy Efficiency, Waste Heat Utilization, District Heating.

Abstract: Data centres serve as a backbone of digitalization, yet consume vast amounts of electricity, particularly for

server cooling and uninterrupted power supply. In response, recent EU directives – especially the recast

Energy Efficiency Directive and the Renewable Energy Directive – push for transparency, reporting

obligations, and reuse of server-generated waste heat. While exemptions (e.g., for economic infeasibility or

technical constraints) currently soften mandatory requirements, Germany has adopted ambitious regulations,

setting concrete efficiency and waste heat quotas. Still, implementation faces practical obstacles, such as the

low-temperature nature of data centre heat, limited district heating infrastructure, and associated costs. As

digital services expand, stricter regulations are expected to drive increased energy efficiency and

decarbonization across the data centre sector.

1 INTRODUCTION

According to Bitkom’s definition, a data centre is “a

building—or at least a closed-off area—that, in

addition to the IT operations area (space for IT

infrastructure), also encompasses all further technical

support areas (areas dedicated to data centre

infrastructure)” (Bitkom, 2022c). Data centres are

regarded as the backbone of digitalization and form

the foundational infrastructure for virtually all digital

applications (Bitkom, 2022c; Österreichische

Energieagentur, 2022). The ongoing digitalization of

every aspect of life and the economy requires steadily

increasing computing power in order to provide

services such as cloud computing, video streaming,

smart buildings, the Internet of Things (IoT), and

especially applications of artificial intelligence

(Bitkom, 2022c; Funke et al, 2019; BMWi, 2019).

At the same time, data centres have a high energy

demand, primarily driven by the cooling requirements

and the need for uninterrupted power supply for

servers and IT components (such as servers, storage,

and network infrastructure) (Borderstep, 2022a).

According to media reports, the energy consumption

of data centres dedicated to AI applications have

reached enormous proportions. Tech giants like

Microsoft, Google, and Meta are planning to meet the

https://orcid.org/0009-0007-5541-6248.

https://orcid.org/0000-0002-8931-6655.

growing energy needs of AI in the future through

nuclear power and are even considering acquiring

their own power plants (FAZ, 2024).

In contrast to this high energy demand, there is the

significant generation of waste heat and the

possibility of harnessing this currently untapped

source for heating purposes. Legislators have

recognized this potential and are increasingly

implementing energy efficiency measures targeting

data centres and have begun to issue specific

regulations to make use of this resource in the future.

This article examines the European and national

regulatory frameworks and current approaches to

ensuring more sustainable and energy efficient data

centres, as well as the barriers that exist.

2 BACKBONE OF

DIGITALIZATION AND A

VALUABLE SOURCE OF

HEAT?

The energy consumption of data centres has risen

significantly in recent years. Between 2016 and 2021,

the capacity of data centres in Germany grew by 30%

(Bitkom/Eco/German Datacenter Association, 2022),

Denk, M. and Holzleitner-Senck, M.-T.

Digitalization Meets Climate Protection: Legal Framework for Energy-Efﬁcient Data Centres.

DOI: 10.5220/0013433100003953

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 14th International Conference on Smart Cities and Green ICT Systems (SMARTGREENS 2025), pages 163-171

ISBN: 978-989-758-751-1; ISSN: 2184-4968

163

while their energy consumption increased from 14

TWh in 2018 to 17.9 TWh in 2022 (Hintemann, 2020;

Hintemann/Hinterholzer, 2023).

The latter figure corresponds to 3.7% of

Germany’s total electricity consumption (Borderstep,

2022a; Österreichische Energieagentur, 2021),

surpassing Berlin's energy needs (Borderstep, 2022a).

A single mega data centre alone can consume as much

electricity as a large city (Hintemann/Hinterholzer,

2023; Funke et al, 2019).

According to Recital 85 EED III in 2018, data

centres across Europe consumed 76.8 TWh of

electricity (2.7% of the EU-wide electricity demand),

with forecasts predicting a rise to 98.5 TWh by 2030

(an increase of 28%) Projections further indicate that

data centres will account for 3.21% of the EU’s

electricity consumption in 2030.

