Union Budget 2023-24
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India’s data center companies are well-placed to drive the sustainability imperative

When one thinks of the adverse environmental impact of economic growth, sooty pictures of huge manufacturing plants with columns of chimneys emanating black smoke comes to mind. It is also easy to imagine the environmental impact of services sectors like e-commerce, where logistics and packaging ostensibly contribute to greenhouse gas emissions and waste generation. It is not easy, however, to perceive the impact of the software industry.

It might therefore be surprising for some to know that information and communications technology (ICT) sector is projected to account for 14% of global greenhouse gas (GHG) emissions by 2040 (compared to 1.5% in 2007). Of course, software by itself has no carbon footprint – it is the energy required by the hardware to host and compute. Most modern applications are being deployed over the cloud. The locus of GHG emissions from the software industry is then in the power-hungry data centers.  

Data center facilities have thousands of electronic components including servers, cooling equipment, power backup and generator, networking equipment, etc. which require a 24X7 power supply to keep the IT operations of a company running. The environmental impact of this is huge – globally, data centers are estimated to use more than 200 terawatt hours each year, which is more than the annual energy consumption of some countries. With ever-increasing data consumption and growing technology penetration, electricity consumption by data centers globally is expected to reach 8% of global consumption by 2030.   

India is currently lagging as compared to global levels of data center capacity. With 14% of global internet users, it has only 6% of the global data center capacity. But the explosive growth in data consumption (15-fold in the past 5 years), a booming software industry that is increasingly adopting the cloud and the call for data localization in the impending data protection regulations has paved the way for the evolutionary growth of the data center industry in India. Additionally, through a data center policy at the central level (in the final stages of drafting) and 6 state-level dedicated data center policies, the government is aiming to turbocharge the ecosystem. Owing to all these factors, the Indian data center Industry’s current IT load capacity of ~800 MW is expected to double and reach 1700 MW by 2025. This expansion capacity is expected to involve investments of over $10 Bn and take up an area of about 300 acres across the country.   This could contribute significantly to India’s growing GHG emissions. 

While India does have the third highest GHG emissions amongst all countries, it is leading the example for net-zero journeys of emerging economies by driving a strong clean-energy push. In the past decade, India saw a 50-fold increase in installed solar power, which takes the total installed renewable capacity to 160 GW including Wind, Hydel, and Biomass power generation. The government has committed to increasing this capacity to 500 GW by 2030, which ties into the vision to achieve net-zero carbon emissions by 2070. In the Union Budget 2022, the government allocated $2.5 Bn for a Production Linked Incentive scheme for manufacturing solar PV modules. On the other hand, the private sector has indicated plans to invest $200 Bn in the coming few years. 

Indian data center companies are hence well placed to lead the evolution of sustainable data centers. It is still an evolving industry, and the legacy burdens are low. It is a good time for the industry to piggyback on the government's push for renewable energy and the corporates’ push for healthy ESG metrics, making it more likely for them to partner with sustainable data center service providers. Most importantly, environmental sustainability is an imperative that impacts all of us. All stakeholders need to step up, take responsibility, and diligently strive for a greener future.