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Data Centre Expansion Puts India’s Renewable Power Capacity to Test
For renewable developers, the expansion of data centres creates a large potential market.
September 28, 2026. By Abha Rustagi
India’s rapid expansion of data centres is creating a new infrastructure challenge for the country, ensuring that enough reliable electricity, renewable power, transmission capacity and water-efficient cooling systems are available as artificial intelligence and digital services drive demand for computing capacity.
Installed data-centre power capacity in India has risen from about 375 MW in 2020 to around 1,575 MW as of August 2026, according to government data. The sector is expected to expand further, with capacity projected to approach 8 GW by 2030.
The expansion is being accompanied by a rapid increase in the electricity requirements of data centres, which operate continuously and require highly reliable power for servers, storage, networking and cooling.
The Central Electricity Authority estimates that power demand from data centres could reach about 17 GW by 2031-32. Separately, information available with the Ministry of Power puts electricity demand from data centres at 13.56 GW for the same period.
The differing estimates highlight the scale of uncertainty around how quickly India's digital infrastructure will expand, particularly as AI and high-performance computing increase the density and power consumption of computing facilities.
AI Changes the Data-centre Equation
The growth of artificial intelligence is adding another layer to India's data-centre requirements.
About 38,231 graphics processing units (GPUs) have been onboarded through 14 empanelled service providers and data centres under the country's AI compute capacity framework, with access provided to startups, researchers, academia and other eligible users at a subsidised average rate of about INR 65 per hour, according to the government data.
AI workloads are also changing the physical design of data centres. High-performance computing requires greater computing density, which in turn can increase heat generation within facilities. Operators are therefore deploying high-density racks and more advanced cooling systems, including direct-to-chip liquid cooling, adiabatic cooling, immersion cooling and closed-loop liquid cooling.
The government says these technologies are being adopted to reduce both power and water consumption.
That shift is important to note because cooling is one of the central resource requirements of a data centre. Conventional systems can require substantial amounts of electricity and, depending on their configuration, water. India's water constraints therefore present a parallel challenge to the growth of digital infrastructure.
The water requirement of a data centre depends on its cooling technology, while groundwater extraction for industrial purposes is governed by regulations issued by the Ministry of Jal Shakti, according to the government.
Power Reliability Becomes Critical
Unlike many conventional industrial loads, data centres cannot easily tolerate interruptions. Servers, storage systems and networking equipment operate continuously. Uninterruptible power supplies provide immediate backup during outages, while generators and electrical distribution systems provide additional resilience during longer disruptions. Cooling systems must also continue operating to maintain suitable conditions for computing equipment.
This makes the availability of dependable electricity as important as the headline generation capacity being added to the grid.
India's national transmission network is being expanded as electricity demand rises, and the government says transmission infrastructure is being planned to maintain reliable supply across regions.
For data-centre operators, however, reliability increasingly has another dimension: the source of electricity.
The government is promoting renewable-energy access through measures including the Green Energy Open Access Rules, the Green Energy Corridor programme, the National Green Hydrogen Mission, the National Programme on High Efficiency Solar PV Modules and the Solar Park Scheme.
The policy push is relevant because data centres are large, continuously operating electricity consumers. Renewable power can help operators reduce the emissions associated with their electricity consumption, but intermittent generation also creates a requirement for firming, storage, grid connectivity or other mechanisms capable of supporting round-the-clock operations.
Andhra Pradesh Emerges as a Major Test Case
The scale of the coming expansion is particularly visible in Andhra Pradesh. The state has secured agreements for 6.5 GW of targeted data-centre capacity, with projects moving towards execution, according to state Human Resources Development Minister Nara Lokesh.
Lokesh said the state had completed agreements covering its 6.5 GW target and that projects were being grounded. He also said Andhra Pradesh intended to source 70 percent of the energy for the projects from renewable sources, while water would be sourced in a way intended not to reduce supplies available for agriculture or cities.
The proposed capacity is substantial when compared with the state's original data-centre policy objectives.
Andhra Pradesh's Data Center Policy 4.0 for 2024-29 initially targeted an addition of 200 MW of data-centre capacity.
The scale raises questions about how quickly the projects will be commissioned, how their power requirements will be contracted and whether transmission infrastructure will be available when new loads come online.
It also highlights an important distinction. The 6.5 GW figure refers to the state's targeted data-centre compute capacity, while estimates of national electricity demand refer to the power required to operate data-centre facilities. They should not be treated as equivalent measures.
Renewable Power Alone may not Solve the Reliability Challenge
For renewable developers, the expansion of data centres creates a large potential market. Data-centre operators can enter into renewable power purchase agreements, use open-access procurement mechanisms or combine renewable generation with storage and grid power. The requirement for continuous operations makes the ability to deliver electricity when needed particularly important.
