Facing obstacles in data centre regulation compliance
The data center industry is grappling with a complex web of policy initiatives, technological advances, and market dynamics as regulators focus on energy use, data sovereignty, tariffs, merger control, foreign direct investment (FDI), foreign subsidies, anti-trust, and securitization. These factors are shaping the industry's growth, operational efficiency, and global footprint.
Energy Use and Environmental Regulation
In an effort to support rapid data center development, the U.S. government is accelerating regulatory processes. A new executive order dated July 23, 2025, aims to fast-track federal permitting processes for data center infrastructure, including power generation and natural gas pipelines. Natural gas is highlighted as a significant energy source, with regulatory easing by the Federal Energy Regulatory Commission (FERC) to facilitate infrastructure projects.
Sustainability remains a major focus, with the industry increasingly adopting energy-efficient storage technologies and advanced cooling solutions such as liquid cooling, driven by the computing demands of AI workloads. The Biden administration's AI Action Plan emphasizes modernizing physical and digital infrastructure, aiming for faster environmental permitting and deregulation for data centers and semiconductor manufacturing.
Data Sovereignty
Data sovereignty concerns are intensifying as global regulation increasingly mandates that data be stored and processed within specific jurisdictions for security and privacy reasons. This encourages geographic dispersion and local data center development, complicating infrastructure planning but responding to regulatory demands for secure and compliant cross-border data handling.
Tariffs and Trade Regulations
Although specific tariffs related to data centers are not detailed in the latest sources, the globalized supply chains and construction materials for data centers suggest trade policies and tariffs on IT equipment and infrastructure components remain relevant. The broad regulatory environment implies continued scrutiny on imports essential for data center hardware, potentially affecting costs and deployment timelines.
Merger Control, Foreign Direct Investment (FDI), and Foreign Subsidies
With the data center industry's asset values expected to reach nearly $170 billion needing development or permanent financing in 2025, regulatory oversight on mergers, acquisitions, and investments is growing. Regulators are increasingly attentive to foreign direct investment and foreign subsidies in strategic sectors like data centers, due to national security and economic control considerations.
Anti-trust Considerations
Competition authorities are expected to be vigilant about deals that could stifle competition or create excessive market concentration, a significant point as hyperscale facilities continue to expand.
Securitization and Financing
The industry faces major financing demand to support infrastructure buildout and upgrades. Investors view securitization—the pooling of data center assets as financial products—as a way to mobilize capital efficiently. Regulatory frameworks around financing mechanisms are evolving to accommodate these new structures while safeguarding investor interests and industry stability.
Impact on the Data Center Industry
The rapid growth driven by AI, cloud computing, and edge deployments is causing data centers to scale in size and complexity, resulting in higher energy demand and regulatory pressure to optimize energy use sustainably. Regulatory reforms, especially in permitting and environmental compliance, are intended to remove bottlenecks, allowing accelerated development but also increasing scrutiny on environmental and security issues.
Data sovereignty requirements encourage regional expansion but complicate global operations and infrastructure standardization. Tighter controls on FDI, subsidies, and mergers are creating a more cautious investment environment, impacting capital flow and ownership structures. The shift toward advanced cooling and energy management technologies is fundamental to meeting regulatory energy mandates while addressing AI-driven compute density needs.
In summary, the data center industry is at a regulatory inflection point in 2025, balancing the imperatives of energy efficiency, rapid infrastructure development, security, and competitive markets. Policymakers and industry players are simultaneously confronting the challenges of facilitating innovation-driven growth and managing security, sovereignty, and environmental impact through evolving regulations across permitting, investment, and competitive practices.
[1] Executive Order on America’s Energy Affordability Act [2] Biden Administration's AI Action Plan [3] Data Centre Dynamics [4] PwC Global Data Centre Survey 2021 [5] 451 Research
- The increasing focus on energy use and environmental regulation, as seen in the Executive Order on America’s Energy Affordability Act and the Biden Administration's AI Action Plan, is driving the adoption of energy-efficient storage technologies and advanced cooling solutions in the data center industry, aiming for a more sustainable future.
- With data sovereignty concerns rising and global regulation mandating data storage within specific jurisdictions, the data center industry is witnessing a geographic dispersion and local data center development, posing challenges for infrastructure planning but responding to regulatory demands for secure and compliant cross-border data handling, as reported by Data Centre Dynamics and 451 Research.
