The Rack Report—Q2 edition

By: Laura Morton, Jane Rueger, Max Friedman, and Connor Hughes

Did you know that geothermal energy can deliver exactly the kind of power AI data centers need most: firm, carbon-free electricity, available around the clock?

One of the most binding constraints on a hyperscale AI campus today often isn't capital or chips—it's access to firm power delivered at gigawatt scale on a compressed timeline. Geothermal answers that call: It produces steady power on demand more than 90% of the time that meets both the operational and environmental requirements of next-generation data center campuses. It runs straight through the multiday stretches of cloudy, windless weather, emits among the least carbon of any energy source over its lifetime, and takes up so little land that it can sit right next to the data center it powers.

Moreover, technological advances underpinning enhanced geothermal systems (EGS) and advanced/closed loop geothermal systems (AGS) transform geothermal from a niche Western resource into a continental-scale solution that can reach the very markets driving demand. Critically, developers of EGS and AGS solutions are offering commercial operation dates well before other clean firm technologies like new nuclear plants or small modular reactors.

This is where transactional structuring earns its keep. Whether the deal is a colocated behind-the-meter campus, a "powered land" master-planned anchor, or a grid-connected power purchase agreement under an innovation like Nevada's Clean Transition Tariff, the hard work lies in assembling the full bundle of land, underground, water, and access rights; deciding who bears the risk that the underground resource won't perform as hoped (and building in guarantees and milestones to address it); and writing contracts—covering guaranteed-payment terms, the right to dial output up or down, and options to add capacity later—that bridge the gap between how fast data centers need power and how long geothermal projects take to build. In practice, one of the fastest ways to stall a clean-power build is to treat the subsurface resource and its legal classification as an afterthought. One of the most effective ways to accelerate it is to pair a tech company's financial strength with the geothermal developer's drilling experience from day one—the combination that reassures lenders the resource will deliver and opens the door to large-scale project financing.

By: Alix Bromer and Laura Morton

Did you know that under EPA's proposed revisions to the New Source Review (NSR) permitting program, data center developers could begin constructing nonpollutant-emitting components—including foundations, utility infrastructure, and building shells—before obtaining a final NSR permit? While beginning construction on pollutant-emitting equipment such as backup diesel generators would still be prohibited until a permit is obtained, the proposal could allow substantial site preparation and construction activities to proceed in parallel with the permitting process, potentially accelerating timelines for data centers and other major industrial developments.

The proposal also makes clear that this flexibility comes with an important caveat. Any construction undertaken before permit issuance is entirely at the owner's or operator's risk, and EPA states that these early activities will not alter or influence permitting decisions, including the agency's best available control technology (BACT) and lowest achievable emission rate (LAER) analyses. As a result, developers cannot rely on pre-permit investments to support permit approval or justify less stringent permit conditions.

The proposed rule represents a significant shift in how EPA regulates pre-permit construction activities and could significantly accelerate timelines for data center infrastructure projects across the country. As the rulemaking progresses, companies planning large-scale construction projects subject to NSR permitting should evaluate how the revised definitions may affect project timelines and permitting strategies.

To learn more, see our legal development: "Accelerating AI infrastructure—what EPA’s new NSR proposal means for developers"

By: Ben Rooke, Alexandra Peace, Kate Muller, Jane Hall, and Matthew Taylor

Australia is one of the hottest locations in the world right now for data center development, due to the combination of demand for AI, abundant land and renewable energy, a stable regulatory environment, and internal competition among the Australian state governments to attract investment to their regions. Similar to the United States, Australia’s federal system means that regulations vary by state and operate alongside a rapidly evolving national framework. "Australia's evolving data center landscape: Policy meets pipeline" delves into the complexities of this system and provides in-depth details about investing in data center development in Australia.

By: Sascha Arnold

Germany is making a bold statement about its ambitions as a European data center powerhouse. On March 18, 2026, the Federal Cabinet adopted Germany's first-ever national Data Center Strategy, setting a clear target to at least double the country's data center capacity and quadruple AI and high-performance computing capacity by 2030. The strategy is underpinned by 28 concrete measures across three priority areas—energy and sustainability, site availability and permitting, and technology and digital sovereignty—each designed to address the practical barriers that have historically slowed investment. As in other major markets, however, the regulatory picture in Germany is layered: Investors must navigate federal measures alongside the requirements of individual Länder, evolving EU obligations, and energy grid constraints that are still being worked through. Our legal development on "Germany's National Data Center Strategy" unpacks what this landmark framework means in practice for operators, investors, and developers looking to enter or expand their presence in one of Europe's most strategically important digital infrastructure markets.