By Jim Mennie:

Short version

Scotland’s oil and gas industry still has a future, but that future is heavily constrained. Successive Westminster governments of all parties — Labour, Conservative and Liberal Democrat — have retained control over energy policy because it remains a reserved matter. As a result, Scotland has had little meaningful say over the pace of development, licensing decisions, or the long-term direction of the sector. This lack of control has left the industry and the communities that depend on it in a state of uncertainty for years.

Rather than continuing to battle for greater influence within a system where Scotland has no final say, there is a strong case for developing new technologies where Scotland can take the lead. One such opportunity lies in subsea data servers placed ‘near shore’ in Scotland’s lochs — both the sheltered sea lochs along the west coast and inland freshwater lochs.

These lochs offer protected, stable environments that make deployment and ongoing maintenance significantly more practical than in open waters. At the same time, they provide natural cooling that can dramatically reduce the energy demands and environmental footprint of traditional onshore data centres. As demand for computing power continues to grow rapidly due to AI and digital services, finding lower-impact ways to host this infrastructure will become increasingly important.

The concept is not theoretical. Microsoft’s Project Natick demonstrated that underwater data centres can operate reliably for extended periods with fewer hardware failures than land-based facilities. More importantly for Scotland, a home-grown company is already active in this space. Verlume, based in Inverurie near Aberdeen, manufactures subsea power systems which takes and regulates power from renewable sources including offshore wind and tidal. These systems store energy in DC format within robust subsea enclosures that are similar in size and design to the Natick units.

This existing Scottish capability creates a powerful combination. Verlume’s technology could provide the reliable, renewable power needed to run data servers placed in our lochs. The result would be integrated systems that are easier to install and maintain close to shore or in sheltered inland waters, while still delivering the efficiency advantages of underwater cooling.

By pursuing this type of technology, Scotland would not be abandoning its offshore expertise. Instead, it would be applying the skills, engineering knowledge, and manufacturing capacity developed over decades in the North Sea to a new and growing sector. Crucially, it would allow Scotland to move forward in a field where it can set its own direction, rather than remaining dependent on decisions made elsewhere.

Developing subsea data servers in Scotland’s lochs offers several clear advantages. It would reduce pressure on land and the electricity grid from large onshore data centres. It would create new high-skilled jobs in manufacturing, installation, and operations, open up the potential to use closed-loop excess heat for district heating plants (for schools, hospitals, public buildings, sheltered housing etc.), and it would position Scotland as a leader in sustainable digital infrastructure at a time when global demand for efficient computing solutions is rising sharply.

Scotland has world-class capabilities in subsea engineering and renewables. What it has lacked is the ability to fully direct its own energy and industrial future. By developing new technologies such as subsea data servers in our lochs, Scotland can begin to change that — building a progressive and exciting industry on its own terms.

Here’s the full report:

Near-Shore Underwater Data Centres with Waste Heat Recovery – A Distinctly Scottish Opportunity

Version: June 2026 V2
Author: Jim Mennie

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A Vision for Scotland’s Digital and Energy Future

Scotland has a distinctive opportunity to help shape the next generation of digital infrastructure.

By placing compact, sealed data centre pods in the sheltered sea lochs of the west coast and in suitable inland freshwater lochs, Scotland could combine world-class subsea engineering expertise with natural cooling and waste heat recovery.

The result would be a lower-impact way to host high-density computing while simultaneously delivering low-carbon heat to homes, hospitals, schools and public buildings.

This is not about competing with the largest hyperscale facilities on land. It is about creating a complementary, distributed model that plays to Scotland’s unique geography and industrial strengths — and positions the country as an early leader in sustainable, resilient digital infrastructure.

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Scotland’s Natural and Industrial Advantages

Scotland possesses two powerful assets that few other places can match in combination.

First, an abundance of sheltered sea lochs along the west coast and numerous inland freshwater lochs. These provide stable, protected environments that are far more practical for deployment and maintenance than open ocean, while still offering the cooling benefits of water.

Second, decades of world-leading subsea engineering capability developed in the North Sea. This includes expertise in robust underwater enclosures, power systems, corrosion management, and remote operations — skills that are directly transferable to underwater data infrastructure.

A Scottish company, Verlume, already manufactures subsea power systems designed to integrate with renewable sources such as offshore wind and tidal. These systems are housed in robust subsea enclosures similar in concept to those proven in Microsoft’s Project Natick underwater data centre trials. This existing capability creates the foundation for an integrated Scottish solution.

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The Concept: Near-Shore Underwater Data Centres with Waste Heat Recovery

The approach involves placing sealed data centre pods in sheltered lochs. These pods would operate in a nitrogen-filled environment, as demonstrated by Microsoft’s Project Natick, which showed significantly lower hardware failure rates than land-based servers.

Natural water provides highly efficient cooling with minimal energy input. A closed-loop waste heat recovery system would capture the thermal energy generated by the servers and transfer it onshore without mixing with the loch environment.

Onshore high-efficiency heat pumps would then upgrade this low-grade heat into higher-temperature hot water suitable for district heating networks.

The facilities would be designed for lights-out, autonomous operation, with maintenance supported by established subsea techniques such as cathodic protection, remotely operated vehicles and telemetry.

This model turns what is normally wasted heat into a valuable local resource while dramatically reducing the energy and land footprint associated with conventional data centres.

