This is a huge opportunity for renewable energy producers, power equipment manufacturers and power infrastructure investors for India to become a global artificial intelligence infrastructure hub. However, the price of electricity, the stability of the electrical grid, reliance on foreign technology and the economic implications of AI will see if the country can benefit from the entire expansion.

The next big infrastructure development wave in India is not about to be led by highways, airports or regular manufacturing. It might be generated by the power needed to power artificial intelligence data centres. With global tech giants racing to increase their investments in computing infrastructure, India's renewable energy industry is anticipating a significant surge in demand, which may change the landscape of the power sector, bring billions in investments to the country and bolster India's role in the global digital economy.

The scope of the opportunity is vast. Wood Mackenzie projects the nation's data centre capacity will grow to 12GW by 2030, with around 6.5GW for artificial intelligence applications. Another 1.3 gigawatts of IT capacity is already being built, while 3.2 gigawatts of projects has received land, electricity connections and regulatory approvals, BloombergNEF found. These projections suggest India is moving beyond traditional data storage to more energy hungry computing infrastructure.

The cost of the tech is not just felt in the tech industry. Kuldeep Jain, founder and managing director of CleanMax Enviro Energy Solutions, believes that the total renewable generation capacity can be 30–40 gigawatts to support five gigawatts of data centre capacity. His assessment comes at a time when the amount of extra generation capacity that will be needed to support reliable electricity from intermittent solar and wind resources is considerable.

The amount of solar and wind power that Jain estimates would be needed to power a one-gigawatt AI data centre, plus three gigawatt-hours of battery storage, is about 75% of the power the facility requires to be renewable. The match-up of the investment required in the renewable infrastructure could be around ₹40,000 crore.

If applied to five such gigawatts, it yields a possible investment opportunity of around ₹2 lakh crore. This is an approximate calculation and not an outlay, but it illustrates the scale of the new market.

CleanMax is also expanding renewable power capacity by 1.5GW per year with up to ₹9,000cr of capex. Under contract with Brookfield Asset Management, the company has locked in renewable electricity supply contracts with Meta, Google, Apple and Amazon. The contracted capacity of around 1.8 gigawatts is a significant part of the hyperscaler RE agreements inked in the previous three years in India.

The developments point to the fact that renewable electricity is no longer just an environmental measure but also an integral part of digital infrastructure.

India's competitive advantage also is a reflection of changing geopolitical conditions. In the U.S., opposition to energy-intensive data centres has hindered expansion plans, especially as electricity availability, water use and utility costs have become a topic of contention. At the same time, Middle Eastern instability has raised fears of the physical security of digital infrastructure.

India provides a massive domestic market, has technologically connected population, has a robust technological workforce and boasts a thriving renewable energy sector. The combination of these benefits and its ability to compete in the electricity market may draw in international firms wanting geographic diversification.

But simply having cheap renewable generation is not enough to be successful. The uninterrupted power supply, advanced cooling solutions, robust transmission infrastructure, and the ability to quickly connect to a backup power system are essential for AI facilities. However, solar generation cannot run computing continuously and the availability of wind is dependent on the weather conditions.

Therefore, battery storage, pumped hydroelectric and conventional generation will continue to be vital aspects of the investment equation. Nuclear energy could also be a significant source of on-demand, low-carbon electricity in the future.

An institutional regime for electricity buying is also evolving. Purchasing electricity through flexible renewable contracts is becoming a more popular approach among international technology companies, who want to buy electricity directly or environmental attributes with electricity sold elsewhere. These can be cost-flexible, but it may be unclear if the billing of renewable electricity contracts necessarily equates to the consumption of clean electricity at the data centre.

The difference is significant for India. Ultimately a country that wants to be leaders in sustainable computing has to go beyond just how many renewable certificates it buys and look at actual electricity use and emissions.

The business impact on the world is now starting to be felt. French electrical equipment manufacturer Schneider Electric on 16 October raised its forecast of annual revenue and profitability due to "extraordinary demand for data centre infrastructure". The company now expects its revenue to grow by 12-14% organically and its adjusted operating income growth to range between 18-21%. The company's third-quarter revenue was €11.46 billion, showcasing the impact of investments in AI on the electrical equipment, cooling and power-management sector.

The same demand that lies available for Indian manufacturers. There is potential for use in transformers, switchgear, high-voltage cables, industrial cooling systems, optical fibre, battery equipment and technologies for managing the grid. For home engineering firms, the chance is especially important with regards to entering higher value production.

But the investment frenzy is accompanied by risks. There are worries globally that AI firms will not be able to generate the revenue to support their massive investments in infrastructure. Higher than expected commercial uptake and cost of financing may make projects less economically attractive. It is important, therefore, that policymakers make a clear distinction between financial safety and mere announcement of projects.

Another strategic issue is reliance on foreign computer chips and electrical components as well as battery supply chains. India may be able to draw billions worth of investment for its data centres and much of the equipment's value could go overseas. Infrastructure must be complemented by manufacturing incentives, technology collaborations and improved research and development capabilities.

The availability of water and land acquisition also need to be addressed. Clustering large computing centers in urban centers may exacerbate strain on city infrastructure. When planning a factory, the following factors should be taken into account: cooling efficiency, recycling water, electricity distribution and regional economic development.

Finally, the goal of India should go past hosting foreign-owned computing facilities. The country needs to create an integrated system that integrates renewable electricity, domestic manufacturing of equipment, AI research, cloud-based services and high-paying jobs.

The pay-off for the strategy is high. Wherever the world's computing infrastructure is placed, countries that can provide reliable and cost-effective power will have a greater impact. For India, the investment cycle that's ahead provides a chance to make the transition to energy strong into industrial and technological power.