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Abstract This study aims to improve the combined energy efficiency of data center cooling systems and heating/cooling systems in surrounding premises by implementing a modular cooling approach on a 42 U IT rack. The cooling solution uses a close-coupled technique where the servers are air-cooled, and the air in turn is cooled within the rack enclosure using an air-to-refrigerant heat exchanger. The refrigerant passively circulates in a loop as a thermosyphon, making the system self-sustaining during startup and shutdown, self-regulating under varying heat loads, and virtually maintenance-free by eliminating mechanical parts (other than the cabinet fans). A heat load range of 2 kW–7.5 kW is tested on a prototype system. Experimental results reveal stable thermosyphon operation using R1233zd(E) as the working fluid, a maximum evaporator pressure drop of 21.5 kPa at the highest heat load and a minimum thermosyphon resistance of 6.8 mK/W at a heat load of 5.7 kW. The air temperature profile across the load banks (server simulators) and evaporator follow the same profiles with varying heat loads. Heat losses from the cabinet due to natural convection and radiation are of the order of several Watts for heat loads below 4 kW and rise sharply to 1 kW at the highest heat load tested. The system time constant is determined to be 25 min. The heat recovery process can be financially and environmentally beneficial depending on the downstream application.