On September 21, 2023, the German Parliament (Bundestag) passed the Energy Efficiency Act (Energieeffizienzgesetz, EnEfG), which imposes a number of energy efficiency obligations on all German companies, but specifically on data centers.

Summary of the main provisions of the Energy Efficiency Act with regard to data centers

Energy or environmental management system

Data centers must draw up an energy and environmental management system (other companies from a total annual energy consumption within the last three years of more than 7.5 gigawatt hours). For data centers with 1 megawatt or more of nonredundant rated power (300 kilowatts for those operated in public ownership), the energy or environmental management system must be validated and certified starting in 2026. Implementation plans for energy savings measures that have been identified as cost-effective must be published.

Reuse of waste heat

Among the core rules for data centers is the requirement to reduce and reuse waste heat as well as obligations to provide that heat to (municipal) heat suppliers. The obligations to provide heat are in line with the obligations of the German states (Länder) and municipalities to draw up municipal heat plans, as envisaged by the federal government.

Special targets for energy consumption effectiveness

Power usage effectiveness (PUE) targets will be obligatory for data centers, depending on when they were put into operation. Data centers that began operations before July 1, 2026 must comply with a PUE of 1.5 from July 2027 and 1.3 from July 2030. Data centers that begin operations after July 1, 2026 will have a PUE of 1.2.

Requirements to use renewable energy

In addition, data centers will have to obtain a significant share of electricity from renewable, nonsubsidized energy sources in the near future, namely a share of 50 percent from 2024 and 100 percent from 2027.

Legislative process

The Bundestag passed the draft law on increasing energy efficiency (Gesetz zur Steigerung der Energieeffizienz und zur Änderung des Energiedienstleistungsgesetzes) introduced by the German government (Bundesregierung) on September 21, 2023, after the vote scheduled for July 7, 2023, could not take place due to the lack of a quorum in the Bundestag.

In general, the new law serves to implement the revised EU Energy Efficiency Directive and is intended to set out a binding framework and concrete targets for increasing energy efficiency. This is in line with the climate targets of the EU and Germany, for which Germany’s overall energy consumption must decrease. According to the Cabinet’s draft, previous subsidy programs have not had the desired effect because they generally resulted in “only those measures being implemented that are economically viable in the short and medium term.” (What else?) According to the German government, data centers consumed approximately 16 billion kilowatt hours in 2020, or about 3 percent of Germany’s total electricity consumption. Unlike other industries, data centers have shown a significant increase in electricity consumption of about 6 percent per year. The EnEfG is intended to counteract this and provides special regulations for data centers, which are the focus here.

The committee responsible for climate protection and energy made a number of changes to the German government’s original version of the EnEfG. For example, specific requirements for air cooling systems in data centers were dropped, while other requirements, such as PUE targets, were tightened.

The Bundestag passed the committee’s draft EnEfG without further changes. The law has yet to be signed into law by the German president.

Energy or environmental management system

To create transparency, operators of data centers—regardless of their energy consumption—will be required to introduce by July 1, 2025 an energy management system in accordance with DIN EN ISO 50001 or an environmental management system in accordance with EU specifications. With these systems, they are to continuously measure performance and energy demand and take measures to continuously improve energy efficiency (Section 12 of the draft EnEfG). In some cases, data center operators have special monitoring obligations compared to other companies.

While larger data centers with a nonredundant nominal connected load of 1 megawatt or more must also have their energy or environmental management systems validated or certified as of January 1, 2026. Less energy-intensive data centers with high quotas of reused energy are exempt from introducing such systems. This exemption also applies to data centers that will be decommissioned before July 1, 2027.

To ensure that the management systems have a real impact, data centers with an average annual energy consumption of more than 2.5 gigawatt hours must publish implementation plans (Section 9 of the draft EnEfG). The plan must list all the economic energy-saving measures identified in the energy or environmental management system or by an energy audit. The rule here is that existing energy efficiency potential must also be realized. The correctness and completeness of the implementation plans drawn up must be confirmed by a certifier, environmental auditor or energy auditor; the confirmation therefore also includes the fact that any savings measures not listed would not be economical.

Power consumption effectiveness, PUE

The legislator assumes that German data centers currently have a power usage effectiveness (PUE) of around 1.7. The draft EnEfG provides for mandatory PUE values for existing and new data centers that fall below the current PUE average. In short, all (average) data centers must improve their PUE.

For data centers that commence or have commenced operation before July 1, 2026, PUE of no higher than 1.5 will apply from July 1, 2027, and no more than 1.3 from July 1, 2030. In each case, the annual average is taken into account. Data centers with operations starting on or after July 1, 2026 must achieve PUE of less than or equal to 1.2 in accordance with Section 11 (2) Sentence 1 No. 1 of the draft EnEfG. The requirements must be met at the latest after an optimization phase of two years after commissioning.

The value of the PUE is determined in each case according to DIN EN 50600-4-2.

