The talk around datacentres is nothing short of relentless at the moment. Discussions around the water or energy needed, the costs of development and land and more, abound on the pages of company websites. There’s a seemingly relentless hunger for more and more data capacity, created by the thirst for increasing quantities of AI and online technology. So, what’s all the fuss? What are the risks? And how can you mitigate them? Perhaps unsurprisingly, datacentres are far more than just a big box in a field (or a desert) with complex M&E. And as demand increases, so do the complexities and challenges around their construction.
In the following article I examine some of those complexities, along with the commercial and practical challenges the sector faces.
Location and Infrastructure Challenges
Location is key.
One big factor now affecting datacentre development is the increasing scarcity of space for development in key strategic locations. There was a period when firms would find a suitable plot on the west coast of Ireland, plug in and go. There was a reliable energy supply, plentiful water and an ideal climate. Granted, it wasn’t quite that simple, but the growth potential was seen as an almost universal positive.
Step forward a few years and the landscape is increasingly complex.
There’s been a noted de facto ban on datacentre developments in a number of parts of Ireland. This has arisen due to pressure on the national grid and concerns around long-term sustainability. Developers are now being pushed towards sites with stronger renewable energy capability and improved infrastructure. In some cases, the developers are creating their own energy source from which to power their development.
This creates a challenge itself. Datacentres now need more than just land for their own use. They need long term energy certainty, strong fibre connectivity, cooling capability and infrastructure that can cope with the increasing demand over a prolonged period. Finding all of that in one location is becoming increasingly difficult.
Energy Demands
Power remains one of the biggest issues facing this sector. AI driven demand is placing huge strain on energy and grid capacity across Europe and world-wide. In some locations, projects are now being delayed simply because the grid cannot support them.
The UK is a good example of this challenge. In early 2025, the government estimated that UK datacentres accounted for around 2.5% of the country’s electricity consumption, with predictions suggesting this could increase significantly by 2030. At the same time, the queue for grid connections has continued to grow as pressure on infrastructure increases.
These factors combined will inevitably lead to probable cost escalation and risk factors that need factoring into plans, contracts and the estimating process if disputes are to be avoided. Good advice from experienced professionals is almost certain to be necessary in order to ensure success and reduce risks.
Sustainability and Environmental Pressures
Sustainability and environmental concerns are also becoming increasingly significant. Water usage in particular has come under scrutiny due to the scale of cooling systems required to keeping the facilities operational. Local authorities and communities are asking more questions about the long-term environmental impact of large-scale developments, particularly in areas already facing these resource pressures.
In response, there has been a growing shift towards ‘green datacentres’. Developers are looking at smarter designs, renewable energy and more sustainable models. Cooler climates can help reduce cooling requirements, which is one of the reasons countries such as Ireland and parts of Scandinavia initially became attractive development locations. Despite this, facilities still require significant infrastructure and energy to maintain these strict operating temperatures.
Construction Pressures
The construction of a datacentres is also unlike many traditional construction projects. The technical requirements are significantly higher and the tolerance for failure is exceptionally low. Programmes are often fast tracked due to the commercial pressure to get facilities operational as quickly as possible. Businesses are racing to secure market shares and increase the capacity. This is exacerbated as AI and cloud computing continue to expand.
This in turn puts pressure on the construction supply chain. Pressure almost always leads to the types of risk that leads to disputes. Risks such as:
- Over-promising, when resources are limited.
- Rushing initial scope planning when the complexity of a project necessitates careful planning.
- Spending less time on planning than is needed to ensure a robust delivery programme.
Recent approvals for major AI datacentre schemes in the UK highlight the scale the sector is now operating at. Plans approved in North Lincolnshire for what has been described as the UK’s largest AI datacentre campus are expected to involve around £7.5bn to £10bn of investment. The project includes vast data halls, battery storage facilities, substations, cooling infrastructure and dedicated energy centres. It will see complex phased delivery programmes stretching over many years.
Material Pressures
The pressure on materials and resources is also becoming increasingly significant. Datacentres rely heavily on specialist materials, particularly copper, steel and complex M&E systems, all of which are facing pricing volatility and growing global demand.
Copper in particular is becoming a major issue. Demand is expected to increase significantly over the next decade. This is driven not only by datacentres but also by electric vehicles and wider electrification across infrastructure and construction. Some forecasts suggest the datacentre ecosystem alone could require around 500,000 tonnes of copper annually by 2030. At the same time, analysts have warned of price increases and supply shortages as global demand continues to rise.
These pressures create further commercial challenges. Procurement strategies and supply chains are becoming increasingly important. This is particularly true on large hyperscale developments. Here, even relatively small fluctuations in material pricing can have substantial cost implications.
Contractual and Legal Challenges
Datacentre projects are technically complex and fast moving. They often involve multiple specialist contractors, consultants and operators working across interconnected projects.
Getting the contracts right is critical. Ambiguities and uncertainties remain one of the most common sources of disputes across major projects, particularly where responsibilities and risk allocation have not been clearly defined from the beginning. Questions around who carries design responsibility, infrastructure risk, delay exposure or pricing fluctuations can quickly become contentious if they are not properly addressed early in the project lifecycle. Again, advice from experienced professionals will be necessary to avoid costly disputes.
Most large-scale data centres to date have been delivered under design and build (D&B) contracts due to the speed and coordination benefits that procurement route can offer. However, there is now a growing appetite for engineering, procurement and construction (EPC) contracts as developers and investors look to transfer more risk onto contractors, achieve greater programme certainty and accelerate delivery times.
Pricing volatility also creates additional contractual pressure. Standard form contracts contain mechanisms that may assist with fluctuations in material pricing or supply chain disruption. However, these provisions need to be properly understood and carefully managed. As projects become larger, more technically demanding and increasingly reliant on specialist materials and infrastructure, clear contractual drafting and realistic risk allocation become even more important.
The Future of the Sector
Despite the challenges, there are few signs of the sector slowing down. Demand for AI, cloud computing and digital infrastructure continues to increase at pace, and with it the need for more data capacity.
However, the future of the sector will depend on far more than simply building larger facilities.
The rapid expansion of data centre infrastructure driven by cloud adoption and AI demand is giving rise to a marked increase in disputes across the development lifecycle. What was once a relatively low-friction asset class is now encountering systemic challenges spanning planning, stakeholder engagement, environmental compliance, and project delivery.
Energy reliance, sustainability, infrastructure capacity, resource availability and effective risk management will all play a role in shaping datacentre development over the coming years. Whatever your role in the datacentre supply chain, taking good advice from experienced and qualified professionals can help reduce the risk of lost money and project failure.
Whether you’re planning, delivering or operating a datacentre project, Damian James can help you navigate the commercial and contractual challenges involved. Get in touch to find out more.