Industry Convergences to Boost Demand for Green Power

Over the last couple of years, the Indian startup ecosystem has displayed a momentous rise, pushing the country to the position of world’s third-largest startup base. While Healthcare, Telecommunications and Consumer Goods are among the front runners in this startup race, the Technology sector has definitely managed to steal the show by scoring 43% of the countries startups. According to The National Association of Software and Services Companies’ (NASSCOM) Startup Report, the Indian Technology sector alone houses around 5,200 startups, which will likely increase to 11,500 by 2020.

Demand for Third-party Data Centres

However, owing to their B2B business structure and lack of appropriate IT-infrastructure in India, these startups are often faced with cyber security risks. Moreover, these companies may encounter severe challenges if and when an accident causes damage to key equipment in their data centres. Consequently, these factors have stimulated a huge demand for third-party data centres in India as they guarantee high operational efficiency and scalable infrastructure with zero capital investment. Companies belonging to the Banking, Financial services and Insurance (BFSI) sector have also played a part in creating demand for local data centres as they are adverse to the idea of hosting their data in data centres located outside the country due to confidentiality and security reasons.

At present, the data centre market in India is valued at $2.2 billion, which is expected to reach $4.5 billion by 2018. As per predictions, investments in data centres will reach as high as $7 billion by 2020, making India the second largest market for data centres in the Asia Pacific region. Recently, US tech giant Oracle announced its plans to set up a local data centre to expand its cloud services. IBM has already set up two data centres in India (Mumbai and Chennai) while NTT Communications has three (Mumbai, Bangalore and Noida).

What is Data Centre?

A data centre is a systematic service of the networked computers which contain enterprise servers, server communication equipment, cooling and power equipment. Different business organizations use it to structure, process, store and distribute huge amount of data.

Data Centre is a crucial requirement for any business. A business typically depends upon the services provided by a data centre for everyday operations.

The biggest challenge of a datacentre is to keep the environment cool. Data centres are powered by multiple power feeds from distinct sources, backed up by several UPS and diesel-powered generator. Nevertheless, a major drawback of these data centres is the huge amount of energy consumed in order to operate and subsequently cool the servers. A major drawback of these data centres is the huge amount of energy consumed in order to operate and subsequently cool the servers.

Exhibit 1: Distribution of Energy Usage in Data Centres

Source: www.energyrating.gov.au, LSI Research

A very large data centre may consume 30GWh of power/year, amounting to a electricity bill of around US$ 4,265,250.

In various cases, data centres are placed in the type of location where the climatic condition is favourable. Due to heavy power emission, a cool climate is always favourable and affordable to keep the equipment and several mechanical procedures under control.

Carbon Footprint of a Data Centre

Data Centres have become the matter of several criticisms from different environmental groups because of their contribution to carbon emissions.

A carbon footprint is the total amount of Green House Gases (GHGs) produced during the time of different activities in a direct or indirect manner. It is measured by summing up the total carbon dioxide () emission in a given time duration.

Globally, data centre causes around 17% of carbon emissions. The electricity that is needed to run these data centres is nearly 30 billion watts.

Exhibit 2: Carbon emissions by several types of activities

Source: www.energuide.be, LSI Research

The never-ending demand for more data has an immediate effect on global energy consumption. Though, multiple global tech giants have started their journey towards the path of sustainability, still there is a long way to go.

Data centres across the world consume around 3% of globally generated power and account for approximately 2% of greenhouse gas emissions, leaving behind a carbon footprint almost equivalent to the airline industry. This has brought them under severe scrutiny of environmental groups. As a result, the IT Industry has been making a conscious effort to reduce their carbon footprint by adopting green innovations.

Data Centres’ Green Efforts

A feasible solution at hand for reducing carbon footprint of these data centres is the usage of renewable energy. Utilising renewable energy can not only help reduce data centres’ overall emission by 98%, when combined with other strategies, but also effectively bring down their expenses. Some of the world’s renowned Tech giants have already commenced on this path of green revolution by introducing their data centres to renewable energy. Google is the world’s largest corporate buyer of renewable energy and intends to meet its target of 100% renewable power usage by this year. Apple has already reached this mark as all its data centres are 100% powered by clean energy while Microsoft’s data centres are 100% carbon neutral with a 50% renewable energy target in place for 2018.

Exhibit 3: Types of Energy Used by Data Centres of Different IT Companies

Note: Clean Energy Index to sum up the amount of clean energy companies use form renewable sources plus hydroelectric power. It also assesses how open and transparent a company is about its energy sources and planning as well as how much firms advocate for the use of clean energy.

Source: greenpeace.org

Green Footprint Initiatives Will Boost Demand for Green Power in India

The Indian data centres are likely to soon follow suit, given the exponential growth expected in the country’s cloud market, in the absence of reliable and adequate power grid infrastructure. Apparently, India has a target of 175GW of renewable energy by 2022, which makes an attractive market for leveraging this trend in the growth of data centres. In fact, Indian data centres’ inclination towards adding renewable energy to the mix is already in the rise. NxtGen has built India’s largest carrier-neutral data centre at Bidadi which partially draws power from solar panels. The solar plant will mitigate 57,54,427 kg of carbon dioxide over its project life, making it India’s first green data centre. In 2014, IBM India started using solar power and water cooling for air conditioning in its Bengaluru data centre, cutting greenhouse emissions by nearly 40%. It uses a 50-kW solar photovoltaic system that provides electricity to the data servers.

Smart Cities Initiative to Further Spur Renewable Energy Demand

The Indian government had announced a flagship program Smart Cities, an initiative undertaken to develop 100 smart cities by 2024. These Smart Cities will run on smart technologies, viz. smart grid, smart phones and different tracking devices, all of which will generate large amounts of data, in turn creating further demand for data centres.

Two of the core infrastructure elements in a smart city would include robust IT connectivity and digitalization along with assured electricity supply but within a clean and sustainable environment. As power is one of the major components of these smart cities, there is a need to develop alternative energy sources to make them financially and ecologically viable. As a result, developing India’s capability in the new and renewable energy space is a key requirement to ensure success of the Smart Cities project.

The government is promoting various energy sources such as wind, solar, hydro, and nuclear at full throttle while introducing new technologies to harness power from renewable energy. The target of generating 20 GW through solar power has been enhanced to five times at 100 GW by 2022. The total installed capacity crossed the 5 GW mark recently and there is a clear line of sight to get to 20 GW in the next 18 months.

Exhibit 4: Demand Generation Factors for Green Power in India

Source: LSI Research

Conclusion

Nevertheless, the government’s path will be laced with several challenges when it comes to implementation. Smart Cities will be mostly dominated by high-rise buildings with very less rooftop space which will likely result in space crunch during installation of solar modules. Besides, accumulation of dust on solar panels and high per unit cost of energy are some of the unique challenges the renewable energy industry in India faces. A major hindrance is the high initial cost of installation. While development of a coal-based power plant requires around Rs 4 crore per MW, wind-based and solar-based plants require investments of Rs 6 crore per MW and Rs 18 crore per MW, respectively.

Despite the challenges faced by the Indian Renewable Energy market, depending on fossil fuel energy resources can no longer be an option as they will be exhausted within a generation or two given the present global economic growth rate. Therefore, the future of our energy needs lies in renewable energy resources, the use of which should be encouraged by introducing new policies and regulatory mechanisms. Given the vast potential of renewables in India all that is required are comprehensive policies and an investor friendly regime for the nation to be amongst one the global leaders in clean and green energy.

By – LSI Financial Services Pvt Ltd

Source: lsimails