Energy Reuse Factor (ERF)

One of the aims of the EnEfG is to avoid waste heat generated by data centers (as indicated by the PUE values up to now) is to be avoided or better used in the future, namely by feeding it into heating networks. For this reason, companies in general and data centers in particular will be required to apply state-of-the-art-technology to avoid generating waste heat, or to reduce it by having such heat used (sections 16 and 11 of the draft EnEfG).

In concrete terms, this means that data centers with an output of 1 MW or more that go into operation on or after July 1, 2026, must have an energy reuse factor (ERF) of at least 10 percent. This value will successively increase to 15 percent if operations start from July 1, 2027, and 20 percent if they start from July 1, 2028. As with the PUE, these requirements must be achieved at the latest after a two-year optimization phase after commissioning.

However, compliance with specific ERF limit values will not be necessary, in particular if a data center operator concludes an agreement with a heating network operator in the vicinity on the use of waste heat, whereby the waste heat can be used via the heating network—at least after network construction—within 10 years. In a roundabout way, this results in an obligation for data centers to at least offer heat suppliers the use of their waste heat.

This should also be interesting because the obligation to avoid and use waste heat, especially in data centers, is not limited to “reasonable measures,” as was the wording in previous drafts, which means that uneconomical measures would also have to be taken.

Power supply from renewable energy

Data centers are also subject to far-reaching obligations regarding the procurement of electricity from renewable energy. From January 1, 2024, 50 percent of the electricity consumed by German data centers must be covered by unsubsidized electricity from renewable sources. From 2027, the requirement will be 100 percent.

This means that the electrical energy used may not come from existing quantities of electricity already subsidized by the Renewable Energy Act. The draft EnEfG refers to the balance sheet, not the physically consumed electricity, so the purchase of corresponding certificates will be sufficient. It is thus foreseeable that data center operators will become a major player in the commercial green power purchase market.

Reporting obligation to the federal government

In addition, the draft EnEfG (Section 13) imposes annual reporting obligations, which serve to plan future electricity and power requirements more precisely, and which also create an opportunity for potential data center customers to compare energy efficiency and climate neutrality.

For the first time, data centers with a nonredundant rated connected load between 200 kilowatts and 500 kilowatts must report by July 1, 2025 at the latest, and by May 15, 2024 for higher connected loads.

The information requirements are quite extensive and include, in particular:

  • Information about the nominal connection power of the information technology and the nonredundant nominal connection power of the data center
  • Total power consumption
  • Share of renewable energies in total electricity consumption
  • Annual electrical power generation from fossil fuels and renewables at the data center site.
  • Amount and average temperature of waste heat released to air, water, or soil.
  • Amount of data stored and processed in the data center
  • PUE and ERF
  • Water use efficiency indicator
  • Information on refrigerants used in refrigeration systems and heat pumps
  • Total water consumption
  • Annual average utilization of at least 90 percent of the installed central processing units (CPU)—in percent
  • Specification of the averaged weekly profile for the utilization of at least 90 percent of the installed CPU—with an hourly resolution.

It is important to note that the transmitted data are ultimately transferred to a European database of data centers, where the data are accessible to the public at least in aggregated form. This provides customers with an opportunity for review and comparison and an indirect competitive incentive for operators of energy efficient data centers.

Duty to provide information in the customer relationship

An opportunity for customers to check and compare is created above all by the fact that data centers will have to provide their customers with transparent information about the annual energy consumption attributable to them from January 1, 2024 (Section 15 of the draft EnEfG). Since aggregated comparative information is available across Europe, environmentally conscious customers can simply switch data centers in the event of poor efficiency values.

Legal consequences

To enforce compliance with these requirements, the EnEfG sets out numerous misdemeanors that are punishable by considerable fines (Section 19 of the draft EnEfG), with maximum fines of €50,000 or €100,000, depending on the violation. This is also important because even violations due to negligence will result in a fine.

Misdemeanors include, but are not limited to, the following:

  • Missing, incorrect, untimely or incomplete implementation of an energy or environmental management system
  • Failure to publish or confirm implementation plans in a timely manner, correctly, or completely
  • Noncompliance of data centers with the prescribed PUE and ERF values
  • Missing, incorrect, untimely or incomplete reports to the federal government
  • Failure to prevent or reduce waste heat

Competent authority

The Federal Office of Economics and Export Control (BAFA), as the federal agency for energy efficiency, is entrusted to implement the law and thus is also responsible for any reviews.

Conclusion and outlook

The new EnEfG is not limited to monitoring and reporting obligations. It provides for ambitious efficiency rules (for data centers in particular) and will impact more than just developers of new data centers. Existing data centers are also likely to have some catching up to do in terms of the prescribed PUE values, while waste heat utilization is coming into (legal) focus for the first time. Standardized energy and environmental management systems will become mandatory as a basis for this. Increasing energy efficiency is not purely an end in itself—subject to fines. Through customer information and European comparison databases, energy efficiency is increasingly becoming a metric that will influence competition.