In addition to the high electricity demand, data

centres cause further environmental impacts, such as

high water demand for cooling and and land use for

facilities (Hintemann/Hinterholzer, 2023).

Against this backdrop, data centres are

increasingly becoming the focus of legislative

measures, particularly in the domain of energy

efficiency law (Bitkom/Eco/German Datacenter

Association, 2022). In its Digital Strategy, the EU

aims to make data centres climate-neutral by 2030

and to introduce transparency measures to record the

ecological footprint (Communication from the

Commission, 2021).

A central approach to improving the sustainability

of data centres lies in harnessing the (server) waste

heat they generate. According to the German digital

association Bitkom, a medium-sized data centre with

a 5 MW IT-capacity could provide heating for

approximately 1,000 residential units (Bitkom,

2022b). Across Germany, it is estimated that the

waste heat from the 90 existing large-scale data

centres could supply 350,000 apartments (Bitkom,

2022a).

The recast Renewable Energy Directive (RED III,

Directive [EU] 2018/2001) highlights the

underutilization of waste heat, despite its widespread

availability. This underutilization results in

squandered resources, insufficient energy efficiency

in national energy systems, and unnecessarily high

energy consumption throughout the EU (Recital 70

RED III).

At the same time, employing waste heat can make

a crucial contribution to decarbonizing heating supply

systems by replacing fossil fuels (Holzleitner-

Senck/Moser/Denk, 2025).

Although data centre waste heat remains largely

underutilized, initial projects demonstrate its

feasibility. In Stockholm, for instance, 30 data centres

have been connected to the district heating network

since 2018 (Ostler, 2018; Funke et al, 2019;

Borderstep, 2022b). Stockholm City Administration

has also set itself the ambitious goal of completely

eliminating fossil fuels by 2040 and thus taking on a

pioneering role in the implementation of sustainable

energy policy. A key pillar of this strategy is

systematically integrating data centres into the

municipal energy system, in particular through the

use of their waste heat (Ostler, 2018). To support this

endeavor, the city aims to attract additional data

centres to contribute their waste heat into the district

heating network. Current planning suggests that by

2035, the waste heat from these data centres alone

will meet around 10% of the entire metropolitan

area’s heating needs, thus making a substantial

contribution to decarbonizing the city’s heating

supply (Deutsch-Schwedische Handelskammer /

AHK Schweden, 2018). Austria also offers an

example: in Vienna, waste heat from a data centre is

used to heat a hospital located in close proximity

(Wien Energie, 2024).

In order to take advantage of these potential

benefits and to contribute to a transition towards

sustainable heating as well as more sustainable

digitalization, recent EU legislation includes

regulations governing the use of waste heat.

While these directives have (in part) been

transposed into national law by the various European

Member States, Germany has adopted the most

comprehensive regulations regarding data centres.

The following sections present the relevant EU-

level and national regulations.

3 REQUIREMENTS UNDER EU

LAW

3.1 Energy Efficiency Directive

3.1.1 General Considerations

The Energy Efficiency Directive (EED III, Directive

(EU) 2023/1791) was recast in 2023 and sets out, as

a key objective, a reduction in EU-wide energy

consumption by 11.7% by 2030 (Article 4(1) EED

III).

The principle of “energy efficiency first” is at the

core of EED III, and Member States are obligated to

consider this principle in all policy areas (Recital 15

EED III). In line with this principle and in view of the

increasing digitalization described above—along

with its energy-intensive infrastructure—EED III

imposes certain obligations on data centres.

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Pursuant to Article 2(49) EED III, the term “data

centre” is understood according to Annex A Nr.

2.6.3.1.16 of the EU-Energy-Statistics-Regulation

(Regulation (EC) No 1099/2008). Under this

definition, a data centre is “a structure or a group of

structures used to house, connect and operate

computer systems/ servers and associated equipment

for data storage, processing and/or distribution, as

well as related activities.”

3.1.2 Disclosure and Reporting Obligations

To foster sustainable development in the ICT sector,

Article 12(1) EED III lays down reporting

requirements for operators and owners of data centres

(Recital 85 EED III).

