Mexico's challenges: drought, data centres, and water

Economic development is big business. It is extraordinarily competitive. Municipalities, states, regions, nations, and continents are all participants in this game. The necessity to capture economic opportunity that will bolster employment, attract investment capital, new industries, and provide a boost to the overall vitality of the existing economic infrastructure is imperative today. However, there are costs associated with economic development. Some are hard costs like providing tax incentives to attract new businesses. Others are soft costs like the sprawl of new land development that encroaches on established communities increasing the load on existing transportation infrastructure. In Mexico, particularly Queretaro (the third most populous metropolitan area in the nation), the intersection where the appetite for economic development by attracting massive data centres by multinational behemoths and the fundamental resources required to support said development are on a collision course. I refer to this as 4D—the dilemma of drought, data centres, and drinking water. Allow me to explain.

Confronting the 4D

According to London Business School Professor and author Charles Handy, “Words are the bugles of social change.” ‘4D’ is not a new term. Human perception is typically described as 3D or 3 dimensional. 3D refers to the human capacity to interpret life in terms of height, width, and depth. In physics, 4D refers to the idea of time as a fourth dimension, or integrating the 3D dimensions with time, or the space-time dimension (Einstein). 4D has been referred to as a ‘place in the future that is difficult to imagine.’ 4D space isn't something that humans can imagine because it's not a part of our sensory perception repertoire. Humans ‘know’ life in 3D, as our brains cannot comprehend how to look for anything more.

In 2018, award winning writer Michael Lewis published a book entitled The Fifth Risk. The book explores the consequences when people are given control over governments and the policies they author and implement. Have they any complete idea of how they may actually work (or not work)?

In terms of 4D—the dilemma of drought, data centres, and drinking water—Mexico (and Queretaro specifically) have made a substantial commitment to data centre economic development in the midst of an enduring drought and shortages of available drinking water for the populous. 4D requires the use of our imagination to contemplate the less apparent deleterious effects of our economic development policy implementation.

Lewis observes: "Wilful ignorance plays a role in these looming disasters. If your ambition is to maximise short-term gains without regard to the long-term cost, you are better off not knowing those costs. If you want to preserve your personal immunity to the hard problems, it's better never to really understand those problems. There is upside to ignorance, and downside to knowledge. Knowledge makes life messier. It makes it a bit more difficult for a person who wishes to shrink the world to a worldview."¹

Has anyone imagined what 4D might mean for the economic development of data centres, the current drought, and adequate supplies of available drinking water in our world? I will use Queretaro (3rd largest city in Mexico) and Mexico as an example in this piece.

Mexico’s drought—Queretaro

The City of Querétaro had a total population (metropolitan area of Querétaro) of 1,161,458 inhabitants in 2010 (INEGI, 2011) and 1,594,212 inhabitants in 2020 (INEGI, 2021), an increase of +37% in 10 years.

According to a study published in 2021, “The city of Querétaro faces long-term groundwater depletion issues.”² In Mexico, public drinking water is considered a human right. Sources suggest by 2030, Mexico faces a water supply shortfall of nearly 23 million. In May 2024, Conagua (Mexico’s National Water Commission) reported that 19.5% of the nation had moderate drought, 20% was in severe drought, 19% in the extreme stage, and 12% in exceptional drought. When May 15, 2024 figures (70.76%) are compared with the same figures from the exact same day and month of 2023 (44.23%), there is an increase in the area affected by drought of 26.53 percentage points for the current year.

Observers lament that the drought in Mexico has worsened by human mismanagement, intensive water use, and inefficient management of water sources across the nation. Consumption of water by the industrial sector is estimated 5%, increasing to nearly ten percent (when adding water usage for cooling electric power plants). Water supply shortages are anticipated to be long-term, challenging problem. Even if drought conditions improve over this summer, annual droughts in Mexico are worsening—over the last decade they have increased in duration, frequency, and intensity.

According to current data, in Queretaro (city), water scarcity is classified as high (Conagua). Conagua has reported 76% of Queretaro's water systems are highly contaminated. About 60% of Queretaro’s water supply originates from underground aquifers. The remainder is supplied from neighbouring Hidalgo state via the existing Acueducto II. Between 2019 and 2022, Queretaro ranked sixth nationally in water stress. The nation of Mexico remains the number one consumer of bottled water globally. Roberto Constantino Toto, the director of the water research office at the Metropolitan Autonomous University in Mexico City says that it is due to “the failure of our water policy.”

On January 15, 2023, the National Water Commission (Conagua) released a report about Mexico’s drought. In Queretaro, 17 out of 18 municipalities had experienced moderate to severe levels of drought, making it the Mexican state that has suffered the most severely from water scarcity in 2022.

In May 2024, Conagua issued a warning that Querétaro, Mexico, faces severe drought, declaring the necessity for urgent water conservation measures. In the same month, researchers from the National Autonomous University of Mexico (UNAM) had warned that in the next 10 to 15 days the country would experience the highest temperatures recorded in history. This prediction was accurate. According to Conagua, “severe levels of drought include probable losses in crops or pastures, a high risk of fires, and water scarcity. On this level, restrictions on the use of water should be mandatory.”

