The rise of artificial intelligence is skyrocketing demand for data centers to keep pace with the growing tech sector — and pushing Europe to explore space options for digital storage, in a bid to reduce its need for energy-hungry facilities on the ground.

Europe is exploring options for space-based data centers in a bid to reduce its need for the energy-hungry facilities on the ground, as the rise of artificial intelligence skyrockets demand for digital storage.

Advanced Space Cloud for European Net zero emission and Data sovereignty, a 16-month long study that explored the feasibility of launching data centers into orbit, has come to a “very encouraging” conclusion, according to Damien Dumestier, manager of the project.

The 2 million-euro ($2.1 million) ASCEND study, coordinated by Thales Alenia Space on behalf of the European Commission, claims that space-based data centers are technically, economically and environmentally feasible.

“The idea [is] to take off part of the energy demand for data centers and to send them in space in order to benefit from infinite energy, which is solar energy,” Dumestier told CNBC.

Data centers are essential for keeping pace with digitalization, but also require significant amounts of electricity and water to power and cool their servers. The total global electricity consumption from data centers could reach more than 1,000 terrawatt-hours in 2026 —that’s roughly equivalent to the electricity consumption of Japan, according to the International Energy Agency.

The industry is about to be hit with a “wave of data tsunami,” said Merima Dzanic, head of strategy and operations at the Danish Data Center Industry Association.

“AI data centers need something like three times more energy than a traditional data center and that is a problem not just on the energy side, but also the consumption side,” she told CNBC.

A “whole different approach to how we build, design and operate data centers,” is required, Dzanic added.

The facilities that the study explored launching into space would orbit at an altitude of around 1,400 kilometers (869.9 miles) — around three times the altitude of the International Space Station. Dumestier explained that ASCEND would aim to deploy 13 space data centre building blocks with a total capacity of 10 megawatts in 2036, in order to achieve the starting point for cloud service commercialization.

Each building block — with a surface area of 6,300 square meters — includes capacity for its own data center service and is launched within one space vehicle, he said.

In order to have a significant impact on the digital sector’s energy consumption, the objective is to deploy 1,300 building blocks by 2050 to achieve 1 gigawatt, according to Dumestier.

ASCEND’s goal was to explore the potential and comparative environmental impact of space-based data centers to aid Europe in becoming carbon-neutral by 2050.

The study found that, in order to significantly reduce CO2 emissions, a new type of launcher that is 10 times less emissive would need to be developed. ArianeGroup, one of the 12 companies participating in the study, is working to speed up the development of such reusable and eco-friendly launchers.

The target is to have the first eco-launcher ready by 2035 and then to allow for 15 years of deployment in order to have the huge capacity required to make the project feasible, said Dumestier.

Yet Dzanic warned the somewhat “fringe” idea of space-based data centers doesn’t fully solve the issue of sustainable energy usage. “It’s just one part of the puzzle,” she said.

Michael Winterson, managing director of the European Data Centre Association, acknowledges that a space data center would benefit from increased efficiency from solar power without the interruption of weather patterns — but the center would require significant amounts of rocket fuel to keep it in orbit.

Winterson estimates that even a small 1 megawatt center in low earth orbit would need around 280,000 kilograms of rocket fuel per year at a cost of around $140 million in 2030 — a calculation based on a significant decrease in launch costs, which has yet to take place.

“There will be specialist services that will be suited to this idea, but it will in no way be a market replacement,” said Winterson.

“Applications that might be well served would be very specific, such as military/surveillance, broadcasting, telecommunications and financial trading services. All other services would not competitively run from space,” he added in emailed comments. 

Dzanic also signaled some skepticism around security risks, noting, “Space is being increasingly politicised and weaponized amongst the different countries. So obviously, there is a security implications on what type of data you send out there.”

ASCEND isn’t the only study looking into the potential for orbital data centers. Microsoft, which has previously trialed the use of a subsea data center that was positioned 117 feet deep on the seafloor, is collaborating with companies such as Loft Orbital to explore the challenges in executing AI and computing in space. Its work is crucial for innovation and to “lay the groundwork for future data management solutions in space,” a Microsoft spokesperson told CNBC.

ASCEND is one way through which the EU seeks to gain a competitive advantage within the AI ecosystem, where the bloc is currently lagging behind the U.S. and China, Dzanic said.

The EU is only now “starting to wake up and smell the coffee and go in with funding these projects,” she added.

The ASCEND researchers are in talks with the International Space Agency for the next phase which includes consolidating all of the data they have gathered and work on the development of a heavy lift launcher.

“We want to ensure data sovereignty for Europe, but this kind of project can benefit other countries,” said Dumestier. “We are pushing a lot because we can tell that it is a promising project. It could be a flagship for the Europe space development.”