Mint Explainer | India’s booming data centre industry: Which is the way of water and power for $70 billion investments?

While this is good for India’s artificial intelligence ambitions, experts and reports underline that the scarcity of freshwater supplies, coupled with lack of ample uninterrupted energy, may combine to rattle the industry that’s currently on an unprecedented upward surge.

Mint explains why water and power are major threats to the infrastructure of all the world’s cutting-edge technologies and what can be done about it.

What are the key concerns over India’s data centre bets?

The foremost concern is over water consumption. India’s per-capita water availability was already 13% below the nationally accepted average water threshold of 1,700 cubic metres (m3) in 2021, the Observer Research Foundation said in a note dated 25 August. ORF projected that this would decline 8% to a low of 1,367 m3, almost 20% below the threshold.

This, to be sure, does not take into account the rise of data centres.

Typically, data centres deploy thousands of processing chips that work round the clock to deliver the services used today. The rise of AI at scale has accelerated data centre demand globally, and with India projected to be the world’s largest consumption market for AI, Big Tech and domestic firms alike are venturing into the field.

The rise of data centre deployment will also require at-scale cooling solutions, which typically use massive amounts of water. A 25 June report by the Environmental and Energy Study Institute pegged water consumption of a ‘large’ data centre at about 19 million litres per day— equivalent to the daily water consumption of over 50,000 people in urban Indian cities.

The second concern is power usage, which has surfaced as a secondary matter since India’s emergence as a power-surplus nation. However, worries remain over pollution from power generation, which data centre companies are seeking to address.

Why is water a key resource for data centres?

There are two tiers to cooling solutions – water-based cooling and specialized solutions. For one, data centres use large volumes of water to keep processing chips cool. Water-based cooling is more efficient and effective than air-cooled systems and less expensive than specialized solutions.

Specialized solutions include direct-to-chip cooling systems, or liquid immersion cooling systems. It involves specialized hardware that places a plate directly above the chip to circulate a special coolant that dissipates heat produced from processing chips.

Immersion cooling literally submerges the hardware in a specialized compound to manage the heat.

Both systems, especially immersion cooling, typically have high first-time setup costs. But cutting-edge data centres are gradually moving to immersion-based cooling systems to cut down on water wastage drastically since a specialized ‘dielectric’ fluid – and not water – is used.

That said, water-based cooling systems are prevalent, and haven’t been done away with—keeping water waste a key concern for now.

Aren’t all companies planning ‘green’ data centres now?

For the most part, more companies have vouched to offer clean energy-based data centre operations. This includes Google’s 1GW data centre announced on 14 October, for which it will source clean energy from multiple vendors. Tata Consultancy Services, which received a $1 billion investment from TPG for its data centre plans, also made a similar announcement.

All of this, however, is contingent upon India’s green energy progress. In November 2021, Prime Minister Narendra Modi said India will scale to 500 GW in non-fossil fuel energy generation by 2030. Progress under this goal is still under way. Eventually, power goals would be addressed by micro-grids operated by data centres.

Could data centre demand create resource scarcity?

Experts said that while data centres are essential infrastructure, building them at scale would require careful strategic planning and regulatory recommendations for reducing water and conventional energy consumption in order to lower their strain on resources. Data centres also generate heat and processing-related emissions, which further create concerns over the use of such power-hungry infrastructure.

One key concern is that water usage at data centres typically leads to water wastage, which is not in a state to be reused and recycled for freshwater consumption. As the industry develops, experts say standards will, too.

Is there an alternative policy in place?

India has in the works a draft data centre policy, which recommends creating a framework to regulate the field in line with it being national infrastructure. A part of this includes a 2025 draft data centre policy, which requires energy to be sourced from solar grids and small modular reactors.

Overall, the policy mandates the creation of dedicated data centre economic zones, which will segregate the facilities from residential areas and create a regulated framework for resource usage. This includes imposing transparency requirements on water usage effectiveness, which data centre operators may have to report to the Centre as the policy is formalized.