Data centre development in Queretaro

In May 2024, Mauricio Kuri, the governor of Querétaro announced the beginning of operations for the first Hyperscale Cloud Data Centre Region in Mexico, by Microsoft. In the same month, Marco Antonio Del Prete Tercero the Secretariat of Sustainable Development (SEDESU) of Querétaro, announced that 18 data centres are in the process of being installed in the state. The area for this development is being referred to as ‘the valley of data centres.’ According to state officials, this data centre development in Queretaro will be 'one of the largest cloud infrastructures in the world.' Companies constructing data centres (other than Microsoft) in Queretaro include; AWS (Amazon Web Services), Oracle, Google, Facebook (now Meta Platforms), OData, KIO Networks, and Apple. China’s Alibaba Cloud has also announced its plan to launch its first cloud region in Mexico (location has yet to be announced).

According to Market Watch, the global data centre market is set to reach $116.43 billion by 2027, growing at a rate of 14.6 percent per year. This expansion is spawned by the growing global use of the internet, the increasing adoption of cloud computing, ongoing digital transformation in businesses, and the increase in gaming culture participation. Research and Markets predicts that Mexico's investment in the development of data centres is forecast to exceed the $1 billion by 2028.

Why Queretaro? Firstly, the attraction involves available land. Querétaro possesses abundant land for development and industrial parks. Pricing for leasing and purchasing these plots are reported to be up to 20 percent below the national average. Secondly, labour. Querétaro has a skilled, increasingly bilingual workforce, along with a superb and established higher education infrastructure, rare labor disruptions (strikes, etc.), and a workforce with technical skills that currently serve the existing base of companies in the manufacturing sector. Thirdly, an appetite by governmental economic development agencies (at all levels), to aggressively catch and ride the current, burgeoning, expansion wave in the data centre development sector.

During the period of April through June 2024, there were both spontaneous water supply and electrical service delivery disruptions for residents and businesses in the Queretaro metropolitan area.

For Mexico, one commentator observes, “In summary, Mexico's data centre industry is on the cusp of extraordinary expansion, fuelled by the increasing adoption of cutting-edge technologies like cloud computing, coupled with the flourishing digital economy. It's essential to highlight the critical role played by the electrical infrastructure's capacity, which has the potential to significantly impact this growth.”

Colliding interests

According to the Global Facility for Disaster Reduction and Recovery (GFDRR), the impact of drought must be considered in all phases of project planning decisions, project design, and construction methods must take into account the level of water scarcity.

According to the United Nations, by 2025, 50% of the world’s population is projected to live in water-stressed areas, making data centre water usage a key environmental area to prioritise change. The chart below by Dgtl Infra in January 2024 illustrates the water usage by typical data centres.

An April 2024 article was published by attorneys in the Environmental Practice Group at the consulting firm of Sanchez-Devanny (locations in Mexico City, Monterrey and Queretaro) entitled Amendments to Water Regulations in Queretaro.³ The authors are attorneys Georgina Gutiérrez-Barbosa and Jose Enrique Crúz-Lozano. During her career, Georgina Gutiérrez-Barbosa founded the Environmental Protection Agency of the State of Morelos and was the General Attorney. Jose Enrique Crúz-Lozano is recognised as an attorney with a decade of experience in environmental law and a pioneer in climate litigation in Mexico. An excerpt from this piece is below.

“A few months ago, due to the crisis of water scarcity in the in the State of Queretaro and the accelerated population growth, the agreement, called "Batan, Water for All", aims to double the supply capacity in the state to 1,500 l/s through several actions by both authorities."

The CEA and the state government will build, operate, and maintain the treatment and water treatment plants that will be an integral part of this project. They are going to build the necessary infrastructure to collect both waste and surface water.

The system will have the capacity to supply up to 1,500 liters per second, similar to what the Acueducto II system currently supplies, according to the governor of Querétaro, Mauricio Kuri González. It will be comprised of two state-of-the-art water treatment plants; in addition to being a sustainable and environmentally friendly model.

Unfortunately, this new capacity will not be on-line for 5 years.

Conclusions

It should be noted that the operators of data centres are acutely aware of the impact these facilities have on the environment. They continue to evolve and implement technologies that further mitigate their environmental impact in terms of the consumption of power, water, and emissions.

Data centres require large amounts of water for computer room air handler (CRAH) apparatus, while others use water for cooling computer room air conditioning (CRAC) equipment. Clearly, the primary use of water in these facilities is for cooling the servers they operate. This cooling requirement may include condensers, humidifiers, heat exchange devices, pumps, pipes, chillers, and cooling towers.

With drought, already stressed water supply resources, rapid near term data centre development coming on line, and enhancements to the current water supply infrastructure some five years away—this is the essence of the dilemma, the intersection where the dilemma of drought, data centre development, and drinking water collide. It is 4D, as author Michael Lewis observes: “We often decide that an outcome is extremely unlikely or impossible, because we are unable to imagine any chain of events that could cause it to occur. The defect, often, is in our imagination.”

Of course, Mexico and Queretaro are not alone. The ongoing collisions at the intersection where economic development and environmental resource impacts collide abound in our world today. AI is just beginning to gain traction and will require enormous amounts of additional server capacity, water, and power. The tangible effects of the ongoing climate deterioration, adequate supplies of clean drinking water essential for human life, and the human desire for economic progress will become an increasingly intense sector of human conflict. How humanity quenches its thirst where economic vitality and human vitality require the sustenance of the same dwindling resource(s) is the unimaginable question of our time.

Imagine that.