Cooling, Water and Data-Centre Construction Supply Chain — 2026-10-09
Texas has paused certain data center approvals amid grid and water concerns, while California mandates new water-use disclosures for AI facilities. Meanwhile, Eaton reports a three-year backlog for transformers, highlighting the severe supply constraints throttling AI infrastructure buildouts.
Cooling, Water and Data-Centre Construction Supply Chain — 2026-10-09
Top developments
Texas pauses environmental permits for data centers
On October 5, 2026, Texas directives created uncertainty for data center projects seeking ERCOT interconnection or requiring TCEQ permits. The move reflects escalating efforts by the governor to slow development ahead of November’s election, citing grid stability and water scarcity concerns. This regulatory pause directly impacts contractor backlogs and may force developers to delay cooling and power equipment orders.
Eaton faces unprecedented transformer backlog
Eaton is experiencing "unprecedented demand" for power transformers, with lead times extending to three years. This bottleneck is a critical constraint for AI data centers, where switchgear and transformers are essential for delivering high-density power. The shortage underscores why liquid cooling adoption is accelerating; as power delivery becomes harder to secure, efficiency gains from cooler operation become more valuable to maximize existing grid capacity.
California enacts strict water disclosure laws
Governor Gavin Newsom signed Assembly Bills 2469 and 2619 into law on September 21, 2026, linking data center permitting to mandatory water use disclosures and drought planning. These laws are part of a seven-bill package described as "the most comprehensive data center laws in the nation." For vendors like Vertiv and Schneider, this increases the pressure to provide verifiable Water Usage Effectiveness (WUE) metrics in their cooling proposals.
Liquid cooling market forecast revised upward
A new report published on October 9, 2026, projects the data center liquid cooling market to grow at an 18.3% CAGR through 2034. The growth is driven by AI infrastructure and high-density racks that exceed the limits of air cooling. This reinforces the strategic necessity for Nvidia partners and Chinese vendors like Envicool to scale production of cold plates and CDUs to meet this accelerating demand curve.
Local view
Arizona Community Pushback In Casa Grande, Arizona, residents voiced strong opposition during a commission vote approving the Grande Valley Data Center. The community expressed frustration over the lack of transparency regarding water usage and noise impacts. This local sentiment highlights the growing social license risk for new AI halls, potentially affecting future permit approvals for cooling-intensive facilities.
Context & numbers
- Transformer Lead Times: Tier 1 manufacturers report lead times extending to 3 years for large power transformers, creating a severe bottleneck for data center power delivery.
- Liquid Cooling CAGR: The global liquid cooling market is projected to expand at an 18.3% compound annual growth rate from 2026 to 2034.
- Water Consumption: Google reported total water consumption rose 34% to 10.9 billion gallons in 2025, with data centers driving most of the increase.
- Labor Shortage: The U.S. faces a shortage of approximately 58,000 workers needed to install fiber-optic cable connecting data centers, exacerbating construction delays.
On the radar
- Bloomberg Water Reuse Tax Credit: A legislative proposal is gaining traction for a 30% tax credit for water reclamation projects, which could incentivize closed-loop cooling systems in drought-prone regions.
- Schneider Electric Whitepaper: Schneider released guidance on how cooling design affects noise and permitting, aiming to help developers navigate growing community opposition.
- Ben Horowitz Warning: Tech investor Ben Horowitz flagged that only 2% of U.S. electricians are certified for data centers, identifying a hidden labor bottleneck that could slow AI buildout despite available capital.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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