Will Europe’s data centres ever match the towering might of America’s hyperscale giants? Mayank Saraswat, Associate Principal in Charles River Associates’ Energy Practice, believes they can – if regulators cut red tape and the grid keeps pace.

As the world becomes increasingly digital, the demand for data centres is soaring to unprecedented heights. Much like the rise of skyscrapers that reshaped urban skylines in the early 20th century, data centres are now redefining the digital landscapes, bringing both opportunities and challenges in their wake.

In the US, large data centres exceeding 200 MW are now common. Their rapid growth is being driven by soaring demand for generative AI, ongoing technology innovation, supportive policies and rapid adoption of digital technologies. These factors have created an environment that prioritises speed-to-market, altering the scale and pace deployment.

Across the Atlantic, the UK and Europe find themselves on a different trajectory. Smaller scale developments, typically between 20 and 50 MW, dominate the market. However, regulatory hurdles, grid bottlenecks and limited power supplies hinder the region’s ability to match the rapid US expansion. To navigate these obstacles, developers in the region must embrace innovation and learn from US successes.

The digital skyline shaping the modern economy

Data centres are becoming the skyscrapers of the digital age. Not for their physical height, but for their towering importance in shaping economies and societies. Much like the steel-and-glass skyscrapers that once symbolised the rise of urban powerhouses, data centres are now the landmarks of our digital economy, underpinning innovation, connectivity and progress.

These modern giants, from Virginia’s sprawling ‘Data Centre Alley’ to the high-speed hubs of Amsterdam and Dublin, represent a shared global ambition: to build the infrastructure that powers the world’s most vital technologies. Hyperscale facilities in the US reflect the scale and speed of technological adoption driven by generative AI, high performance computing and cloud computing. Meanwhile, European developments, though often smaller in scale, are equally critical – providing the backbone for global finance, healthcare and public services.

The evolution of these digital skylines echoes the rise of skyscrapers. Just as those towering structures reshaped cities, data centres are reshaping how economies function, offering jobs, attracting investment and enabling innovation on a global scale.

Though their landscapes differ, the role of data centres is universal: they are the keystones of a digital-first world. Whether nestled in the urban sprawl of Northern Virginia or supporting the dense economic networks of European capitals, these facilities are united by their purpose. Together, they are crafting a digital skyline that mirrors the complexity and ambition of the modern economy.

A tale of two regulatory markets

Regulation plays a pivotal role in shaping the growth of data centres globally, influencing sustainability goals, connection timelines and the costs of compliance. Developers across all markets are grappling with how to balance environmental accountability with the urgent need for digital infrastructure. However, regional approaches differ significantly.

In Europe, ambitious climate goals drive stringent regulations for data centres, requiring compliance with rigorous energy efficiency and emissions standards. The EU’s Energy Efficiency Directive, for instance, mandates detailed reporting on energy and waste for facilities consuming over 500 kW. While these measures promote sustainability, they also raise development costs and add complexity. In response, developers in markets like Germany are adopting innovative solutions, such as 24/7 clean energy packages blending solar, wind and hydropower. However, evolving regulations create uncertainty, making it difficult to plan for the long term and deterring investment in an already challenging market.

In contrast, the US prioritises growth and innovation, fostering an environment that accelerates digital infrastructure development. States like Virginia and Texas lead the way with streamlined permitting, tax incentives and fewer sustainability mandates. Federal initiatives – including executive actions to fast-track AI-focused data centres- further lowers barriers by leveraging federal lands and simplifying approvals. While Europe emphasizes environmental accountability, the US focuses on scalability and speed, highlighting two distinct regulatory philosophies.

Despite these differences, a shared challenge lies in energy market regulations, which significantly influence data centre deployment timelines. In Europe, localised regulations often complicate grid connection negotiations. For example, navigating the Régulation de l’Énergie (CRE) process in France can take up to two years, delaying projects and inflating costs. In contrast, deregulated markets like Texas allow US developers to directly source power from producers, bypassing intermediaries and enabling faster project delivery. This operational flexibility provides a critical advantage, particularly as developers race to meet surging demand.

The power problem

Access to reliable energy and grid connection is a critical challenge for data centers. These facilities require enormous amounts of power for server operations, and can stress the electric grid. In Europe, overstretched grids often lack the capacity to accommodate these large-scale developments. For example, London faces grid bottlenecks preventing new grid connections until 2028, while Dublin’s data centres account for over 21% of electricity, prompting moratoriums on new projects.

Developers are increasingly exploring innovative solutions like microgrids, potential nuclear co-location and in some cases, direct tie-ups to natural gas infrastructure. However, these measures remain in early stages and are not yet sufficient to meet surging energy demands, which is projected to exceed 1000 TWh by 2026, equivalent to Japan’s total electricity consumption.

Meanwhile, the US benefits from abundant land, lower energy costs and a more collaborative ecosystem between utility operators and developers. Significant investments in grid infrastructure ensure that energy deliverability keeps pace with hyperscale growth, enabling tech giants like Google, Amazon and Microsoft to scale rapidly.

Building the future of the digital economy

To unlock the full potential of data centres, Europe must address key barriers, starting with simplifying and accelerating the approval process for new facilities. Looking across the Atlantic, the US offers a compelling blueprint for growth, built upon close collaboration between regulators, utilities and developers to ensure reliable power and scalable infrastructure.

Renewable energy strategies also offer valuable lessons. Long-term Power Purchase Agreements (PPAs) with solar and wind farms in the US have made data centres more sustainable and cost effective. Adopting similar models could help Europe ease urban grid strain while driving regional economic growth.

Investment in grid infrastructure is equally critical. Expanding transmission capacity and clearing interconnection queues will reduce bottlenecks and enable energy deliverability to meet surging demand. Without these foundational improvements, Europe risks falling behind in the race to build its own digital skyline.

By addressing regulatory and infrastructure constraints – and drawing inspiration from the US model – Europe can unlock the full potential of data centres. The question is whether it can move fast enough to seize the opportunity.