Storage Needs: Data centre market sees strong growth

Data centre market sees strong growth

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…

Demand drivers

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.

Government initiatives

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 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 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.

Diksha Sharma