These obligations apply to data centres with an

electricity demand of at least 500kW for installed IT

capacity. According to Recital 85 EED III, such data

centres have a significant footprint and present

opportunities for substantial reductions in energy and

water consumption, increases in system efficiency to

promote decarbonization of the grid, or reuse of waste

heat in nearby facilities and heating networks (Recital

85 EED III).

By 15 May 2024, and annually thereafter, the

obligated undertakings must publish the information

listed in Annex VII. This includes the name of the

data centre and of its owner or operator, the date the

data centre was commissioned, the municipality in

which it is located, the total area of the data centre, its

installed capacity, annual incoming and outgoing data

traffic, the volume of data stored and processed in the

data centre, and the data centres’ efficiency in the

preceding calendar year based on key performance

indicators. These indicators cover, inter alia, energy

consumption, power utilization, temperature set

points, waste heat utilization, water usage, and the use

of renewable energy sources. The Delegated

Regulation (EU) 2024/1364 on the rating scheme for

data centres

(Commission Delegated Regulation (EU)

2024/1364) serves as the basis for evaluating these

performance indicators (cf. Annex VII Nr. 3(c) EED

III).

Article 12(3) EED III mandates the creation of a

European database for data centres by the European

Commission, which is to compile the information

provided by obligated data centres in accordance with

Article 12(1) and make it publicly available in

aggregated form. Under Article 5 of the Delegated

Regulation (EU) 2024/1364, a common user interface

will be set up to ensure uniform data submission.

As indicated in Recital 87 EED III, the Union

legislator assumes that the collected data and

sustainability indicators will help raise awareness

among operators, owners, manufacturers, software

developers, and users of data centre services

regarding the importance of sustainable practices

(Recital 87 EED III). The collected data will form the

basis for transparent, fact-based planning and

decision-making (Recital 87 EED III). Consequently,

by 15 May 2025, the Commission will review the

collected data on data centre energy efficiency and

present a report that may include legislative proposals

for additional measures. These further measures may

concern regulations aimed at enhancing energy

efficiency, introducing minimum performance

standards, or transitioning to net-zero-emission data

centres (Article 12(5) EED III).

3.1.3 Mandatory Use of Waste Heat

EED III recognizes data centres as a potentially

valuable source of waste heat (cf. Recital 105 EED

III). Accordingly, Article 26(6) EED III stipulates

that data centres with a total rated energy input

exceeding 1 MW must either utilize their waste heat

or adopt alternative heat recovery methods. Data

centres can be exempted if they demonstrate

economic or technical infeasibility. Article 26(7)

EED III outlines the criteria for such exemptions (see

Section 3.1.4. of this article).

3.1.4 Cost-Benefit Analysis for Waste Heat

Utilization

Pursuant to Article 26(7)(d) EED III, newly planned

or substantially modernized data centres with a

nominal total energy input exceeding 1 MW must

conduct a cost-benefit analysis regarding the potential

use of waste heat. In doing so, they must assess the

feasibility of employing waste heat to meet a justified

economic demand and the possibility of connecting

such facilities to a district heating network or to an

efficient or renewable-based district cooling system,

or to other means of heat recovery.

This analysis includes, inter alia, considerations

of technical feasibility, cost-effectiveness, and the

effects on energy efficiency and local heat demand,

including potential seasonal fluctuations.

Under Article 26(8)(c) EED III, Member States

may exempt certain data centres from the obligations

set forth in Article 26(7) EED III. This primarily

concerns data centres whose waste heat is already

being used—or is planned to be used—in a district

heating network or directly for space heating,

domestic hot water preparation, or other purposes

within the building or group of buildings in which the

data centre is located.

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According to Article 26(12) EED III, Member

States must record and publish the findings of these

cost-benefit analyses.

3.2 Renewable Energy Directive

3.2.1 General Considerations

The RED III is the primary legislative act for the

expansion of renewable energy sources. Under

Article 3(1) RED III, Member States are required to

pursue the ambitious goal of covering at least 42.5%

of their gross final energy consumption from

renewable sources by 2030 (an additional indicative

target of 2.5% supplements this main target).