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Strategic Benefits for Scotland

This concept offers Scotland several strategic advantages that go beyond simple computing capacity.

It applies decades of North Sea subsea engineering knowledge to one of the fastest-growing global sectors.

Rather than remaining dependent on models and decisions made elsewhere, Scotland could develop and lead in a niche where its geography and industrial heritage give it a genuine edge.

The integration of local renewable power systems (such as those from Verlume) with underwater servers would help create a home-grown supply chain.

This strengthens domestic industrial capability and reduces reliance on imported solutions.

Because the pods are located in water, they free up valuable onshore land and reduce pressure on water supplies and the electricity grid for cooling. A distributed network of smaller facilities also improves overall system resilience by avoiding the single points of failure inherent in very large, concentrated onshore sites.

Physical security is inherently higher in underwater locations.

Importantly, the model creates a direct link between digital infrastructure and community benefit through waste heat recovery. Low-carbon heat could be supplied to district heating networks, helping decarbonise essential public services while lowering long-term energy costs.

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Economic Opportunity and Local Benefit

A Scottish-led approach could deliver high levels of local economic value.

It is realistic to target at least 50% of components and over 80% of labour from Scottish sources.

The main imported elements would likely be specialised servers and certain battery systems, while the majority of manufacturing, installation, subsea works, and operations could be delivered domestically.

This would generate new high-skilled jobs in manufacturing, marine operations, and digital infrastructure — building on, rather than replacing, existing offshore expertise.

There are also clear circular economy opportunities. Materials recovered from decommissioned offshore oil and gas platforms (steel, pipework, and cables) could be repurposed or remanufactured for use in near-shore data centre projects. This creates a practical bridge between Scotland’s traditional energy sector and its emerging digital future.

A structured Community Benefit Fund, funded through annual contributions from project revenues, could provide long-term support for local priorities — community facilities, education and skills programmes, or environmental initiatives — helping ensure that host communities share directly in the value created.

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Resilience, Scalability and Realism

Near-shore underwater data centres are unlikely to match the sheer scale of the largest hyperscale onshore facilities. That is not their purpose.

Instead, they offer a scalable, distributed complement.

A network of smaller facilities spread across suitable lochs can deliver meaningful computing capacity while enhancing overall system resilience. Because they are dispersed, they reduce the risk of dependency on single points of failure in power and connectivity. The underwater environment also provides natural protection against certain physical and environmental risks.

The concept is grounded in proven technology.

Microsoft’s Project Natick demonstrated reliable long-term operation of underwater servers. Scotland’s existing subsea capabilities reduce many of the technical risks. The main challenges — planning, grid connections for the onshore heat infrastructure, and securing suitable loch locations — are manageable with appropriate collaboration between government, industry, and local communities.

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Making It happen

Realising this opportunity would require focused collaboration.

A demonstration project in one or two carefully chosen lochs could prove the integrated model at scale, combining Scottish subsea power systems with underwater servers and onshore heat recovery. Early engagement with local authorities, communities, and regulators would be essential to address planning and environmental considerations.

Policy support could include streamlined processes for suitable near-shore locations and recognition of the dual benefit of computing capacity plus low-carbon heat.

Partnerships between Scottish companies, research institutions, and technology providers would accelerate development while maximising local content.

The goal would not be to replace existing data centre strategies, but to add a distinctly Scottish strand that plays to national strengths and delivers broader public benefit.

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Conclusion

Near-shore underwater data centres with waste heat recovery represent a realistic and exciting opportunity for Scotland.

By applying its established subsea engineering expertise to sheltered lochs, Scotland could develop a model of digital infrastructure that is more efficient, more resilient, and more integrated with local energy systems than conventional approaches.

It could retain and generate high-value jobs, support the circular economy, deliver meaningful community benefits, and help position Scotland as a leader in sustainable digital infrastructure.

This is not about chasing every global trend. It is about thoughtfully applying what Scotland already does exceptionally well to one of the defining technological challenges of the coming decades — and doing so on its own terms.

The opportunity is there. The capabilities exist. What remains is the collective will to explore it seriously.

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Features, Advantages and Benefits Summary

Feature	Advantage	Benefit
Sealed underwater pods in sheltered lochs	Natural water cooling in protected environments	Dramatically lower cooling energy use and no large freshwater consumption
Nitrogen-filled sealed environment	Stable, low-corrosion conditions	Significantly lower hardware failure rates (proven by Project Natick)
Closed-loop waste heat recovery	Captures heat without mixing with loch water	Converts waste energy into a usable resource
Onshore heat pumps + district heating	Upgrades low-grade heat to usable temperatures	Low-carbon heat for hospitals, schools, homes and public buildings
Application of North Sea subsea expertise	Transfers proven skills to a new sector	Scotland leads rather than follows in an emerging field
Integration with Scottish companies (e.g. Verlume)	Local renewable power systems combined with servers	Home-grown integrated supply chain
High local Scottish content	≥50% components and >80% labour from Scotland	Maximises economic benefit and supports domestic manufacturing/jobs
Circular economy links	Repurposing materials from decommissioned offshore infrastructure	Reduces waste and creates sustainable link between sectors
Distributed smaller-scale facilities	Network rather than single large sites	Greater resilience and reduced single points of failure
Community Benefit Fund	Structured annual contribution to local areas	Direct, long-term benefits to host communities