India's ambitious push for data localisation and a robust digital public infrastructure is colliding with a formidable reality: the nation's energy governance framework is ill-prepared for the relentless power demands of artificial intelligence. The rapid proliferation of AI data centres, which require uninterrupted, high-quality electricity, is exposing critical gaps in planning and infrastructure, forcing a fundamental rethink of energy-security priorities.
The Unquenchable Thirst of AI: Grids Under Pressure
Artificial Intelligence has seamlessly woven itself into daily life, powering everything from search engines and digital payments to health diagnostics. However, this convenience comes with a massive energy cost. AI operates through large data centres that must run continuously to train and update complex models. Unlike variable industrial or household consumption, these facilities place a sustained, high-load demand on electricity grids, requiring near-zero downtime.
This trend is driving a global surge in energy consumption. The International Energy Agency (IEA) reports that worldwide data centre electricity use has grown by 12% annually since 2017 and is projected to reach a staggering 945 TWH by 2030. In India, with installed data centre capacity expected to hit 2.5 GW by 2028, the strain on existing power infrastructure is set to intensify dramatically.
Fragmented Governance and the Coal Conundrum
India's energy policy architecture remains fragmented and tailored for a different era. Electricity planning is split across multiple institutions, with generation, transmission, and distribution regulated separately by central and state bodies. Crucially, data centres fall under the Ministry of Electronics and Information Technology, while land, water, and environmental clearances are handled by other agencies with minimal coordination.
This siloed approach means decisions on data centre locations often ignore grid capacity, water scarcity, and long-term sustainability. The system prioritises aggregate capacity addition over the quality and reliability of load that AI infrastructure demands. Consequently, despite non-fossil fuel capacity reaching 235.7 GW, coal remains the primary stabiliser for grids supporting data centre clusters, complicating India's climate commitments.
Water, Waste, and Policy Vacuums
The environmental footprint extends beyond carbon emissions. AI data centres consume vast amounts of water for cooling. A relatively small 100-megawatt facility can use about two million litres of water daily. Major hubs like Mumbai, Chennai, and Hyderabad are already water-stressed, setting the stage for potential conflict between data centres and households, agriculture, and industry.
Compounding these issues is a significant policy void. The Draft Data Centre Policy 2020 was never formally adopted. Current state-level policies focus on investment incentives, not sustainability. There are no compulsory energy-efficiency rules for data centres, and most green standards are voluntary. Furthermore, utilities often lack the expertise to manage the long-term impact of such large, algorithmically controlled digital loads.
Pathways to a Sustainable Digital Future
The solution lies in an integrated AI-energy policy framework that treats data centres as strategic energy consumers, not just commercial entities. Their specific needs must be baked into long-term power planning and grid design. This requires unprecedented coordination between the ministries of power, electronics, environment, and water resources.
While solar and wind are essential, their intermittency makes them unreliable for 24/7 digital infrastructure. Here, nuclear energy, including Small Modular Reactors (SMRs), offers a viable source of stable, low-carbon baseload power. India's SHANTI Bill, 2025, aimed at advancing nuclear energy, gains critical relevance in this context, mirroring moves by tech giants like Microsoft and Google in the USA and China's nuclear expansion for its data centres.
Simultaneously, policy must mandate energy efficiency, water-use limits, and emissions reporting. Incentives for using treated wastewater, renewable power storage, and efficient cooling can drive sustainable practices across the sector. By aligning its digital ambitions with clean energy transitions and institutional reforms, India can build a digital economy that is both globally competitive and environmentally resilient.