That creates potential opportunities for battery energy storage systems, hybrid renewable projects, firm and dispatchable clean-power arrangements and transmission developers. The government has also pointed to nuclear energy as part of the longer-term clean-power mix.
The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India, or SHANTI, Act is intended to strengthen India's nuclear energy ecosystem and support future deployment of small modular reactors and micro nuclear reactors. The government has identified such technologies as potential sources of reliable power for emerging sectors including AI and data centres.
For data-centre operators, the underlying requirement remains the same: power must be available continuously, irrespective of whether the electricity is generated by solar panels, wind turbines, nuclear reactors or conventional sources.
Water Efficiency Moves up the Agenda
Electricity is not the only resource constraint. As computing density increases, removing heat from servers becomes more challenging. Traditional cooling systems can place pressure on both electricity and water resources, particularly in regions where water availability is already constrained.
The government says the industry is responding through direct-to-chip liquid cooling, adiabatic cooling, immersion cooling and closed-loop systems. High-density racks are also being deployed to support AI and high-performance computing workloads while improving resource efficiency.
The regulatory framework is evolving alongside these technologies. The Bureau of Indian Standards has developed standards relating to data-centre Power Usage Effectiveness (PUE), Carbon Usage Effectiveness (CUE), Cooling Efficiency Ratio (CER) and Water Usage Effectiveness (WUE).
PUE measures the efficiency with which a data centre uses electricity relative to its computing equipment, while WUE focuses on water consumption. CER addresses cooling efficiency, and CUE relates to carbon emissions associated with electricity use.
The Bureau of Energy Efficiency has also notified the Energy Conservation Building Code, 2017 and the Energy Conservation and Sustainable Building Code, 2024, which include energy-efficiency and water-conservation provisions relevant to buildings and data-centre infrastructure.
Policy Support Accelerates Investment
The expansion of India's data-centre industry is also being supported by policy measures designed to attract investment into digital infrastructure.
Data centres were included in the Harmonised List of Infrastructure under the Union Budget 2022-23, giving the sector infrastructure status and improving access to long-term financing. The Union Budget 2026-27 also introduced a tax holiday for eligible foreign cloud service providers until 2047, covering notified foreign companies using India-based data-centre infrastructure, according to the government data.
Other programmes are supporting the wider technology ecosystem. The second phase of the Semicon India programme, Semicon 2.0, was approved with an outlay of INR 1.275 trillion. The IndiaAI Mission has a budget allocation of INR 10,371.92 crore, while the Electronics Components Manufacturing Scheme received an increased allocation of INR 40,000 crore. The government has also launched PLI Scheme 2.0 for IT Hardware to strengthen domestic production of equipment such as servers.
Together, these policies are aimed at expanding the ecosystem around computing infrastructure rather than treating data centres as isolated buildings.
From Digital Infrastructure to Energy Infrastructure
India's data-centre expansion is increasingly becoming an energy-infrastructure story.
Nationally, installed data-centre capacity has grown more than fourfold from 2020 levels, while the sector is projected to reach around 8 GW of capacity by 2030. The government says nearly USD 70 billion of investment is already underway in India's data-centre sector, with another USD 90 billion in announced projects.
At the same time, new data-centre clusters are emerging beyond established markets such as Mumbai, Navi Mumbai, Hyderabad, Bengaluru and Delhi NCR. Andhra Pradesh, Madhya Pradesh, Chhattisgarh and West Bengal are identified as emerging investment destinations.
That geographic expansion could distribute digital infrastructure more widely across the country, but it also means electricity planners and utilities will have to account for large new loads in locations that may not previously have been major data-centre hubs.
The challenge is therefore not simply to build more servers. It is to synchronise the construction of data centres with generation, transmission, storage, renewable-energy procurement, water infrastructure and cooling technologies.
Andhra Pradesh provides an early indication of the scale of that task. Its 6.5 GW target, if executed as planned, would create a substantial new electricity requirement and place greater emphasis on renewable-power contracts, storage and grid infrastructure.
The government has said India's transmission system is being expanded to accommodate rising demand. But the next phase of the data-centre build-out will test how effectively those investments can be coordinated with the speed at which digital infrastructure is being commissioned.
For renewable energy developers, storage companies, utilities and transmission operators, the opportunity is significant. For policymakers and local communities, the central questions will be whether new projects have credible power and water plans, whether announced capacity translates into operational capacity, and whether infrastructure is built ahead of the digital loads it is expected to serve.
