Tech giants back new data center climate initiative

Microsoft, Google, Amazon and Meta are teaming up with a nonprofit investor to accelerate new technologies using data centers as test cases.

Why it matters: The initiative, led by Elemental Impact, is among the clearest attempts yet to turn the massive buildout of AI infrastructure into a proving ground for new technologies rather than just a new source of emissions.

• Those technologies include advanced cooling, energy storage and low-carbon building materials.

"We see data centers as really important customers for entrepreneurs to commercialize technologies that we've been working on for a long time," said Dawn Lippert, CEO and founder of Elemental Impact, the nonprofit investment firm spearheading the initiative.

The big picture: The AI boom is driving a historic surge in electricity demand, increasing fossil fuel use and putting climate goals — including those of major tech companies — on the back burner.

• Opposition to data centers is also growing, fueled by concerns about rising power prices and AI displacing jobs.

"This initiative is coming at the most perfect time because the priorities they have are literally the same priorities that you're hearing from communities," said Ryan Panchadsaram, a top adviser to venture capitalist John Doerr at Kleiner Perkins.

• Panchadsaram, whose firm is not involved in the initiative, said those include Elemental Impact's focus on community engagement and supporting technologies that enable more efficient use of energy and water.

Follow the money: Elemental will invest between $500,000 and $5 million in up to 10 startups through 2027 to support pilot projects in data centers.

• The tech companies are not formally committing investment dollars, though that remains a possible outcome, Lippert and others involved said.
• They did provide funding to help launch the effort and will pay annual membership fees.

Yes, but: That investment range is relatively small in the world of cleantech. Lippert said the group settled on that amount partly to move quickly over the next year — and because the initiative's value extends beyond funding.

• Getting connected to data center developers is valuable to startups looking to demo their technologies, Lippert said.
• That was echoed by Chris Graves, CEO of energy startup Noon Energy, who said faster customer connections can help speed tech development.

"It does sound quite valuable to accelerate things," said Graves, whose company has received financial support from Elemental Impact previously but did not know yet the full details of the initiative before its Wednesday release.

The intrigue: The initiative also includes philanthropic backing from organizations including the Bill Gates-backed Breakthrough Energy and Builders Vision Philanthropy, backed by Lukas Walton, an heir to the Walmart fortune.

• The groups are providing multi-year grant funding to Elemental to support its investment into startups, though grant sizes were not disclosed.

What they're saying: "There are plenty of promising technologies that exist, but they do struggle to move from the pilot to large scale deployment," said Melanie Nakagawa, chief sustainability officer at Microsoft.

• "There's a real need right now to apply the pace and agility of an [investment] accelerator and the venture funding," she added.

How it works: Wednesday's announcement of the initiative will also kick off a request for proposals from startups.

• Technologies under consideration include cleaner materials such as green cement and steel, alternatives to copper wiring, energy storage and new cooling methods, Lippert said.

Friction point: Nakagawa declined to predict to what degree this could soften opposition to data centers, but said this initiative is part of Microsoft's overall approach to building the projects.

• "We recognize that communities are asking really important questions around energy use, water and local impact," Nakawaga said.

Reality check: Opposition to data centers runs far deeper than what this initiative alone can solve, including concerns about AI-driven job losses.

• Still, Lippert said the goal is both to accelerate innovation and ensure local communities are considered.

"This is not funding data center expansion itself, but it's working with entrepreneurs to shape how that happens and to help them commercialize ideas," said Lippert, adding that innovation in the spaces of climate, energy and water "can be really beneficial locally."

What we're watching: Elemental may expand the initiative if it's successful after 2027.