Source: The post “India’s Power Grid & Data Centre Boom: Can It Meet AI Demand?” has been created, based on “Can India’s power system keep up with the explosion in data centres?” published in “Indian Express” on 24th February 2026.
UPSC Syllabus: GS Paper-3- Economy
Context: The rise of AI-based computing is driving a surge in electricity demand due to rapid expansion of data centres. India’s installed data centre capacity is about 1.2 GW and may increase fourfold by 2030. According to Grid India officials, such expansion could create a paradigm shift in grid planning and operations.
Reasons behind Data centres creating power challenges
- Large and Complex Electricity Loads
- Data centres are high-intensity loads requiring transmission-level connectivity.
- Hyperscale facilities can require nearly 1 GW of power each.
- They are different from traditional industrial loads because they operate continuously.
- Highly Dynamic and Variable Demand
- Data centre loads are “spiky” and unpredictable due to AI workloads.
- Sudden isolation from the grid can cause disturbances and voltage instability.
- Forecasting demand becomes difficult.
- Strain on Transmission Infrastructure
- Massive power demand requires high-voltage substations.
- Poor planning could lead to chaotic infrastructure development and higher tariffs.
- Central and State Transmission Utilities need advance planning.
- Resource Adequacy Concerns
- Power systems must provide not only electricity but also reserves and balancing capacity.
- Data centres must contribute to resource adequacy rather than rely entirely on the grid.
- Baseload Supply Requirements: Hyperscale centres need stable, long-duration electricity supply. India’s limited nuclear capacity constrains baseload options.
Opportunities from Data Centre Growth
- Boost to Renewable Energy: Renewable energy through open-access power procurement can support data centres. Pumped hydro storage and battery storage can provide round-the-clock green electricity.
- Efficiency Innovations: Semiconductor improvements such as Intel’s energy-efficient chip designs reduce power demand. Heterogeneous AI workloads can optimize energy consumption.
- Grid Modernisation: Data centre growth can drive smart grid technologies, storage solutions, and better forecasting.
Policy and Infrastructure Solutions
- Planned Infrastructure Development: The Central Electricity Authority should create a national plan for data centre locations. Grid expansion and substations must be pre-planned.
- Mandatory Captive Generation & Storage: Data centres should install on-site renewable generation or storage. Battery storage and pumped hydro should support peak demand.
- Strengthening Resource Adequacy Rules: Regulations should ensure data centres contribute to reserves and balancing capacity. Compliance standards must evolve.
- Diversified Energy Mix: A mix of solar, wind, storage, and stable baseload sources is needed. Nuclear power expansion could also support long-term demand.
- Demand-Side Management: Workload scheduling and energy-efficient hardware can reduce peak demand.
Conclusion: AI-driven data centre expansion presents both an energy challenge and an opportunity. With proper planning, renewable integration, storage adoption, and regulatory reforms, India can meet rising demand while ensuring grid stability and sustainable growth.
Question: “The rapid growth of AI-driven data centres is emerging as a major challenge for India’s power system.” Examine the issues involved and suggest measures to ensure energy security and grid stability.
Source: Indian Express
