Identifying Barriers to Data Centre Growth

The data centre industry is experiencing significant growth, driven by rising demand for cloud computing, artificial intelligence and digital infrastructure. However, expanding capacity is becoming increasingly complex, with challenges around power availability, energy demand, sustainability, investment and regulation creating barriers to development.

Drawing on more than 15 years of experience in executive search across digital infrastructure and industrial sectors, Venari Partners' Partner Peter Keller examines seven key barriers to data centre growth. He considers the infrastructure, commercial and regulatory challenges facing the industry, as well as what these developments mean for the specialist leadership talent needed to support its expansion.

Here are seven challenges shaping the future of data centre development.

Power infrastructure

As AI continues to grow in importance across a range of industries, the data centres needed to power this still-emerging technology have become a crucial area of interest across various sectors – including private equity. However, it is no secret that data centres consume enormous amounts of electricity. Between 2023 and 2030, global power demand from data centres is expected to increase by as much as 165%. Access to power has fast become one of the biggest bottlenecks compromising growth.

In both Europe and America, outdated energy grids are struggling to keep pace with demand and require billions of dollars in investment to be upgraded. Sudden disconnections and newfound contingencies related to data centre clusters can also threaten grid stability. The strain on existing ecosystems has made it difficult for data centre operators to approve new facilities and secure reliable sources of power.

Energy demands

Compounding these challenges is the intensity of data being processed. The more sophisticated the AI technology, the greater amount of power is required to operate it. For example, a data centre for a hyperscaler, one of the large cloud service providers, uses an average of 20 to 50 megawatts of electricity annually. This is the equivalent to the energy usage of 37,000 households. AI technology is expected only to increase in complexity as it continues to evolve. Similarly, revenue from cloud services is expected to double in the next five years, requiring commensurate power for the explosion in data growth.

Despite the constraints existing power ecosystems face, investors like Blackstone are approaching the confluent demand as a unique investment opportunity. With over $70 billion worth of data centre assets and another $100 billion in their pipeline, Blackstone are seizing the opportunity to concurrently invest in utilities and power generating assets.

Sustainability and the environment

Skyrocketing energy consumption has given rise to mounting concerns over the environmental impact of data centres. Given the challenges associated with existing energy infrastructure, alternative and supplementary sources of power are being explored. In the US, a small percentage of power supply is still coal-generated. This energy source saw its influence wane under the Obama and Biden administrations, though coal production has received a boost under Trump. Separately, while wind and solar assets have the potential to power data centres, their capacity is limited due to alack of consistent supply.

Nuclear power has become the frontrunner in the search for a cleaner alternative to meet sustainability targets. In the US, it is the largest source of non-fossil energy and the most reliable with the highest capacity factor. Furthermore, it’s considered a more flexible alternative because it can be widely deployed and fit a variety of end users. In March 2025, Amazon, Google and Meta signed a pledge to support the tripling of nuclear energy capacity by 2050. Although nuclear will be a core aspect of future infrastructure, the development of power plants comes with its own challenges including sourcing sufficient uranium and difficulty obtaining permits.

Sustainable investments

In 2024, the amount of private capital invested into advanced nuclear companiessurpassed the total deal value for the past 15 years combined. There is significant pressure for the sector to address sustainability, as the spike in power demand conflicts with global net-zero goals. This is exacerbated in countries like Ireland, where consumption needs already outpace renewable energy development, complicating the country’s ability to meet sustainability goals by 2030.

In terms of data centre builds, operators are expected to implement energy-efficient practices, deploy sustainable technology and reduce carbon emissions. To do so effectively, however, can be costly. In certain cases, significant investment is required upfront to meet sustainability targets, which can be a deterrent for operators looking to scale quickly. Further complicating these challenges are a variety of factors beyond an operator’s control like regional policies, local energy supply changes and increasing electricity prices.

