Should India Go the America Way in Data Centres?
Data centres are booming as AI drives massive demand — but their rapid growth raises a pressing question: how much power?
The Gist
Google announced a $15 billion investment to establish an AI data centre in Andhra Pradesh, marking its largest investment in India.
- The data centre in Visakhapatnam will initially have a capacity of 1 Gigawatt, consuming significant power.
- India's overall energy demand is projected to grow, with the potential for power shortages amid rising AI infrastructure.
- Concerns arise regarding the ecological impact and water stress in the region due to the data centre's high energy consumption.
Tech major Google on Tuesday said it would invest $15 billion over five years to set up an artificial intelligence (AI) data centre in Andhra Pradesh, its biggest investment in India.
Google committed to spending about $85 billion this year to build data centre capacity, the WSJ reported earlier. Big tech is busy ramping up infrastructure in a competitive manner; to meet booming demand for AI services.
The data centre campus in the port city of Visakhapatnam or Vizag will have an initial capacity of 1 Gigawatt.
The Unaccounted AI Bill
The term gigawatt, used interchangeably between data centres and units of power; as power is the critical driver of data centres. It means that the data centre would consume 1,000 MW or 1 GW of power.
A Niti Aayog document says Andhra Pradesh has around 30 GW of capacity. Interestingly, almost 10 GW of this is generated by wind and solar sources. The balance is powered by gas and coal.
This split is also important and we will come to that in a moment.
A State Electricity Plan from two years ago bases its energy projections on growth in leading cities of Andhra Pradesh like Vizag, Vijayawada, Guntur, Tirupati. It also accounts for growth of industrial corridors, technology parks, lift-irrigation schemes, new airports and sea ports.
Needless to add, there is no mention of data centres at that point.
Overall energy demand is projected to grow at a compounded annual growth rate (CAGR) of about 6.64% as per the same plan. Andhra may or may not see a deficit in capacity, power is fungible and can be pulled in from other states.
But Andhra is not alone as a region which is seeing new, and energy-guzzling data centres dropping out of the sky, almost.
Data Centres Or Power Centres?
According to the datacentremap, the United States has over 4,000 data centres, compared to around 269 in India right now.
China, France, Australia and Canada are ahead of India but only slightly. China has around 379 data centres, while Germany has 486 and the UK has 495.
The numbers don’t reflect the pace of construction for new data centres which is very high in many countries, including China.
Data centres have been around for some years in their current form. However, the mad rush for new data centre capacity is largely driven by the AI revolution. In turn, it is driving increased demand for power.
So much so that in the United States, a few power generation projects come up simultaneously with data centres.
The Wall Street Journal says in West Texas, natural-gas-fired power generation is under construction as part of the $500 billion Stargate project from OpenAI and Oracle.
Gas turbines are in use at Colossus 1 and 2, the massive data centres Elon Musk’s xAI is building in Memphis, Tenn. More than a dozen Equinix data centres across the country are using fuel cells for power.
The WSJ also says America should add about 80 GW of new power generation capacity a year to keep pace with AI as well as cloud computing, crypto, industrial demand and electrification trends, according to consulting and technology firm ICF.
It’s currently building less than 65 gigawatts. That gap alone is enough electricity to power two Manhattans during the hottest parts of summer, says the WSJ.
India’s Power Plans
India has caught up on power generation capacity and the ability to meet demand in recent years, touching over 480 GW now. Estimates by organisations like Council on Energy, Environment and Water say that existing, under-construction and planned generation capacity will be adequate to meet power demand by 2030.
Official figures also say most Indian households are electrified at this time. Presumably, demand projections drawn out by experts incorporate the additional power demand as aspirations rise and households see, for example, more white and brown goods.
However, most demand projections may not have accounted for AI investments.
But data centre capacity must be viewed through a few additional lenses.
The first is how much of the AI hype we see will turn into reality. Remember, an AI search will use 10 times more power as a regular Google search.
This will change over time but AI applications are also becoming more complex and diverse, including the use of video.
There are questions now being asked about how much of the AI frenzy we are seeing right now will actually deliver real-world outcomes, or at least to what extent in the foreseeable future.
Countries like America will eventually adjust for over capacity or over investment, since most if not all of it is driven by private capital.
Though even in America there are questions about demand spikes caused by data centres which are distorting power costs for regular consumers in some areas.
A Bloomberg report from last month says wholesale electricity is costing close to 270% more than it did five years ago in areas near data centres, like Baltimore.
India, of course, may not see the kind of arms race that countries like America. And, it’s unlikely that power rates will jump like this; there could be other grid distortions.
Data’s Giant Carbon Footprint
This brings us to the second point.
How much investment should India direct or welcome towards data centres, and what could that do to current plans of power generation and capacity additions?
And what about the impact on the environment?
The Hindu newspaper reported that, as per the Human Rights Forum (HRF), establishing a high-energy, heat-intensive complex of this magnitude in a terrain like Andhra Pradesh is ecologically reckless.
The HRF said these data centres will be a threat to residents of Visakhapatnam and Anakapalli. Centres of this scale are notoriously water and energy-hungry, consuming billions of litres annually for cooling and maintenance across the world.
Moreover, in Visakhapatnam, groundwater depletion, erratic rainfall and climate variability has already created acute water stress. And, such a project will almost certainly intensify the crisis.
There are other arguments as well around the low number of jobs which is of course a different kind of discussion.
India needs a more comprehensive and current look at AI-led infrastructure investments for sure, one that places it in context of our own needs of economic growth.
Even if that seems unlikely, we should not mirror the United States in its current data centre investment race.
Finally, the point that all data centres can run on renewable energy does not fully address the original question of what is the best use of capital, private or public, for a country like India, and what it will actually deliver.
