Space is a vacuum. i.e. The lack-of-a-thing that makes a thermos great at keeping your drink hot. A satellite is, if nothing else, a fantastic thermos. A data center in space would necessarily rely completely on cooling by radiation, unlike a terrestrial data center that can make use of convection and conduction. You can't just pipe heat out into the atmosphere or build a heat exchanger. You can't exchange heat with vacuum. You can only radiate heat into it.
Heat is going to limit the compute that can be done in a satellite data centre and radiative cooling solutions are going to massively increase weight. It makes far more sense to build data centers in the arctic.
Musk is up to something here. This could be another hyperloop (i.e. A distracting promise meant to sabotage competition). It could be a legal dodge. It could be a power grab. What it will not be is a useful source of computing power. Anyone who takes this venture seriously is probably going to be burned.
It's perfectly possible to put small data centres in city centres and pipe the heat around town, they take up very very little space and if you're consuming the heat, you don't need the noisy cooling towers (Ok maybe a little in summer).
Similarly if you stick your datacentre right next to a big nuclear power plant, nobody is even going to notice let alone care.
- You have to size your cooling towers for your hottest hour. Doing this saves you no capital costs.
- You barely have to run the fans on your cooling towers in the winter because the air is so cold. So often this also won’t save you much operating costs.
- Already there is an essentially unlimited amount of so called “waste heat” from power plants and factories. Building district heating systems is extremely capital intensive, which is why this isn’t done more.
- As a municipality it’s just a horrible idea to make the heating system of your whole city rely on a random company continuing to operate (even worse if said company is in a potential bubble). This is why most district heating systems work with power plants - they already have the government involved in ensuring their continuing operations.
You cannot put a power station in the middle of a city centre, you can put a datacentre there. The main reason this isn't done more is that it's expensive to build heat network between the 'far out of town industrial area' where they put the heat sources and the city centre where the heat consumers are.
I don't know why a municipality is involved, but regardless you can simply install a backup heat source and/or add a mix of heat suppliers to the network. Backup gas boiler or similar is not that problematic or expensive to add particularly because you don't need to add redundancy as it's just there for a backup scenario.