India's data-centre expansion is ultimately a race between computing demand and the infrastructure required to sustain it. The outcome will depend not only on how many gigawatts of servers the country can install, but also on whether it can provide the reliable, increasingly clean and resource-efficient power needed to keep those servers running around the clock.
Installed data-centre power capacity in India has risen from about 375 MW in 2020 to around 1,575 MW as of August 2026, according to government data. The sector is expected to expand further, with capacity projected to approach 8 GW by 2030.
The expansion is being accompanied by a rapid increase in the electricity requirements of data centres, which operate continuously and require highly reliable power for servers, storage, networking and cooling.
The Central Electricity Authority estimates that power demand from data centres could reach about 17 GW by 2031-32. Separately, information available with the Ministry of Power puts electricity demand from data centres at 13.56 GW for the same period.
The differing estimates highlight the scale of uncertainty around how quickly India's digital infrastructure will expand, particularly as AI and high-performance computing increase the density and power consumption of computing facilities.
AI Changes the Data-centre Equation
The growth of artificial intelligence is adding another layer to India's data-centre requirements.
About 38,231 graphics processing units (GPUs) have been onboarded through 14 empanelled service providers and data centres under the country's AI compute capacity framework, with access provided to startups, researchers, academia and other eligible users at a subsidised average rate of about INR 65 per hour, according to the government data.
AI workloads are also changing the physical design of data centres. High-performance computing requires greater computing density, which in turn can increase heat generation within facilities. Operators are therefore deploying high-density racks and more advanced cooling systems, including direct-to-chip liquid cooling, adiabatic cooling, immersion cooling and closed-loop liquid cooling.
The government says these technologies are being adopted to reduce both power and water consumption.
That shift is important to note because cooling is one of the central resource requirements of a data centre. Conventional systems can require substantial amounts of electricity and, depending on their configuration, water. India's water constraints therefore present a parallel challenge to the growth of digital infrastructure.
The water requirement of a data centre depends on its cooling technology, while groundwater extraction for industrial purposes is governed by regulations issued by the Ministry of Jal Shakti, according to the government.
Power Reliability Becomes Critical
Unlike many conventional industrial loads, data centres cannot easily tolerate interruptions. Servers, storage systems and networking equipment operate continuously. Uninterruptible power supplies provide immediate backup during outages, while generators and electrical distribution systems provide additional resilience during longer disruptions. Cooling systems must also continue operating to maintain suitable conditions for computing equipment.
This makes the availability of dependable electricity as important as the headline generation capacity being added to the grid.
India's national transmission network is being expanded as electricity demand rises, and the government says transmission infrastructure is being planned to maintain reliable supply across regions.
For data-centre operators, however, reliability increasingly has another dimension: the source of electricity.
The government is promoting renewable-energy access through measures including the Green Energy Open Access Rules, the Green Energy Corridor programme, the National Green Hydrogen Mission, the National Programme on High Efficiency Solar PV Modules and the Solar Park Scheme.
The policy push is relevant because data centres are large, continuously operating electricity consumers. Renewable power can help operators reduce the emissions associated with their electricity consumption, but intermittent generation also creates a requirement for firming, storage, grid connectivity or other mechanisms capable of supporting round-the-clock operations.
Andhra Pradesh Emerges as a Major Test Case
The scale of the coming expansion is particularly visible in Andhra Pradesh. The state has secured agreements for 6.5 GW of targeted data-centre capacity, with projects moving towards execution, according to state Human Resources Development Minister Nara Lokesh.
Lokesh said the state had completed agreements covering its 6.5 GW target and that projects were being grounded. He also said Andhra Pradesh intended to source 70 percent of the energy for the projects from renewable sources, while water would be sourced in a way intended not to reduce supplies available for agriculture or cities.
The proposed capacity is substantial when compared with the state's original data-centre policy objectives.
Andhra Pradesh's Data Center Policy 4.0 for 2024-29 initially targeted an addition of 200 MW of data-centre capacity.
The scale raises questions about how quickly the projects will be commissioned, how their power requirements will be contracted and whether transmission infrastructure will be available when new loads come online.
It also highlights an important distinction. The 6.5 GW figure refers to the state's targeted data-centre compute capacity, while estimates of national electricity demand refer to the power required to operate data-centre facilities. They should not be treated as equivalent measures.
Renewable Power Alone may not Solve the Reliability Challenge
For renewable developers, the expansion of data centres creates a large potential market. Data-centre operators can enter into renewable power purchase agreements, use open-access procurement mechanisms or combine renewable generation with storage and grid power. The requirement for continuous operations makes the ability to deliver electricity when needed particularly important.
