As data center power demand surges, tech companies are looking for ways to trim electricity use wherever they can. Cooling is an obvious place to start, since it can account for around 40% of a data center’s energy consumption, according to McKinsey.

Most data centers are cooled by blowing chilled air through their servers. The problem is, air is a pretty inefficient way to move heat. It’s why companies like Amazon, which are investing heavily in power-intensive AI servers, have been turning to liquid cooling. 

One startup, Ireland-based Nexalus, argues that its hot-water approach is not only more efficient, but also produces waste heat that’s actually useful to other industries.

The core of the Nexalus’s liquid cooling systems use what’s known as direct-to-chip liquid cooling, where the heat sink that sits atop a CPU or GPU is plumbed to facilitate the flow of coolant. Unlike some other designs, it doesn’t use small channels to direct the flow of liquid through the cooling plate. Instead, it pumps the liquid through small holes aimed at the cooling plate, much like how fire hoses direct water to a fire. Those microjets direct liquid to the hottest spots on the chip, letting the system run at lower pressure. The company can tailor the microjet to different chips, said CTO Tony Robinson.

Nexalus then seals the entire server inside a box that fits into a normal 1U rack space. Inside the sealed box, the server’s other components are cooled using fans, while heat exchangers on the exhaust side extract heat from the air so it can be reused. The liquid is mostly water and a little bit of propylene glycol, the same compound used in automotive radiators. The heated liquid is then pumped out of the case and cooled in a heat exchanger, which can then vent the heat to the air or move it to another loop connected to a building or industrial user. 

The liquid cooling setup allows more servers to be packed into a data center, saving on real estate and construction costs. It also has the potential to reduce water use, which many data centers use for air conditioning.

That still leaves the question of what to do with the excess heat. Today, most of it is vented to the air. But Nexalus believes it can help companies turn that waste heat into a potential moneymaker by allowing them to sell it to industrial users and heating districts — or even use it to offset their own utility bills.

“We’re not saying we give people power, but we open up more power,” Ken O’Mahoney, the company’s co-founder and CEO, told TechCrunch. “If a house that gets hot water from us is not using the electrical system to heat their water, the grid itself now has more power to distribute.”

It might sound counterintuitive, but hot water can be used for cooling so long as it’s colder than the thing it’s trying to cool. Heat pumps, which have exploded in residential and commercial buildings, operate on this very principle. Most data centers generate heat, but it’s usually not hot enough to be useful to anyone. Nexalus thinks that by using hot water, it can change that while also cutting electricity consumption by 35%, O’Mahoney said.

To get the heat to other customers, Nexalus is working with Munters, which makes data center HVAC systems. To harvest the heat from the servers, the startup has worked with Dell and now HPE, the company exclusively told TechCrunch, to ensure that its liquid cooling systems are drop-in replacements for air cooling. It sells the systems directly or through Dell and HPE integration partners.

O’Mahoney envisions smaller data centers located in cities tapping into existing district heating schemes or, if the servers occupy a floor or two of a skyscraper, reusing the heat within the building. Other, larger data center operators might partner with industrial companies like food manufacturers, who need heat to run their operations.

“It’s hard to believe that, in time, with this amount of energy, that it won’t make economic sense to build a district heating system to co-locate with food production or to capture carbon,” Robinson said.