In addition to this overarching expansion target

and other sector-specific objectives (cf. section 3.2.2.

of this article), RED III also contains provisions

concerning waste heat—along with a definition that

extends beyond the directive itself. By virtue of a

reference in Article 2(128c) of the GBER, the

definition is also relevant for State aid purposes.

It is, therefore, pertinent to examine this set of

regulations in the context of waste heat utilization

from data centres.

3.2.2 Creditability Regime Regarding Waste

Heat for Sector-Specific Expansion

Targets

In order to achieve the long-term decarbonization

target, the share of renewable energy must be

increased across multiple sectors, including buildings

(Article 15a), industry (Article 22a), heating and

cooling (Article 23), and the district heating sector

(Article 24). It is noteworthy that waste heat is not

included in the exhaustive list of renewable energy

(sources) under Article 2(1) RED III and therefore

does not qualify as such.

Nevertheless, RED III allows Member States to

partially include waste heat to meet their expansion

targets in the building, industrial, and heating and

cooling sectors. For example, in the building sector,

under Article 15a(2) RED III, up to 20% of the target

may be achieved by using waste heat. With regard to

the district heating sector, renewable energy and

waste heat are considered equivalent (Holzleitner-

Senck/Moser/Denk, 2025).

3.2.3 Definition of Waste Heat Under Article

2(9) RED III

Under Article 2(9) RED III, “waste heat” is defined

as “unavoidable heat […] generated as by-product in

industrial or power generation installations, or in the

tertiary sector, which would be dissipated unused in

air or water without access to a district heating […],

where a cogeneration process has been used or will be

used or where cogeneration is not feasible.”

Heat generated in industrial, commercial, or

power generation processes is classified as a “by-

product” because it is not the primary objective of

those processes. Generally, the objective is the

production of a specific product, the delivery of a

service, or the generation of electricity. The

production of heat is merely an unintended

consequence. In the context of data centres, waste

heat also qualifies as a “by-product,” since the

primary objective of these facilities is to process,

store, and transmit data rather than generate heat.

According to the definition, the process that

produces waste heat must take place in an industrial

installation, in a power generation facility, or in the

tertiary sector. This covers a wide range of processes,

from manufacturing and processing in factories to

electricity production in power plants, as well as

services and activities in the tertiary sector, such as

hospitals and shopping areas (cf. Annex IV,

Commission Recommendation (EU) 2019/1659). In

any case, data centres are part of this group of

facilities, particularly because they fall under the

“tertiary sector” (cf. Annex IV, Commission

Recommendation (EU) 2019/1659).

Furthermore, heat is only deemed “waste heat” if

“access to a district heating system is available, in

which a cogeneration process has been used or will be

used or where cogeneration is not feasible.”

The wording suggests that, unlike the purely

technical understanding of the term, “waste heat”

does not qualify as such without additional structural

measures (i.e., establishing access to a district heating

system).

For the use of server heat generated by a data

centre, this implies that some of the utilization

methods (cf. Art 26 EED III) addressed in the EED

III or considered within the cost-benefit analysis do

not fully align with the understanding of “waste heat”

under Article 2(9) RED III.

Article 26(6) and (7)(d) EED III also address on-

site and alternative methods of utilizing waste heat,

extending beyond its integration into district heating

networks (cf. Annex XI EED III). However, on-site

usage conflicts with the requirement in Article 2(9)

RED III for access to a district heating system and, as

a result, would not qualify as waste heat under the

definition provided in Article 2(9) RED III.

Therefore, in-house utilization of waste heat would

not qualify for recognition or credit under these

provisions.

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4 NATIONAL PROVISIONS

4.1 Austria

4.1.1 Federal Energy Efficiency Act

In transposing EED III into national law, the Austrian

Federal Energy Efficiency Act (Bundes-

Energieeffizienzgesetz, EEffG) imposes information

obligations on data centres.

§ 72a EEffG obliges owners and operators of data

centres with an installed nominal electrical capacity

of at least 500 kW for information technology to

publish specific minimum information about their

operating data on an annual basis. These reporting

obligations, which take effect on 15 May 2024, are

intended to enhance transparency concerning the

energy consumption and efficiency of data centres.

The scope of the required information is already

set forth in Annex VII of EED III (cf. section 3.1.2.

of this article).