That creates potential opportunities for battery energy storage systems, hybrid renewable projects, firm and dispatchable clean-power arrangements and transmission developers. The government has also pointed to nuclear energy as part of the longer-term clean-power mix.
The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India, or SHANTI, Act is intended to strengthen India's nuclear energy ecosystem and support future deployment of small modular reactors and micro nuclear reactors. The government has identified such technologies as potential sources of reliable power for emerging sectors including AI and data centres.
For data-centre operators, the underlying requirement remains the same: power must be available continuously, irrespective of whether the electricity is generated by solar panels, wind turbines, nuclear reactors or conventional sources.
Water Efficiency Moves up the Agenda
Electricity is not the only resource constraint. As computing density increases, removing heat from servers becomes more challenging. Traditional cooling systems can place pressure on both electricity and water resources, particularly in regions where water availability is already constrained.
The government says the industry is responding through direct-to-chip liquid cooling, adiabatic cooling, immersion cooling and closed-loop systems. High-density racks are also being deployed to support AI and high-performance computing workloads while improving resource efficiency.
The regulatory framework is evolving alongside these technologies. The Bureau of Indian Standards has developed standards relating to data-centre Power Usage Effectiveness (PUE), Carbon Usage Effectiveness (CUE), Cooling Efficiency Ratio (CER) and Water Usage Effectiveness (WUE).
PUE measures the efficiency with which a data centre uses electricity relative to its computing equipment, while WUE focuses on water consumption. CER addresses cooling efficiency, and CUE relates to carbon emissions associated with electricity use.
The Bureau of Energy Efficiency has also notified the Energy Conservation Building Code, 2017 and the Energy Conservation and Sustainable Building Code, 2024, which include energy-efficiency and water-conservation provisions relevant to buildings and data-centre infrastructure.
Policy Support Accelerates Investment
The expansion of India's data-centre industry is also being supported by policy measures designed to attract investment into digital infrastructure.
Data centres were included in the Harmonised List of Infrastructure under the Union Budget 2022-23, giving the sector infrastructure status and improving access to long-term financing. The Union Budget 2026-27 also introduced a tax holiday for eligible foreign cloud service providers until 2047, covering notified foreign companies using India-based data-centre infrastructure, according to the government data.
Other programmes are supporting the wider technology ecosystem. The second phase of the Semicon India programme, Semicon 2.0, was approved with an outlay of INR 1.275 trillion. The IndiaAI Mission has a budget allocation of INR 10,371.92 crore, while the Electronics Components Manufacturing Scheme received an increased allocation of INR 40,000 crore. The government has also launched PLI Scheme 2.0 for IT Hardware to strengthen domestic production of equipment such as servers.
Together, these policies are aimed at expanding the ecosystem around computing infrastructure rather than treating data centres as isolated buildings.
From Digital Infrastructure to Energy Infrastructure
India's data-centre expansion is increasingly becoming an energy-infrastructure story.
Nationally, installed data-centre capacity has grown more than fourfold from 2020 levels, while the sector is projected to reach around 8 GW of capacity by 2030. The government says nearly USD 70 billion of investment is already underway in India's data-centre sector, with another USD 90 billion in announced projects.
At the same time, new data-centre clusters are emerging beyond established markets such as Mumbai, Navi Mumbai, Hyderabad, Bengaluru and Delhi NCR. Andhra Pradesh, Madhya Pradesh, Chhattisgarh and West Bengal are identified as emerging investment destinations.
That geographic expansion could distribute digital infrastructure more widely across the country, but it also means electricity planners and utilities will have to account for large new loads in locations that may not previously have been major data-centre hubs.
The challenge is therefore not simply to build more servers. It is to synchronise the construction of data centres with generation, transmission, storage, renewable-energy procurement, water infrastructure and cooling technologies.
Andhra Pradesh provides an early indication of the scale of that task. Its 6.5 GW target, if executed as planned, would create a substantial new electricity requirement and place greater emphasis on renewable-power contracts, storage and grid infrastructure.
The government has said India's transmission system is being expanded to accommodate rising demand. But the next phase of the data-centre build-out will test how effectively those investments can be coordinated with the speed at which digital infrastructure is being commissioned.
For renewable energy developers, storage companies, utilities and transmission operators, the opportunity is significant. For policymakers and local communities, the central questions will be whether new projects have credible power and water plans, whether announced capacity translates into operational capacity, and whether infrastructure is built ahead of the digital loads it is expected to serve.
India's data-centre expansion is ultimately a race between computing demand and the infrastructure required to sustain it. The outcome will depend not only on how many gigawatts of servers the country can install, but also on whether it can provide the reliable, increasingly clean and resource-efficient power needed to keep those servers running around the clock.
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