The Indian data centre market has been abuzz with activity, especially after the onset of the Covid-19 pandemic. This rapid growth has been fuelled by the adoption of cutting-edge technologies such as artificial intelligence (AI) and big data analytics, coupled with central and state government initiatives. The fledgling market has opened up a plethora of opportunities for industry stakeholders, including data centre developers, energy management companies, and software and solution providers.
This growth in the Indian data centre market has significantly increased the industry’s power consumption and carbon footprint. As such, efficient power management of these centres has become essential. In view of this, data centre operators are now moving towards more energy efficient practices and devising ways to reduce their carbon footprint.
A look at the key demand drivers of the data centre market, recent initiatives taken by the government in this space and the emergence of green data centres…
There are several factors driving the rise in data centre adoption. Rapid digitalisation, the widening digital customer base, improving technology infrastructure and increasing internet penetration have given a strong impetus to the Indian data centre space. The growing adoption of cutting-edge technologies such as big data analytics, internet of things (IoT), AI, automation and cloud computing across industries has further increased the demand for data storage and processing. Moreover, the rise in the number of smart devices, along with increasing data consumption, has been a key contributing factor. According to the Nokia Mobile Broadband India Traffic Index 2021, the overall data usage increased by 36 per cent in 2020 due to greater usage of smartphones and fixed wireless access. The increasing usage of e-commerce, edtech and digital transactions during 2020 placed the existing IT infrastructure of enterprises under pressure. As such, the demand for data centres increased multifold.
In fact, the Covid-19 pandemic, which facilitated the transition to a remote working model, has amplified the role of data centres to a whole new level. As per JLL’s estimates, India’s data centre capacity is expected to increase from 375 MW in the first half of 2020 to 1,078 MW in 2025. In terms of cities, Mumbai is expected to witness the highest capacity addition of around 360 MW, followed by Chennai with a capacity addition of 134 MW.
Further, the government is playing an active role in adding to the data centre growth in the country. The increased thrust being placed by the government on data localisation under the Personal Data Protection Bill has also added to the demand for data centres. Under the proposed rules, data generated in India must be stored within the country, protecting personal and financial data from foreign surveillance. This is expected to create a bank of opportunity for data centre players to set up shop in the country.
The government has been actively working to scale up the data centre infrastructure in the country. Under the Digital India initiative, it had launched Project MeghRaj, which aims to establish 33 data centres and cloud infrastructure for offering e-governance services. Today, the government is increasingly relying on data centres to support government-to-citizen delivery platforms such as the national e-governance plan, e-visa, the national CSR data portal and e-Aadhaar. Further, the government has entered into partnerships with cloud service providers such as Amazon Web Services and Reliance for cloud computing services.
However, the most important step undertaken to expand the data centre infrastructure in the country remains the draft Data Centre Policy issued in November 2020, which aims to establish India as a global data centre hub. Some of the key proposals floated under the draft policy, issued by the Ministry of Electronics and Information Technology (MeitY), are granting of infrastructure status to the data centre segment, introduction of a single-window clearance mechanism for the establishment of data centres, pre-provisioned data centre parks with internal infrastructure for the “plug-and-play” model for operators, encouraging joint ventures and foreign investments in the sector, and providing incentives for local manufacturing and procurement of IT and non-IT equipment, etc. The draft policy will prove to be a game changer for the expansion of India’s data centre space.
Recently, MeitY announced that it is planning to launch a scheme or policy on hyperscale data centres that would look at incentivising investments in these data centres in India. The scheme/policy would look at achieving a tenfold growth in the hyperscale data centre space.
Apart from the central government, several state governments too have started providing incentives for the establishment of data centres. For instance, the governments of Maharashtra, Gujarat, Telangana, Uttar Pradesh and Haryana are providing fiscal and other benefits for setting up data centre parks. The benefits being provided by these governments range from subsidies on land, power or other infrastructure, to tax or duty waivers, grant of infrastructure/industry status, and classification as an essential service. Further, the Maharashtra, Tamil Nadu and Uttar Pradesh governments have signed multiple MoUs with various data centre operators/developers to build hyperscale data centre campuses in their states. Going forward, state governments’ efforts to incentivise the establishment of data centres, coupled with the implementation of a national policy on data centres, will give a much-needed fillip to the Indian data centre space.
Growing focus on green data centres
As data centres’ power requirement is expected to increase manyfold in the near future, the creation of sustainable and green data centres has become crucial. As per industry estimates, data centres globally consume about 3 per cent of the global electric supply and account for about 2 per cent of the total greenhouse gas emissions. Further, IDC predicts that global data will grow to 175 zettabytes by 2025, and the amount of energy used by data centres will continue to double every four years. This shows that data centres will have the fastest growing carbon footprint in the IT sector. To this end, the industry has started taking initiatives to make data centres energy efficient and environment friendly. The industry expects the green data centre market to grow from $43.24 billion in 2018 to $147.88 billion by 2024.
A green data centre deploys environment-friendly solutions in its infrastructure. Like any other data centre, it stores, manages and disseminates data, and while doing so, it emits a lower carbon footprint. Another aspect of green data centres is that by moving to a green multitenant data centre, it can provide sustainability to players and consumers. It can continuously monitor all the applications to ensure the efficient use of power. Further, it can transfer energy across various applications, depending on the requirements. It can significantly reduce the capital expenditure of an organisation and also address the problem of dead server space prevalent in traditional data centres.
In April 2021, as part of its mission to rapidly grow its green energy footprint, Bharti Airtel commissioned a 14 MWp captive solar power plant to meet the energy requirements of its core and edge data centres in Uttar Pradesh. The facility in Tilhar (Shahjahanpur, Uttar Pradesh) is the first of the two solar plants being set up by Airtel in partnership with AMP Energy. The second plant, at Begampur, is expected to go live in the next quarter. This will provide a major boost to Airtel’s initiatives to reduce its carbon footprint. Airtel had acquired a 26 per cent equity stake in AMP Solar Evolution as part of its commitment to green energy-based solutions.
Meanwhile, in March 2021, ST Telemedia Global Data Centres’ India unit announced a partnership with Avaada Energy to procure renewable energy. According to STT GDC, around 34 per cent of the power for all of its Indian facilities comes from renewable energy sources and the addition of the Avaada Energy partnership will see the company achieve a carbon reduction of 456,500 tonnes by 2025.
Market outlook and opportunities
Given the massive surge in data consumption that is taking place, the Indian data centre industry is expected to grow by leaps and bounds. According to CRISIL the Indian data centre industry is expected to record a 25-30 per cent compound annual growth rate to reach $4.5 billion-$5 billion by fiscal year 2025. Further, as per a recent JLL report, the data centre space is expected to grow exponentially to reach 1,007 MW by 2023 from its existing capacity of 447 MW. Geographically speaking, Mumbai and Chennai are expected to constitute 73 per cent of the sector’s total capacity addition during 2021-23, while other cities such as Hyderabad and Delhi-NCR are emerging as new hotspots.
The study also noted that in terms of investment requirement, India’s data centre sector will need about $3.7 billion over the next three years, in order to fulfil the 6 million square foot greenfield development opportunity for the industry.
Given the plethora of opportunities in the data centre space, operators and infrastructure investors are increasingly pursuing expansion plans in India. To this end, a number of players are adopting the acquisition route to enter the Indian market. Various policies and reforms brought in by the government with the aim of catapulting India into a global data hub have also provided the necessary impetus to investment growth in the Indian data centre space.