This includes basic information such as the name

of the data centre, the name of its owner or operator,

the date of commissioning, and the municipality in

which it is located. Additionally, the data centres’

floor area must be reported, along with its installed

capacity, annual incoming and outgoing data traffic,

and the volume of data stored and processed.

Furthermore, the data centres’ efficiency indicators

for the most recent full calendar year must be

disclosed. These cover key performance metrics such

as energy consumption, electricity usage, temperature

setpoints, waste heat utilization, water consumption,

and the share of renewable energy.

These items of information must be made

available on the website of the respective data centre

and must be regularly updated (§ 72a(3) EEffG).

Furthermore, the national energy supervisory

authority E-Control must be notified of the

publication of minimum information pursuant to §

72a(1), including its transmission as required by §

72a(3). This includes, inter alia, the name of the data

centre and efficiency of the data centre in the last full

calendar year in accordance with the key performance

indicators, in particular for energy consumption,

electricity use, waste heat utilization, water

consumption and use of renewable energies.

4.1.2 Energy Efficiency Standardised

Abridged Reports Regulation

The EEff-SKV (Energieeffizienz-Standardisierte-

Kurzberichte-Verordnung) imposes reporting

obligations in the form of a standardized short report

pursuant to § 43 EEffG, focusing on the potential for

waste heat recovery from technical installations in

businesses.

§ 5 EEff-SKV requires data to be reported as

thermal output (in kW) and full-load hours,

categorized into the following temperature ranges:

1.  Cooling temperatures below 0 °C,

2.  Low temperatures between 0 °C and 50 °C,

3.  Medium temperatures between 50 °C and

200 °C and

4.  High temperatures at or above 200 °C.

4.2 Germany

4.2.1 Energy Efficiency Act

According to the German Federal Government’s

energy efficiency strategy, the use of waste heat in the

economy illustrates the “energy efficiency first”

principle more effectively than any other area (BMWi,

2019). For this reason, the German federal legislator

has introduced comprehensive regulations for data

centres in the form of the Energy Efficiency Act

(Energieeffizienzgesetz,

EnEfG). The relevant

provisions apply to operators of data centres with a

non-redundant nominal connection capacity of 300

kilowatts or more. According to Bitkom, a “non-

redundant nominal electrical connection capacity”

means “the total of the maximum electrical capacity

required for operation” (Bitkom, 2024) This

encompasses both IT system capacity and auxiliary

systems like cooling and lighting (Bitkom, 2024).

Under § 11(5), these data centres must ensure that,

50% of the electricity is covered by renewable energy

sources on a balance sheet basis starting 1 January

2024. From 1 January 2027 onward, the data centres’

electricity consumption must be supplied entirely (i.e.,

100%) by renewable energy sources.

With regard to additional requirements, the

legislation differentiates between data centres that

begin—or have begun—operations before 1 July 2026

(subsection 1) and those that begin operations on or

after 1 July 2026 (subsection 2).

The former must be designed, built, and operated

so that they permanently achieve an average annual

Power Usage Effectiveness (PUE) of less than or

equal to 1.5 starting 1 July 2027, and less than or equal

to 1.3 starting 1 July 2030. Under § 3(15) EnEfG, PUE

is defined as “a metric for the energy efficiency of a

data centres’ infrastructure, describing the ratio of the

data centres’ total annual energy demand to the IT

energy demand, in accordance with DIN EN 50600-4-

2.”

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167

New data centres, i.e. those that go into operation

from 1 July 2026, must be set up and operated in such

a way that they achieve an energy efficiency of less

than or equal to 1.2.

From the perspective of the German legislator,

data centres’ waste heat offers the potential to meet at

least some of the future demand for heating

(Deutscher Bundestag, 2023).

With this in mind, the just mentioned “new” data

centres must have a proportion of reused energy of at

least 10%. This percentage increases with later

commissioning. Therefore, data centres that beginning

operations on or after 1 July 2027 must have a planned

share of reused energy of at least 15%; data centres

that commence operations from 1 July 2028 must have

a planned share of reused energy of at least 20%.