Supply chains

The pace of technological innovation is another barrier to data centre growth. In order to remain competitive, data centres face pressure to frequently upgrade their infrastructure and provide faster processing, larger storage capabilities and more efficient services. The continuous investment in hardware, software and networking equipment can be expensive for operators and time-consuming.

Given the pace at which the industry is advancing, long-term planning has proven to be a challenge in terms of deciding when to invest in new equipment, not to mention at what point outdated models become a liability. Increased demand for the latest advancements in cooling technology, storage and automation for example, have also led to global supply chain issues. The popularity of certain components has led to delays in acquiring critical infrastructure like backup generators, servers and cooling systems. Rising costs for these parts also add to the difficulty operators have in maintaining profitability. To counter this, operators are adopting strategies like building stronger vendor relationships and diversifying supplier portfolios to reduce the impact of disruptions.

Another complication for supply chains are geopolitical tensions. Export controls can cause shortages and delays in delivery. Similarly, tariffs and trade wars can raise the cost of equipment, raw materials thereby increasing operating costs. Notably, the recent tariffs introduced by President Trump in April, are predicted to increase costs for essential materials like steel, lumber and HVAC systems in particular.

Regulation and compliance

The discrepancies in regulation and compliance between a variety of jurisdictions is another obstacle to data centre growth. In particular, regulations determining cybersecurity data privacy vary greatly and developers have to navigate a complex and varied landscape. The lack of a united regulatory framework makes it more challenging for data centre operators to expand internationally. For example, in the European Union the General Data Protection Regulation (GDPR) is one of the strictest data privacy systems globally in relation to data storage, processing and protection.

Regulation surrounding cybersecurity has become increasingly important, as data centres have become a prime target for cyberattacks. Data is a valuable asset and in recent years, cyberattacks have become increasingly sophisticated. It has become imperative for data centre operators to protect not only their client’s data, but their own infrastructure which can be expensive. In addition to cyberattacks, data centres also face physical security risks like physical break-ins, power failures and natural disasters. Adhering to the regulations designed to mitigate cybersecurity risks and ensuring physical safety measures are in place can be complicated and expensive for operators, particularly those in different markets with their own unique vulnerabilities.

In a similar vein, regulations governing environmental sustainability, waste disposal and energy present further complications for data centre operators as they vary between jurisdictions. Adhering to regulations in different markets can increase costs and thereby decelerate the rate of expansion.

Location limitations

Physical space is another important factor impacting data centre growth. Data centres need large footprints which can be expensive in urban or more populated areas. A decade ago, a 30-megawatt (MW) centre was considered large but today, a 200-MW facility is considered the norm. In specific areas like Northern Virginia in the USA or London and Singapore, clusters of hyperscale data centres have been developed in close proximity.

In order to scale effectively, sufficient space and access to power are both becoming increasingly scarce and costly in such established markets. To counter this, alternative locations with more affordable land costs are being targeting for future developments, although operating data centres in remote areas poses challenges as decreased proximity can delay latency and transmission speeds.  Another crucial element of site-selection is access to power.

Alternative locations with more affordable land costs are being targeted for future developments. European cities like Milan, Berlin and Cambridge or the mid-west in the USA are being targeted due to greater affordability and the availability of power. There is a shift in the industry towards fewer dominant clusters and a greater number of data centre markets considered primary zones.

What this means for talent

Despite growing interest in data centres, not least from a PE perspective, there are still numerous points around hiring that are proving problematic. A lack of suitable candidates – whether because of aging workforces and/or a lack of new talent coming through – is just part of the problem. Data centre businesses are, increasingly, looking for new ways of appealing to candidates, as well as retain them.

While areas like AI look likely to be ever more influential on the data centre landscape, this is an area that very definitely still needs a human touch. Bridging the existing skills gap in the sector, while addressing historical concerns around subjects including sustainability and diversity, should be on the agenda for forward-thinking hiring managers.

Get in touch for hiring advice

We are always keen to hear from companies in the data centre space that need advice on finding the best talent for their organisations. Please feel free to reach out if you would like to hear more!