India’s ambition to become a $5 trillion economy relies heavily on its digital infrastructure, with data centres at the heart of this transformation. Beyond driving GDP through jobs, investments, and innovation, data centres’ massive energy demands tie them to sustainability and energy security. Rather than being mere power consumers, they can evolve into energy assets, supporting grid stability and economic growth.
We’re entering an era where energy and digital infrastructure are inseparable. They are the backbone of everything—from AI-driven factories to cashless transactions. Digital energy is what happens when technology and power systems merge—using tools like AI, automation and real-time data to make the entire energy network smarter and cleaner. The digital energy ecosystem blends technologies such as smart grids, renewables, battery storage and AI-driven controls with India’s power network to make it more efficient and resilient. In short, it optimises how we generate, distribute and use electricity across the board.
India’s power grid faces growing strain from rising demand and the integration of intermittent renewables like solar and wind. Data centres, traditionally viewed as energy guzzlers, can flip this narrative by becoming prosumers—entities that both produce and consume power. This shift is achievable through several strategies.
First, AI-driven energy management can optimise cooling systems and server loads, slashing electricity use. Second, on-site solar panels or wind turbines paired with battery storage can turn data centres into virtual power plants, reducing reliance on the grid and enabling peak shaving during high-demand periods. Third, waste heat recovery systems can capture excess heat to power nearby industrial processes or heating networks. Finally, bi-directional energy flows can allow data centres to feed surplus power back to the grid or provide demand response services, acting as stabilisers during outages or peak loads.
To fully realise this potential, India must reclassify data centres as utility infrastructure. This shift would grant them access to low-cost financing, tax incentives, and faster regulatory approvals—key to scaling up their role in sustainable energy systems and cementing their status as grid-supporting prosumers.
Around the world, governments and companies are reimagining data centres as energy partners. Norway requires large data centres to explore waste heat reuse for district heating, cutting energy waste. Singapore’s Green Data Centre Roadmap ties new capacity to renewable energy adoption and strict efficiency standards. In the U.S., the Digital Energy Council advocates for policies that weave data centres into national grid planning. Private sector innovations are equally inspiring: Google’s Belgian data centre uses batteries to balance the grid, while Meta’s Denmark campus supplies waste heat to 6,900 homes. These examples highlight how data centres can bolster energy resilience and sustainability.
India is taking steps in this direction with initiatives like the National Smart Grid Mission (NSGM), Bureau of Energy Efficiency (BEE) guidelines, and the National Green Hydrogen Mission. Picture data centres in cities like Pune or Hyderabad not just storing data but also stabilising local grids with on-site renewables, batteries, or even hydrogen fuel cells. Yet, challenges like weak cybersecurity frameworks and inconsistent interoperability standards across states must be tackled to make this vision a reality.
(Source: CBRE and NASSCOM)
(Source: CBRE, Institute for Energy Economics and Financial Analysis)
Data centres can be economic powerhouses for India. The market, valued at $1.2 billion in 2021 (up from $385 million in 2014), could reach $10 billion by 2027, growing at a compound annual growth rate (CAGR) in the low-to-mid teens. Reclassifying them as utility infrastructure could push this to $15 billion by 2030, contributing 0.3–0.4% to a projected $4.5–5 trillion GDP. With India’s digital economy expanding three times faster than overall GDP and expected to account for one-fifth of it by 2026-27, data centres are vital enablers, attracting foreign direct investment (FDI), spurring infrastructure development, and creating jobs.
Beyond their core functions, data centres can generate new income. If 10% of their projected 210 MW capacity by 2027 is used for grid support—priced at $50 per MWh—they could earn $38 million annually from ancillary services. Repurposing waste heat for industrial use or deploying advanced cooling could add 5–10% to revenue, translating to $500 million–$1 billion yearly by 2027. These streams boost profitability while directly enhancing GDP.
Reclassifying data centres could unlock $5–10 billion by 2030 for on-site renewables, battery storage, and cooling systems. Combined with public-private partnerships (PPPs), total investment could hit $15 billion, aligning with India’s 500 GW renewable energy target. This capital would drive infrastructure growth, from solar farms to grid upgrades, sustaining long-term economic momentum.
(Source: CBRE, RMI, World Bank, CEEW)
Shifting data centres to 50% renewable energy by 2030 could offset 0.7 million tons of CO₂ annually, reducing coal reliance. Waste heat reuse, as seen in Europe, could save $100–200 million in industrial energy costs yearly. Smart cooling might cut peak grid loads by 50–100 MW, saving $20–40 million annually. Even a 1% reduction in energy costs across India’s $1 trillion industrial sector—driven partly by data centre efficiencies—could add $10 billion to GDP each year.
Positioning India as a hub for sustainable data centres could attract $5–10 billion in FDI by 2030, mirroring China’s clean energy boom. By easing grid strain and fossil fuel dependence, this shift supports India’s net-zero 2070 goals, potentially saving $10–20 billion in import costs annually. With a projected capacity of 2,500–3,000 MW, data centres could contribute $5–8 billion to GDP by 2030 through revenue, jobs, and sustainability gains.
(Source: DQ India)
India’s data centres face a tangled web of challenges before they can fully become energy prosumers and grid allies. India’s grid infrastructure needs a fundamental overhaul to enable bidirectional power flow, while rising cybersecurity risks further complicate this shift as digital systems are layered onto an aging grid. Cash-strapped DISCOMs hesitate to modernise, fearing revenue loss, while regulatory gaps leave data centres locked out of demand response and energy trading opportunities. At the same time, India lacks clear mandates for waste heat recovery, slowing progress on industrial and district heating solutions. Cumbersome open access rules and patchy incentives stall renewable energy and battery adoption on-site. Even where data centres want to participate in grid services like peak shaving or virtual power plants, outdated tariffs and fragmented state regulations hold them back.
What’s needed? A national push to reclassify data centres as utility infrastructure, modernise grid infrastructure, streamline renewable approvals and roll out incentives for AI-driven energy management and heat recovery.