The term “reused energy” is understood in

accordance with DIN EN 50600-4-6. Under that

technical standard, only reuse outside the boundary of

the data centre is considered. Consequently, any use

of waste heat within the same facility does not fulfill

the requirements of § 11 EnEfG (Bitkom, 2024).

Data centres that begin operations before 1 July

2026 are thus not subject to any legal provisions on

energy reuse or waste heat utilization. For (new) data

centres subject to a mandatory waste heat utilization

requirement, exceptions apply under § 11(3) EnEfG.

According to this provision, waste heat utilization

requirements do not apply if the operator of the data

centre can prove that the share of reused energy fails

to meet the requirements under subsection 2 Nr. 2 due

to unforeseen events, without any fault on the part of

the operator. Such unforeseen events might include

failed construction projects for the necessary

infrastructure (Bitkom, 2024).

Likewise, the requirements do not apply if there is

an agreement with a nearby municipality or a district

heating network operator that legally binds them to

establish a district heating network within ten years.

This agreement must include an investment plan,

clarify the cost allocation for the connection

infrastructure, and determine the price for supplying

waste heat. Furthermore, the obligation lapses if a

nearby district heating network operator declines an

offer to use the waste heat at cost price, even though

the data centre provides the necessary infrastructure—

particularly a heat transfer station—while the network

operator is required, upon the data centre operator’s

request, to disclose the heating network’s available

capacity.

Operators of data centres are also subject to

several disclosure obligations. Pursuant to § 13

EnEfG, data centre operators are required to publish

information regarding their facilities for the preceding

calendar year by 31 March each year, in accordance

with Annex 3, and submit this information to the

federal government. This includes details on the

quantity and average temperature of waste heat

discharged into air, water, or ground, as well as the

quantity of waste heat delivered by the data centre to

heat consumers (in kWh per year) and its average

temperature in °C.

For this purpose, § 14 EnEfG obliges the German

Federal Government to establish an “Energy

Efficiency Register for Data Centres,” in which the

transmitted data is stored and forwarded to a European

database for data centres.

In addition to these data centre specific provisions,

§  16 EnEfG includes general requirements on the

“avoidance and use of waste heat,” which also apply

to data centre operators.

According to § 16(1) EnEfG, certain companies

are obligated to avoid the waste heat generated in their

operations in accordance with the state of the art and

to reduce the waste heat generated to the proportion of

technically unavoidable waste heat, insofar as this is

feasible and reasonable. Feasibility (or

“reasonableness”) is assessed by taking into account

technical, economic, and operational factors.

Pursuant to § 16(2) EnEfG, any unavoidable waste

heat must be reused to the greatest possible extent

through energy-saving measures and techniques,

insofar as this is feasible and reasonable. Again,

feasibility is determined by technical, economic and

operational factors. Under § 16(2) EnEfG, such waste

heat should not only be reused within the particular

installation but also be made available on the

company’s premises and to potential external

customers. For maximum efficiency gains, the

recovered waste heat should be reused multiple times

in a so-called cascade process based on its exergy

content, or in successive temperature steps.

Furthermore, the law contains a right of

information for district heating network operators and

other potential companies interested in purchasing

waste heat. According to § 17(1) EnEfG, businesses—

including data centres—must, upon request, provide

operators of district heating networks, district heating

suppliers, or other potential heat purchasers with

comprehensive information about the waste heat

generated in their facilities. This includes, inter alia,

the name of the business, the address of the site(s)

where waste heat arises, the annual quantity of

available waste heat, and the maximum thermal

capacity. In addition, information on the temporal

availability of the waste heat—e.g., in the form of

performance profiles throughout the year—and on

options for adjusting temperature, pressure, and grid

injection must be supplied. The average temperature

level in °C must also be disclosed.

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To alleviate information gaps regarding waste heat

availability (Deutscher Bundestag, 2023), businesses

must annually by 31 March, irrespective of specific

inquiries, submit the aforementioned information to

the Federal Office for Energy Efficiency (Bundesstelle

für Energieeffizienz) and update it immediately

whenever changes occur. This data must be submitted

using a federal government-provided electronic

template. Under § 7(2)(6) EnEfG, the Federal Office

for Energy Efficiency must establish a “Platform for

Waste Heat” for this purpose. The Federal Office

makes the collected information available on this

platform while safeguarding trade and business

secrets.

