India’s data center boom creates new engine for renewable energy

Submission Statement: India's push to become a major hub for artificial intelligence is creating a massive opportunity for the country's renewable energy industry, as data center companies need enormous amounts of electricity and are willing to sign long-term contracts for it.

If a 1 gigawatt data center gets up to 80% of its power from renewable sources, it would need about 6 GW of renewable generation due to the intermittent nature of renewable energy, estimates Kuldeep Jain, managing director of green energy company CleanMax. That would comprise a mix of wind, solar and battery storage for a truly round-the-clock solution supported by the grid.

The demand is already shaping renewable developers' businesses. Of CleanMax's contracted capacity, 42% is with data center and AI companies, Jain said, adding that two years ago it was only 250 megawatts.

Google and Amazon are pouring billions into building large-scale data centers in India. Google's upcoming project in the south Indian city of Vizag will draw at least 51% of its power from renewables, while Amazon's renewable energy portfolio in India comprises 53 solar and wind projects nationwide.

A long-term contract with these so-called hyperscalers or an established data center operator can provide strong revenue visibility to potential lenders. For developers, that can improve the bankability of the project while giving them a stronger incentive to invest in more sophisticated options combining solar, wind and batteries, which otherwise may not be justified on the economics alone, power companies said.

"There is a clear cost premium for round-the-clock, time-matched renewable power compared with conventional solar generation or simply meeting an annual renewable-energy target," said Kishor Nair, CEO of clean power company Avaada Energy.

Over the next three years, operators are expected to reduce their reliance on local utilities, as the procurement model is likely to shift to solar-wind-battery systems run by the companies themselves or by an independent generator, companies and analysts said.