To answer a query, ChatGPT consumes 10 times as much electricity as Google Search, according to a Goldman Sachs report. The world of artificial intelligence, which has come to occupy centrestage in our lives, stands on data centres.
As such, data centres are on the cusp of an explosive growth phase.
It is tempting to assume that data centres, which guzzle power, alongside water, to keep cool, will propel the growth of renewable energy globally by generating demand. But if the assumption doesn’t hold — as appears likely — we are in for trouble.
Earlier, the average size of a data centre was about 2 MW; today, it is 120 MW, says Jestin Dhavamaniraj, Director – Data Centre Advisory at real estate consultancy JLL India.
Such hyperscale data centres require over 100 MW of generation capacity — enough to power 4,00,000 electric cars, as the International Energy Agency notes. In 2023, the overall capital investment by Google, Microsoft and Amazon, the industry leaders in AI adoption and data centre installation, exceeded that of the entire US oil and gas industry — totalling about 0.5 per cent of US GDP.
Three kinds of companies form the data centre ecosystem: service providers such as Amazon, Microsoft and Google; IT services firms such as Infosys and Cognizant; and enterprise users such as banks.
Data centre capacity in India has trebled to 920 MW over the past four years, according to JLL. It is set to quadruple in the coming years. “It is estimated to touch 3.6 GW by 2030,” the consultancy says.
Grid dependence
The challenge is how not to exacerbate the dependence on ‘dirty’ sources of power such as coal. How quickly India achieves the goal of net-zero emissions by 2070 depends on how much green power it uses.
The data centre sector can either quicken the race to the goalpost or delay it, depending on the kind of power it uses. And it appears as if renewable energy will not lift its share of the load to begin with.
Especially the IT/computing companies will continue to rely on the grid to power their data centres, says Labanya Prakash Jena, Sustainable Finance Specialist at the Institute for Energy Economics and Financial Analysis (IEEFA).
“Some companies have rooftop or ground-mounted solar units, and others have direct contracts with solar energy developers. However, a significant chunk of them will still rely on grid-based electricity,” Jena says.
Though there is no data to indicate how much of the additional power required would come from renewables, the companies have limited reliance on their own renewable energy plants, says Jena.
“Since solar and wind power plants are usually far from the city, these companies are unlikely to have significantly large RE power plants or direct contracts with RE providers.” So, they will primarily rely on State power distribution firms.
Climate commitment
As only about 20 per cent of the power supplied by discoms comes from non-fossil fuel, with little scope for an increase anytime soon, the data centre industry will continue to rely on carbon-emitting thermal power for a long time.
Oil Minister Hardeep Puri recently noted that AI was one of the largest energy consumers, with demand for data centres expected to rise 18-20 per cent annually by 2030.
India’s AI-driven digital economy, projected to reach $400 billion by 2030, presents both a challenge and an opportunity.
“The real question is not how we will meet this surge in demand, but how we will do so without destabilising grids or derailing climate commitments,” he said.
Renewables alone will not suffice as AI-driven demand requires round-the-clock reliability, meaning that natural gas, coal with carbon abatement, and next-generation nuclear will remain essential, he said.
Notably, since the IT industry is seen as an economic growth driver, it may be given priority by State power providers, no matter the premium price.
Jena reasons that though no State can perfectly balance the requirements of data centres and citizens, it cannot afford to disappoint corporates’ demand for power.
“After all, these centres generate employment and are heavy taxpayers,” he says.
Since renewable energy may, at best, play a supplementary role, the location of the data centres plays a big role in the reduction of energy needs. As they need water to cool, proximity to water sources, such as in coastal areas, are ideal locations for data centres.
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