Exemptions from the reporting and disclosure

requirements apply to businesses with an average total

final energy consumption of 2.5 GWh or less over the

last three completed calendar years (§ 17(4) EnEfG).

4.3 Portugal

4.3.1 Decreto-Lei n.º 84/2024

The Decreto-Lei n.º 84/2024 aims to implement the

EED III and Delegated Regulation (EU) 2024/1364 in

Portugal and primarily establishes information

obligations.

Article 2 specifies that this law applies to data

centres with a minimum installed IT capacity of 500

kW. The term “data centre” (“centros de dados”)

follows the interpretation in Article 2(49) EED III,

referring to the definition in Annex A of the Energy-

Statistics-Regulation (Article 3).

Article 4 requires the operators and owners of data

centres to make information about their energy

consumption publicly available on their website. This

includes, among other details, the data centres’

location, its annual data traffic, the use of waste heat

and renewable energy sources, as well as water

consumption (cf. the Annex to the act). These details

must be updated annually by 15 May and must also be

submitted in digital form to the national energy

authority (DGEG) (Article 4(4)).

5 5 WASTE HEAT UTILIZATION

CHALLENGES (IN DISTRICT

HEATING SYSTEMS)

5.1 Low Temperature Level

Transferring waste heat from data centres to district

heating systems presents several technical challenges.

A key challenge is the relatively low temperature of

the waste heat. While data centres typically produce

waste heat with temperatures of around 30–40 °C,

district heating networks require significantly higher

temperatures, in the range of 60–70 °C (Funke et al,

2019; Ostler, 2018). This temperature gap

necessitates an additional heating process. In practice,

heat pumps are used to address this issue. They not

only ensure the required temperature boost, but can

also compensate for fluctuations in waste heat

production (Funke et al, 2019; Bitkom, 2022a;

Waldhauser, 2019). However, the economic

feasibility of these systems heavily depends on

electricity costs (Funke et al, 2019).

Liquid cooling of servers offers a promising

alternative that remains economically viable even if

electricity prices increase while heat prices stay low

(Borderstep, 2022b). This approach allows the data

centre to directly produce water at around 60 °C,

thereby enabling immediate heat utilization without

the use of additional heat pumps (Borderstep, 2022b).

5.2 Lack of Off-Takers and

Infrastructure

Many data centre operators are reportedly willing to

provide their waste heat at no or low cost, but they

often struggle to find potential off-takers

(Bitkom/Eco/German Datacenter Association, 2022).

Moreover, the necessary district heating network

infrastructure is still insufficiently developed

(Hintemann/Hinterholzer, 2023).

In addition to expanding infrastructure, district

heating network operators should face greater

obligations to accept waste heat

(Bitkom/Eco/German Datacenter Association, 2022).

Thus, alongside mandatory waste heat utilization or

its provision, energy utilities should be required to

accept that heat and provide nondiscriminatory access

to district heating networks and feed-in options

(Bitkom/Eco/German Datacenter Association, 2022).

The revised RED III mandates regulated “Third

Party Access” to district heating systems with

capacities exceeding 25 MWh.

Article 24(4)(b) RED III requires operators to

either integrate renewable energy and waste heat from

third parties into the network or offer to purchase it

for feed-in.

The directive mandates Member States to define

non-discriminatory criteria for this purpose;

Article 24(4), (i) to (iii) restricts these criteria to

covering additional demand from new customers,

replacing existing heating capacities, or expanding

current generation capacities.

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169

Network access must be granted if demand from

new users grows, if less efficient or fossil-based

sources can be replaced by renewable ones, or if

third-party feed-in increases overall supply capacity.

In the first case, district heating operators are

required to grant network access to third parties when

there is additional demand from new customers. In

other words, they must accept heat from third parties

if it can be used to meet that increased demand (cf.

Article 24(4)(b)(i) RED III).

Second, access for third-party providers is

facilitated if the heat they supply replaces existing,

potentially less efficient or fossil-fuel-based heat

generation capacities. This promotes the use of

renewable or more efficient energy sources in the

district heating network (cf. Article 24(4b)(ii) RED

III).

Third, access must also be allowed if feed-in by

third parties serves to expand existing heat generation

capacities. This means that third parties are permitted

to deliver heat if doing so increases the overall supply

capacity of the network—for instance, to meet

growing demand in the future (cf. Article 24(4)(b)(iii)

RED III).

At the same time, Article 24(5) RED III allows

district heating operators to refuse access or the

purchase of heat if the system does not have sufficient

capacity due to other renewable or waste-heat inputs,

if the heat fails to meet technical requirements for safe

and reliable feed-in, if granting access would cause

disproportionate cost increases for end consumers, or

if the operator’s system qualifies as an efficient

district heating system

5.3 Value Added Tax Liability

In order to comply with existing and likely future

requirements regarding the use of waste heat, data

centre operators might be inclined to supply it to off-

takers without charge. However, it should be noted

that such transactions are generally subject to VAT

and therefore may not be profitable.

The Court of Justice of the European Union ruled

that under Article 16(1) of the VAT Directive

(Council Directive 2006/112/EC), surplus heat

provided free of charge is taxable if the generating

facility (or its components) was eligible for input tax

deductions and the heat is supplied for economic

activities (cf. ECJ, 25 April 2024, Case C‑207/23,

Finanzamt X, ECLI:EU:C:2024:352, para. 48). The

Court based its decision on preventing untaxed final

consumption (of the supplied heat) (ECJ, 25 April

2024, Case C‑207/23, Finanzamt X,

ECLI:EU:C:2024:352, para. 39.). As a result, data

centre operators remain liable for VAT even when

providing waste heat free of charge (Bitkom, 2024).

Regarding the taxable amount under Article 74

VAT Directive, the CJEU held that it corresponds to

the purchase price of the good or, if no such price

exists—as in the present case—the cost price at the

time of application (ECJ, 25 April 2024, Case

C‑207/23, Finanzamt X, ECLI:EU:C:2024:352, para.

50 and 59). In addition to direct production or

generation costs, this calculation must also take into

account indirectly attributable costs, such as

financing costs (ECJ, 25 April 2024, Case C‑207/23,

Finanzamt X, ECLI:EU:C:2024:352, para. 59). It

remains unclear to the authors how exactly these

production costs should be determined in the case of

unavoidable waste heat.

6 CONCLUSIONS

European and national regulations are reacting to the

growing number of data centres, although the current

measures largely consist of publication and reporting

obligations. For the time being, the EU legislature

appears to be relying on economic stakeholders to use

this information to take their own initiatives and

voluntarily implement more energy-efficient

solutions. Nevertheless, it is likely that the

Commission will use the reported data to draft more

comprehensive legislation in the future.

Although data centres offer significant potential

for reducing overall energy consumption through

their waste heat, technical barriers (such as the need

for temperature elevation) and infrastructural

shortcomings currently impede broad-scale

implementation.

While third-party providers are now afforded

non-discriminatory access to district heating systems

under the principle of “Third Party Access,” the right

to feed into these systems can be denied under certain

conditions (e.g., capacity constraints,

disproportionate cost increases).

Overall, current regulations focus heavily on

information obligations aimed at making data on

energy efficiency and waste heat usage more readily

available. This transparency will enable

policymakers, businesses, and researchers to gain a

clearer understanding of data centres’ efficiency

potential and to prepare more far-reaching regulations

if necessary. Additionally, providing waste heat is

associated with tax implications. In particular, the

Court of Justice of the European Union’s ruling on

the VAT liability of freely supplied surplus heat

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170

demonstrates that even free provision may not always

be financially viable for operators.

While current EU legislation relies on industry-

led voluntary measures, it is expected that more

stringent regulations will be introduced once the

newly mandated transparency and reporting

requirements have been thoroughly evaluated.

ACKNOWLEDGEMENTS

This contribution was developed as part of the

research project „ReduzAb“ - CO2-Emissionen

REDUZieren durch Abwärme“ FFG-Nr.:

FO999903330) funded by the Bundesministerium für

Klimaschutz, Umwelt, Energie, Mobilität, Innovation

und Technologie.

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